Averting the Looming Food Crisis

27 March by Sandun Thududgala


“IMG_3932” by Denish C is marked with CC BY-NC-ND 2.0.

A food crisis is inevitable. Food prices are soaring; shortages in essential food items are creating long queues, affecting people’s ability to work and get on with productive lives; the foreign reserve crisis has restricted the country’s ability to import food; the sudden move to ban chemicals in agriculture has created unrest among farmers as it will result in a significant drop in production; increasing food prices, food shortages and loss of agriculture-related livelihoods will have a severe and negative impact on the ability of the poor to feed themselves; and shortages and high cost of food are creating unrest among the public.


According to the National Consumer Price Index food prices jumped by 6.9% and the inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. rate increased to 14.2% in January 2022. Prices for some items such as rice have risen by nearly one-third and the prices of vegetables such as tomatoes and carrots have risen by five times compared with prices of the last year.

The long term impact of these increases in the cost of food is yet to be seen but as the anecdotal evidence suggests, families are forced to reduce the number of meals or the quality of their meals to adapt.

Women in Tissamaharama and Kirinde in Hambantota District said: “Since we are living near to the sea, we can still have fish. But we can’t eat vegetables as we did in the past. Most of the days we eat only one vegetable a day.”(...) “If we used to have three meals a day, now it has reduced to two meals and sometimes even to one. Children don’t get the cup of milk they used to get in the morning.”

The sudden move by President Gotabaya Rajapaksa banning all chemical fertilizer and other agrochemicals in May 2021 in the middle of the farming cycle shocked the farming community and posed critical challenges to the farmers’ livelihoods and to food security. Although the ban was lifted in November 2021 due to protests by farmers, the fertilizer subsidy that was given by the government over the years was abruptly removed. This resulted in the rapid increase in the prices of chemical fertilizers in the market, which are now unaffordable for farmers. This will result in a drop in agriculture production and a disruption in the market, creating food shortages and price increases.

 Was it a broken system?

The government stressed that there is a definite link between the current crises and the pandemic. Sri Lanka’s foreign currency reserves had been depleted for a while but it suffered an additional blow with the pandemic. The tourism industry, which was one of the main sources of foreign income, collapsed. Other export-oriented industries such as the garment industry, tea and rubber and foreign remittances from migrant workers were also affected, creating a negative impact on the balance of payments Balance of payments A country’s balance of current payments is the result of its commercial transactions (i.e. imported and exported goods and services) and its financial exchanges with foreign countries. The balance of payments is a measure of the financial position of a country vis-à-vis the rest of the world. A country with a surplus in its current payments is a lending country for the rest of the world. On the other hand, if a country’s balance is in the red, that country will have to turn to the international lenders to meet its funding needs. . Depletion of foreign income sources coupled with the pressure of paying back foreign debts have resulted in a severe foreign currency crisis, eroding reserves further.

As a way of facing these challenges, the government sought to limit imports and banned the importation of some agriculture commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. , agrochemicals and fertilizers. The country is facing difficulties in finding necessary foreign currency to maintain essential food imports, creating shortages in the market.

Although the pandemic and recent move to ban fertilizer amplified the discourse around the crises in the agriculture and food system, the crises has deeper roots. Even before the pandemic, agriculture and food systems were failing in their main objectives of ensuring the food security of people and providing dignified livelihoods for farmers.

Malnutrition and undernourishment have always been serious concerns with 32.6% of women aged 15 to 49 years found to be anaemic and 15.9% of infants having low weight at birth according to 2019 data. Despite being considered as an agricultural country, Sri Lanka depends heavily on food imports and the vulnerability of food security is seen at times of crises such as the pandemic and the fall in foreign reserves.

The agriculture system has failed in ensuring a dignified life for the majority of its producers. Poverty is still largely concentrated in rural agricultural areas with more than 80% of the poor living in villages. The micro-credit indebtedness among rural farming communities is the most recent expression of the crises in the rural economy.

The system of food production has become a major environmental polluter. Sri Lanka is one of the highest users of agrochemicals in the world and these chemicals have contributed to polluting the waters and soil and has created health risks for the general population. Large scale mono-crop cultivation has resulted in the destruction of forests, watersheds and biodiversity.

 Contradictory priorities

As Sri Lanka never had a national agriculture policy, the actions of the governments towards agriculture have always been contradictory. On the one hand, it wants to protect the rural peasantry and enhance local food production but on the other hand, since 1977, the thrust has been to transform the economy away from dependency on agriculture and towards export-oriented, industrialized commodity production.

Protecting the peasantry as a class and increasing local food production was one of the main objectives of farmer settlement schemes starting from the Minneriya settlement in the 1930s. This has been a high priority for most of the governments who came into power after the independence.

However, even as the governments reiterated their commitment to protecting local agriculture, the structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/
programs introduced in 1977 began transforming the economy from an agriculture-based economy towards export-oriented, industrialized commodity production. As the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

suggested in its Non-Planation Crop Sector Policy Alternative report in 1996, moving away from government interventions in protecting paddy farming and other forms of subsistent agriculture indicated that new macroeconomic policy priorities were in place.

The recommendations presented to the government by the World Bank in 1996 and through successive country partnership frameworks afterwards encouraged the government to phase out its interventions in agriculture marketing. This led to the privatization of the Paddy Marketing Board, termination of all the commercial activities of the Food Commissioner’s Department and overhauling the land tenure policy to create fully-functional land markets.

These two contradicting policy directions, maintained by all governments that came into power after 1977, have prevented Sri Lanka from having a clear, long term vision for agriculture development.

