The hidden cost of producing cheap food

It is time to know the hidden cost of producing cheap food 

Pic courtesy Down to Earth

In a recent BBC Radio broadcast, Prince Charles said “How we produce food has a direct impact on the Earth's capacity to sustain us, which has a direct impact on human health and economic prosperity.” The clamour for producing cheap food, which is at the very foundation of the mad race towards an unfettered economic growth, is actually based on externalising the ‘hidden costs’ of modern industrial farming. 

The focus on producing surplus and cheap food threatens the very survival of the country’s smaller farms, Prince Charles said, adding if these small farms disappear, “it will rip the heart out of the British countryside.” The warning has been sounded at a time when Statista, a global business data platform, estimates the total number of employed and self-employed farmers in UK to have come down drastically to a mere 107,000 in 2020. 

In lot many ways, his warning finds reverberations in the iconic farmers’ movement being witnessed in India, wherein protesting farmers appear worried at the possibility of their farm lands being usurped by big agribusiness companies once the central farm laws are implemented. In addition, although 86 per cent of India’s farmlands are below 2 hectares, categorised as small and marginal, the advent of Green Revolution in the mid-1960s emphasising on the need to intensify production per unit of land, has come with a huge cost. Instead of making a long overdue correction, more of the same is now being pushed by facilitating the entry of big agribusiness companies. 

This reminds me of a plenary talk I delivered at the 2017 Organic World Congress titled ‘World Must Detoxify its Toxic Farmlands’ presenting a six-point charter for a more specific action-oriented programme at the local, national and international levels to reverse the ecological devastation that industrial farming has inflicted on the planet. Intensifying food production has not only inflicted a severe blow to environment by destroying the natural resources, including soil and water, and acerbating climate change in the process but the resulting unsustainable food systems that have been encouraged over the past few decades in the guise of building efficiency and competitiveness have also taken a heavy toll on human life. 

While the ‘hidden cost’ of producing cheap food has been talked about time and again, with some of the well-known experts and even some of the international committees, including the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) in 2009 and more recently the 2021 report of The Economics of Biodiversity presented by economist Partha Dasgupta, warning that business as usual is not the road ahead, global leadership has simply ignored these concerns. It will therefore be interesting to see how the UN at its proposed Food Systems Summit (UNFSS) in Sept 2021 plans to come up with an effective and implementable road map for radically overhauling the way food is produced, processed, transported and consumed. 

But as Albert Einstein had once said we cannot solve problems by using the same kind of thinking we used when we created them. This is exactly what more than 300 civil society organisations, small scale producers, indigenous communities and individual scientists/experts are pointing to, and this is what the UNFSS has to be careful about. Launching a campaign for boycotting the so-called People’s Summit, they accuse UNFSS of “facilitating greater corporate concentration, fosters unsustainable globalized value chains, and promoting the influence of agribusiness on public institutions.” 

As I have often pointed out, this shouldn’t come as a surprise since the World Economic Forum too had in 2009 come up with a New Vision for Agriculture to be executed by 17 multinational agribusiness companies.  Finding corporate-led market-based solutions to a crisis that is actually the outcome of creating over the years an enabling environment for free markets is not what the world requires at this crucial juncture. Rethinking agriculture is the need of the times given that half the world’s land is used for agriculture, and as a consequence of pushing intensive farming systems it also happens to be the second biggest source of greenhouse gas emissions. 

Nevertheless, another timely report by Rockefeller Foundation -- ‘True Cost of Food: Measuring What Matters to Transform the US Food System’ -- that not only quantifies the cost of producing cheap food but goes much beyond providing a value tag to the ‘hidden costs’ should hopefully shake-up our blinkered economic thinking. Cheap food has always been considered essential to keep economic reforms viable. So far it has worked because economists and policy makers refused to measure its true cost. But the massive environmental disruptions, resulting human health costs and huge livelihood distortions resulting from producing cheap food are so large that it is no longer possible anymore to keep the shocking figures under the carpet.  

American consumers spent roughly $ 1.1 trillion in 2019 on food. The report says the food price tag however does not include the cost of healthcare from diet-related illnesses, the damage it does to environment, including soil, water and biodiversity, greenhouse gas emissions resulting in climate change, agrarian distress and much more. Adding up all these costs, “the true cost of the US food system is at least three times as big -- $ 3.2 trillion per year.” While this certainly is a conservative estimate, what the report helps bring out is to provide numbers to what was already known – the current food system that the world follows is badly broken. 

Globally too, the true cost of producing food is three times higher than what consumers pay. In India, where agriculture output is worth Rs 20.19 lakh crore and where farming as a profession is at the bottom of the economic ladder, studies are needed to quantify the true cost of producing food. Farming remains in distress because to provide cheap food the right price is denied to growers. Reversing this would require bold decisions based on a completely fresh thinking and approach. The same economic and scientific thinking that led to the crisis cannot be expected to provide any real-time solutions. #

The huge cost of producing cheap food. TheTribune. July 23, 2021. https://www.tribuneindia.com/news/comment/the-huge-cost-of-producing-cheap-food-286919?fbclid=IwAR0ZcddRadQrUGE5DyLVN9jfKfpMakMOFyt5PwKtvjzaUx-7CU1MgFB-AYw

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Markets have failed US/EU farmers

Writing in the Conservative American, Austin Frerick, a director at the Open Markets Institute, had said: “In the 1980s, 37 cents out of every dollar went back to farmer. Today, farmers take home less than 15 cents on every dollar.” Pointing to the increasing concentration of economic power in the hands of a few multinational corporations over the decades to be primarily responsible for the declining farm incomes, he called for fixing the broken food system.

