Agriculture Renaissance

Prabhu Pingali

Deputy Director

Agriculture Development

Making “Agriculture for Development” Work

April 20th, 2010

Why Agricultural Development?

Agriculture is key to reducing

hunger and poverty

• Most people living on $1 a day rely

on agriculture for food and income

• In Sub-Saharan Africa, farming

accounts for 2/3 of employment and

1/3 of GDP

• In South Asia, the rural poverty rate

is still approximately 40%

Employment in Sub-Saharan Africa

GDP in Sub-Saharan Africa

Other laborFarming

Other laborFarming

The Transformative Power of Agriculture

• Agriculture growth is 2–4 times

more effective for the poor than

non-agricultural growth

• Almost no country has

managed a rapid rise out

of hunger and poverty without

increasing its agricultural

productivity

• Reducing hunger and

poverty on a large scale

starts with improving

agricultural development

For the poor, agriculture has special poverty-reducing benefits.

Expenditure gains induced by 1% GDP growth, %

Expenditure deciles

Agriculture based

Lowest 2 3 4 5 6 7 8 9 Highest

8

6

4

2

0

-2

Non-agriculture

The Green Revolution

We know progress is possible.

From the 1960s to the 1980s,

crop improvements in Asia and

Latin America helped:

• Double food production

• Save hundreds of millions of lives

• Lay a foundation for growth in

countries like India and China

Rural poverty in India

Poverty rate, %60

50

40

1985

1980

1975

1970

1965

Nearly 20% reduction inpoverty in just two decades.

GREENREVOLUTION

PERIOD

20%

Green revolution impacts on crop improvement

Production• Cereal output in

developing countries has grown 2.8 percent annually for three decades

Productivity• Yields, not area, were

responsible for growth• TFP grew along with

yields

Long run commodity price decline has had a positive impact on food security and poverty reduction

Real prices for commodity group

Investments in agricultural research and development yield high returns.

Agricultural research and development (R&D) yield returns of 40-50 percent.

Returns are high in all regions, including Sub-Saharan Africa.

Traditionally, public research carried out in OECD countries had large spillover effects in developing countries.

Kick Starting Agriculture Productivity Growth: Lessons from Asia

Policy and institutional reforms set the stage for success• These accounted for the largest shares of both agricultural growth and poverty reduction over the six

Asian economies agricultural growth boom periods – Household Responsibility System in China and Vietnam’s doi moi reforms

• Firming up property rights spurs investment and access to credit for business development

• Market-oriented liberalization improves market efficiency and resilience to demand and supply fluctuations through price mechanisms –China and Indonesia developed their ag sectors with careful planning in this area.

Developing and implementing technological improvements essential• The successful Asian economies built up world-class scientific research enterprises in agriculture. These

research institutes, universities and private firms developed new cultivars, agri-chemicals and farm machinery and designs adapted to the needs of local farmers.

• Much of this research was accomplished through close interaction with key international partners such as the agricultural research centres of the Consultative Group for International Agricultural Research (CGIAR)

Support for public infrastructure must be given a priority• Improved rural roads, irrigation, electricity, rural health care and other public services accounted for

nearly 30%, on average, of agricultural output growth in the six Asian economies studied

• Government expenditure on agriculture averaged 15% of total government expenditure in Asia during the boom years in the 1980s; African agriculture investment levels average currently around 5%.

Agricultural Transformation: a Global Phenomenon

Low Productivity Agriculture

Industrialized Agriculture

Modernizing

Agriculture

0

10

20

30

40

50

60

70

80

-1,000 4,000 9,000 14,000 19,000 24,000 29,000 34,000 39,000 44,000 49,000 54,000

GDP (US$ per Capita)

Share of

Agriculture

(% GDP)

Low

Income

Lower

Middle

Income

Upper Middle

Income

High Income

0

10

20

30

40

50

60

70

80

-1,000 4,000 9,000 14,000 19,000 24,000 29,000 34,000 39,000 44,000 49,000 54,000

GDP (US$ per Capita)

Share of

Agriculture

(% GDP)

