Here is a brief of a new policy study that my colleague Praveena and I begin this month. We are excited about this idea as agriculture and development has been sectors of our interest since long and that a sector fatigue (from our work in water sector) is slowly kicking in. We would sharpen this as we get going on this, but sharing a rough cut of the idea is called for to invite inputs and criticism on this from folks we know and the readers of this blog.
Paving the road to hell with agricultural productivity: Agri- commodities, International Trade and Development
Focus on increasing agriculture productivity as an intervention in alleviating poverty across the less developed and developing countries, particularly of Africa and Asia has had reverse effect of pushing people further down into economic crisis. We begin a small study this week where we explore the consequences of large agriculture programs which are focused on increasing agricultural productivity of farm sector, for a variety of staple crops, cash crops as well as horticultural crops. The increase in productivity is treated as end in itself. Whereas, in practice, the productivity rise is not realized as increased income for the farmers but works adversely works on pushing the prices of that crop further down. What is proposed is that increased agri productivity will lead to increase in income of the farmers. In practice, what happens is that the increased flow of agri-produce in the market pulls the price down and neutralized the gain of the producer.
There are two problems that we see –
1) Development programs which focus on increasing agriculture productivity alone are not desirable as they do not alleviate poverty in long term, instead work adversely.
2) Increased agri-productivity affects less developed and developing economies which earn by exporting these primary goods. When a higher volume of produce hit the international market they push the prices down and lead to lesser earnings by the producing country. This has an aggregate effect of leaving the economy as impoverished as it was earlier, if not worse.
These two problems could be addressed by thinking about development sector programs in agriculture as well as international agri-commodities trade from analyzing existing policies in agriculture and trade sectors.
Our argument is that development sector programs in agriculture, domestic as well as international agri-commodities trade and poverty are linked very closely and in a direct fashion. There is a ripple effect that travels right through this chain and leads to adverse effect on the producers if these programs focus only on productivity increase. This fixation without looking at the policy environment and prevalent trade practices will always lead to poor outcomes as seen in declining international agri-commodity prices by as much as 25% across the board – coffee, tea, cocoa and sugar, in the last decade. From 1980 to 2000, world prices for 18 major export commodities fell by 25% in real terms. The decline was especially steep for cotton (47%), coffee (64%), rice (61%), cocoa (71%) and sugar (77%) (World Commission on the Social Dimension of Globalization 2004: p83).
 The commodities crisis and the global trade in agriculture: Problems and proposals, Martin Khor