Last week, another article in Financial Times asked: “Is our food system broken?” In fact, a Google search for broken food systems comes up with hundreds of articles, reports and studies, clearly pointing to the desperate need to redesign global agriculture, with the primary focus on adopting sustainable farm practices and the desperate need to make agriculture economically viable. Another search for farm distress and among the top articles to pop-up is from the Time magazine: “’They’re trying to wipe us off the map’. Small American farmers are nearing extinction,” screams the headline. The more you read on farm distress the more you realise how in the name of free markets and the freedom to sell anywhere, to anyone is pushing small farmers off the land.  

That makes me wonder. If after five decades or more of liberalisation of agricultural markets, with no stock limits for big retailers, and commodity futures markets giving an indication of the price at the time of planting, Al Davis, a former Nebraska senator and cattle farmer is left to say: “Farm and ranch families are facing a great extinction. If we lose the rural lifestyle, we have really lost a big part of what made this country great,” isn’t the exuberance being exhibited over the planned liberalising of agriculture markets in India overtly misplaced? After all, if leaving farm prices to markets is the winning formula, isn’t it first time to explain why American and European agriculture is in a severe state of distress.

Ever since the days of Uruguay Round negotiations, and subsequently after the WTO was formed in 1995, monumental agricultural subsidies being paid by the developed countries have remained a contentious issue. Former Commerce Minister Kamal Nath, who represented India at a number of WTO Ministerial conferences, had often said “you cannot expect Indian farmers to compete with the US treasury,” referring to the massive subsidies being doled out in America. Later, Arun Jaitley as Commerce Minister too had echoed the same sentiments at the time of the Cancun Ministerial. Even now, developing countries are asking for re-opening the hotly debated issue of farm subsidies.

This brings me to the essential question. If agriculture markets are so efficient, how come it failed to prop up US/EU agriculture? The US Department of Agriculture has itself acknowledged that the real farm incomes have been on the decline since the 1960s. And that too, despite such heavy subsidy support provided year after year. This is primarily because 80 per cent of these subsidies go to agribusiness companies, and the remaining 20 per cent are cornered by big farmers, as many studies have shown. An UNCTAD-India study in 2007 had shown that if the green box subsidies (protecting domestic support in agriculture) in the developed countries were to be withdrawn, agricultural exports from US, EU and Canada would drop by about 40 per cent.

Even 25 years after the WTO came into existence; OECD countries are still providing a huge producer support for agriculture, touching $ 246 billion in 2018. Of which, in EU-28 countries, the producer support totals $ 110 billion a year, roughly 50 per cent of it being in the form of direct income support. These subsidies are expected to further increase in the post-Covid period.

Repairing the broken food system therefore would urgently require restructuring the agricultural markets. Whether in America, Europe or India, where despite the scale, agrarian distress has been worsening over the years, the proposed agricultural reforms have to be tailored to the need to first make farming an economically viable, and profitable venture thereby restoring the pride in farming. Leaving farmers at the mercy of the markets hasn’t worked in developed countries. Nor has commodity futures trading been of much help. To illustrate, let’s look at the $ 103 billion chocolate industry, where the prices for cocoa beans is largely determined by commodity futures. While Africa alone produces about 75 per cent of the cocoa in the world, what percolates down to farmers is relatively insignificant. With hardly 2 per cent revenues coming to cocoa farmers, millions are living in acute poverty.

For several years, dairy farmers in UK had been protesting at supermarkets demanding to be paid a fair price that protects them against the volatility in prices. The bigger the retailer the more is the tendency to dictate prices. In the quest for higher profits, and at the same time ensuring competitive prices to consumers, big retail has often been known to squeeze on farmer’s margins. If big retailers like Sainsbury and Tesco, with the ability to maintain huge stocks, were providing a higher price to farmers, there is no reason why half of all the UK farms would end up being in business only by supplementing income from non-farm activities.

Providing a fair and assured price to farmers therefore is turning out to be the biggest challenge. All that has been tried, and tested in the developed countries has failed to show any promise. In fact, it has only pushed developed as well as developing country farmers into a severe crisis. Enabling farmers to sell anywhere, to anyone to get a better price is no reason for excitement, unless farmers can be assured of a better price. Instead of pushing what the agri-business industry needs as marketing reforms, let us develop a system that actually helps farmers become economically viable and in true sense atmanirbhar. Developing a food system based on local production, local procurement and local distribution is what India needs.

This is only possible by strengthening the existing networks of regulated APMC markets, and building a robust system of trading where the Minimum Support Price (MSP) becomes the model price. #

The broken food system. The Tribune. May 29, 2020

https://www.tribuneindia.com/news/comment/the-broken-food-system-91249?fbclid=IwAR3iLqaJuEjVBZ7Mj8BT8hT3HCebV4w41-KNDf_vyxaHepID2wEqgewRq2c

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