High Human Development

Medium Human Development

Low Human Development

Characteristics of Agricultural Transformation

Traditional

Agriculture

Modernizing

Agriculture

Industrialized

Agriculture

Share of Ag

in GDP>30% 10%-30% <10%

Share of Ag

labor in total>50% 15-50% <15%

Market

OrientationSubsistence National International

Output

MixFood Staples

Food Staples

+ Export Crops

Highly

differentiated

Scale

EconomicsNot Important Not Important Important

Developing world agriculture is facing increasing divergence

Low Productive Agriculture in the Least Developed Countries

Modernizing Agriculture in the Transforming Economies

Low-Productivity Agricultural Economies

Generally the Least Developed Countries (LDCs)

Ag has a large share of GDP yet productivity is low

Low NARS capacity & low private sector interest

Low prospects for reaching the MDG goals on poverty and hunger & high levels of environmental degradation

Low agricultural productivity in Africa is a multi-faceted problem

Low investment in research Very limited access to markets

Poor policy and regulatory environments

Low input usage and yield levels

Average cereal yields by region, 1960-2003mt/ha

SSA

ROW4

9

SSA

101

World

Fertilizer use

kg/ha arable land,

2002

21.4

3.01.4

Nigeria India USA

Road access

Metres road/capita

Agricultural research expenditures, 2000

8.2

2.6

1.5

1.5

$13.8 billion

ME and

N. Africa

LATAM

SSA

Asia-Pacific

100% = $36 billion per year

62% 38%

Developed

countries

Developing

countries

Of the ~$36 billion spent on agricultural

research in 2000, only ~$1.5 billion (~4%)

was spent on SSA

Source: FAOStat; IFDC; World Bank

Net ODA and Subsidies to Domestic Agriculture Producers ((Avg. 2003-2005)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Japan US EU

% G

DP

Producer subsidies

for agriculture

Net ODA

Policies, such as trade and investment, towards the developing world often contradict and counteract official development assistance

Developing

countries

Although these regions

have abundant

potential (e.g.,

sunlight, labor, water,

knowledge),

productivity is low,

which represents both

a huge need and

opportunity.

Implications for Agricultural R&D: back to basics?

Focusing on productivity improvement but with the benefit of modern science and 40 years of lessons learnt on trade-offs.

Dealing with the “Changing Locus of Agricultural Research” -- Public to Private Sector

Going further down the impact pathway than in the past

Building local capacity for R&D

Transforming Economies

Dietary transformation fueled by economic growth and demographic shifts

Organizational changes in retail, wholesale, processing, and procurement

Tremendous heterogeneity observed w/ respect to participation and distribution of benefits

Dietary transition in Asia: an overview

Reduced consumption of rice Increased consumption of wheat and wheat

based productsRise in high protein and energy dense diets Increased consumption of temperate zone

productsRising popularity of convenience food and

beverages

Rising GDP per capita is associated with a larger share of supermarkets in food retail

0%

20%

40%

60%

80%

100%

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

GDP per Capita, PPP, 2002

Sh

are

of

Su

perm

ark

ets

in

Fo

od

Reta

il

Source: data from Traill (2006) and World Bank World Development Indicators (2006)

The Changing Food System

InputsPrimary

production

Processing

and

packaging

Distribution

and retail Consumption

Individuals Enterprises

Governed by Institutions:

Rules and regulations

Markets (Contracts)

Transport Services

Transforming Economies: implications for R&D

Sustaining and enhancing staple crop productivity gains

Making domestic agriculture globally competitive

Diversifying agricultural systems & household incomes

Reducing rural poverty & malnutrition, especially in marginal environments

Industrialized Economies

Low share of agriculture in GDP

Productive agricultural sector

High yet declining protection to agricultural sector

Emergence of markets for non-commodity roles of agriculture

Food Price Crisis of 2007-2008

IMPACTS

Real

prices

(USD per

metric

ton)

Source: IMF Commodities database

0

100

200

300

400

500

600

700

800

900

Rice

Wheat

Maize

◊ Demand side determinants

• Population growth &

Urbanization

• Income elasticity of food

demand

• Feed & bio-fuel demand

◊ Supply responsiveness

• Area expansion possibilities

• Increased Intensification

• Reducing the yield gap

• Input price trends

◊ Enabling Policy Environment

• Infrastructure development

• Agricultural R&D

• Macroeconomic & trade policy

◊ Climate Change Risks

• Long term productivity impacts

• Volatility in supplies

Determinants of Future Food Prices and Food Security

Thank You

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