The Changing Role of Rice in Global Food Security: Implications for Latin America
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1 The Changing Role of Rice in Global Food Security: Implications for Latin America C. Peter Timmer Cabot Professor of Development Studies, Emeritus Harvard University Presented at the Americas Rice Congress in Miami, FL, June 6, 2012
2 The Issues Not here to tell you about rice production Not here to tell you about rice prices But market economies are driven by demand, so I do want to talk about what is happening to rice demand, first in Asia and then in other important regions of the world. We don t know a lot about some important rice consuming areas
3 What is food security? Food security exists when all people at all times have physical and economic access to sufficient food to meet their dietary needs for a productive and healthy life. Food security has three dimensions: AVAILABILITY of sufficient quantities of food of appropriate quality, supplied through domestic production or imports; ACCESS by households and individuals to adequate resources to acquire appropriate foods for a nutritious diet; and UTILIZATION of food through adequate diet, water, sanitation, and health care. Each of these three dimensions can be affected by instability in food prices. Recent thinking has stressed the risk and vulnerability of poor households to catastrophic and irreversible changes in their food security. What is the role of rice here?
4 A Framework for Discussion: Why do we worry about this?
5 Basic framework for understanding food security issues Table 1 MACRO SHORT RUN Managing food price crises and budgeting for safety nets LONG RUN Inclusive economic growth and the management of price stability MICRO Vulnerability to shocks, coping mechanisms and resilience Poverty reduction and access to nutritious food = sustainable food security
6 Some historical perspective: What s the problem?
7 The Structural Transformation in 86 Countries from 1965 to 2000
8 Raising Agricultural Productivity The basic cause and effect of the structural transformation is rising productivity of agricultural labor. There are three basic ways to raise labor productivity in agriculture: Use new technology to produce more output for a given amount of labor. Let agricultural workers migrate to other occupations, without lowering output, thus sharing the output with fewer rural people (the classic Lewis model of development). Through higher prices for agricultural output (make it worth more in real economic terms, which may well be happening in the current economic era, but is a reversal of historical trends).
9 The 20 th Century decline in food prices P D D S S' Q
10 Food Security during the Structural Transformation Local food sourcing versus Efficient large-scale production (what about energy-based inputs?) SUSTAINABILITY = higher yields/technology Technology FOOD SECURITY INCOME CONVERGENCE ---Urban (food supplies/prices) Farm size Non-farm issues ---Rural (area x yield x price --> income ) --rural wage --Farm size --urban wage --Inputs/technology --Marketed surplus STRUCTURAL TRANSFORMATION
11 The Changing Role of Rice in Food Consumption in Asia Year Total Calories Calories from Rice Rice as % of Total Average Annual % Increase/(Decrease) (0.25) (0.03) (0.71) (0.47) (1.00) Source: Data from FAO Food Balance Sheets. Calories are daily per capita energy available.
12 3.9 log Consumption per capita Rice consumption declines with per capita income increases Global Engel Curve for Rice log GDP per capita bandwidth =.8
13 Ratio of rice consumption in the top quintile to rice consumption in the bottom quintile over time, India and Indonesia, rural and urban areas Indonesia rural 2.5 India rural Indonesia urban India urban
14 Figure 2. Annualized percentage change in rice consumption by quintile and location, Indonesia, India, and Bangladesh. R refers to rural quintiles, U to urban quintiles. Period over which changes are calculated are for Indonesia, for India and for Bangladesh. 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% R1 R2 R3 R4 R5 U1 U2 U3 U4 U5-1.0% -1.5% -2.0% Indonesia India Bangladesh
15 Figure 3. Alternative projections of world rice consumption at different rates of economic growth and rural to urban migration, with real rice price constant at its 2007 level
16 Implications for the role of rice in Asia s food security: Rice is increasingly the food of the poor. This has significant implications for poverty if countries use high rice prices as a mechanism to guarantee macro food security and a high level of self-sufficiency in rice
17 Implications (2) The share of rice in caloric (energy) intake is falling rapidly. a. Asia now has a strongly negative income elasticity of demand for rice. b. Rapid rural to urban migration lowers per capita rice consumption quite sharply. c. Better connected food systems mean that rural households can be less self-sufficient in food production and consumption, especially rice. d. On average, Asia obtained about 40 percent of calories from rice in the early 1970s, at the peak impact of the Green Revolution, and that share is now below 30 percent and falling. e. The budget share spent on rice is falling even faster. Now only 10 percent of the food budget goes to rice (on average it is higher for the poor), so 90 percent of the food budget is spent on other commodities and value added from processing and convenience.
18 Implications (3) Following the changing patterns of rice consumption, the share of rice in agricultural output and in the overall economy is also falling rapidly. Share of rice in GDP Early 1960s Late 2000s East Asia 6.8 % 1.0 % South Asia Southeast Asia
19 Implications for the role of rice in other regions Price effects, as Asian demand drops Quality differentials, as spreads will widen between high and low quality rice Marketing channels will change as the supply chain revolution spreads Prospects for growth in rice consumption in the Americas
20 What do we know about rice consumption in the Americas? Not a lot Rice consumption in Central America by quintile Weekly rice consumption per capita in kg Q1 Q2 Q3 Q4 Q5 2001, Nicaragua Rural Urban Total , Panama Rural Urban Total
21 Modernizing Food Supply Chains: The Impact on Rice Distribution Rice Economy (starchy staples) Non-Rice Commodities (Fruits and vegetables, meat/ dairy, processed foods, wheat) Farm inputs/ Smaller area possible More value/hectare, but what supplies Higher yields, stress tolerance role for small farmers (what Consumer quality assets do they need to stay in?) Farm Production Very knowledge-intensive for Knowledge intensive; can there (management and good management practices; be effective extension for new knowledge) Access to inputs by farm size technologies? Role of farm assets Procurement/ Less rural consumption as High transaction costs of dealing logistics and workers leave; more transporta- with small farmers; issues of Wholesalers tion and storage; greater produc- quality control and product tion instability with climate change traceability Processing and Milling technology Large share of consumer food value added How to add value; branding? expenditure is spent in this box Retail/consumer Supermarkets as suppliers of Modern supply chains are funneling welfare and rice? Increased price stability consumer demand back up the health dimensions through private actions? Problems system. The food system is less of access by the poor? supply driven
22 Conclusions Things we have not talked about 1. Impact of climate change 2. Will trade agreements change the playing field? 3. Will rice escape the bio-fuel connection? If not, what will drive a connection between rice and petroleum? Wheat, corn, financial markets? A final point: The need for better research in the regions where rice dynamics are not well understood Africa and the Americas
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