Shifting priorities towards the development of tourism, infrastructure and industries have also resulted in the large scale diversion of land and other natural resources away from agriculture.

 Flawed methods of production

Sri Lanka’s move towards a green revolution in the 1960s largely focused on increasing paddy production in the country by introducing improved seeds and agrochemicals. That has resulted in creating an agriculture system that almost entirely depended on imported agricultural inputs from seeds to fertilizer and pesticides. Up until 2021, Sri Lanka has spent an estimated $300 to 400 million annually on fertilizer imports. The continuation of fertilizer subsidies is impossible given the current economic situation. The market prices of chemical fertilizers, both globally and locally, have made agriculture extremely costly and almost non-viable, especially for small producers. With the removal of the fertilizer subsidy, the prices of urea increased five to sixfold, making it impossible for farmers to purchase it.

The gradual withdrawal of the government from agriculture product marketing has resulted in the creation of a strong oligopoly led by few individuals with political and market power, who now control the marketing of agriculture products. Farmer is limited to the status of primary producers who are forced to sell their products to these businessmen for a price decided by the agriculture oligarchs. This is not the case only for paddy but for all the other agricultural products too. The centralized marketing system created around Dambulla and a few other markets have not only taken away the bargaining power of the farmers but has also increased food wastage.

Over the years, governments have continued the fertilizer subsidy as a means of winning the political support of the rural peasantry. Even the current president in his election campaign announced the free issuance of fertilizer subsidies for all farmers. Farmer organizations remain highly influenced by the ruling parties and are used to dispense patronage politics to the farmers. Lack of independent and strong farmer organizations and movements have prevented farmers from engaging effectively in agriculture-related policymaking.

 Way forward

  • An agriculture policy that prioritises the protection of the livelihoods of small scale food producers and local food security
  • Recognize women as an important part of the agriculture system; protect and support their livelihoods
  • The government’s agriculture policy should provide a longer-term systematic vision towards agroecology – research, development and extension services should collaborate to support this transformation
  • Key components of agriculture systems should be diversification of production on agricultural lands, enhancing agrobiodiversity, integration of animal husbandry and multi-crop cultivation, crop rotation the protection and promotion of resilient local seed and plant varieties
  • Local markets should be strengthened to promote the consumption of products to the production point
  • Support the creation of cooperatives or other collective organizations to strengthen efforts in collective production, processing and marketing
  • Invest in agriculture-related research and innovations to develop community-based food processing and food preservation, promoting value addition that enables farmers to engage at a higher point of the agriculture value chains
  • Develop a farmer-based cooperative banking system as a source of affordable financial services for the producers
  • Agriculture policy should prioritize the protection of its producers. All the efforts of pushing small scale producers, who represent the majority of farmers, away from agriculture over the last 40 years have not only failed but also contributed to increasing poverty and social and political unrest.

Agriculture policy should recognize the importance of small scale producers and adopt measures to increase their productivity and sustainability given that approximately 1.65 million smallholder farmers operating on an average of fewer than two hectares contribute to 80 per cent of the total annual food production.

Prioritizing small scale food producers (including women farmers) will require reforms in policies that govern the land and other natural resources. Policy decisions in relation to land use, governance and administration should prioritize the security of livelihoods of small producers an in ensuring the protection of sensitive environmental systems.

The environmental and health impact of the prevailing agriculture production system that depends on chemical inputs has been the subject of concern for a long time. But the chemical driven agricultural system has attracted renewed attention from the perspective of it being unsustainable from an economic stance as well. With the current foreign currency reserves crises, the ability of this government and any other government to restart the fertilizer subsidy is doubtful. The loss of the fertilizer subsidy and the increasing prices of chemical fertiliser in the global markets will definitely push farmers to move towards alternative options.

The government’s agriculture policy should provide a long term, a systematic vision that will enable the country to move towards this transformation. Research, development and extension services should be harnessed and collaboration to support farmers to develop and to implement environmentally friendly farming practices, that will help in rebuilding the soil and the regenerative capacities of other ecosystems.

The key components of agriculture systems should include diversification of agricultural lands; enhancing agrobiodiversity; integration of animal husbandry on agricultural land; adopting multi-crop cultivations and crop rotation and the protection and promotion of local seed and plant varieties which are resilient for pest damages and impacts of climate changes.

The current marketing system requires a major transformation if the agriculture system is to be strengthened to provide affordable and good quality food for consumers and a fair price for farmers.

Decentralized market systems should be strengthened to reduce the distance between producer and consumer as much as possible. This will reduce food wastage, reduce transport costs and create direct market linkages among producers and consumers.

Farmers should be supported to organize as cooperatives or other collective organizations and enterprises to engage in collective production and marketing. Producer owned cooperatives should be promoted as it provides the producers with greater leverage Leverage This is the ratio between funds borrowed for investment and the personal funds or equity that backs them up. A company may have borrowed much more than its capitalized value, in which case it is said to be ’highly leveraged’. The more highly a company is leveraged, the higher the risk associated with lending to the company; but higher also are the possible profits that it may realise as compared with its own value. . Investment in agriculture-related research and innovations should be made to enable farmers to develop community-based food processing and preservation initiatives. This will enable farmers to engage at a higher point of the agriculture value chains. Such collectives will support not only the marketing of agriculture products but also access to agriculture machinery, equipment, seeds and inputs that can also be traded or shared through producer-owned cooperative systems. A cooperative banking system should be developed as a source for affordable financial services for the producers.




Source: Groundviews

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