Food Security 1 — Asia & the Pacific Policy Studies conference

I was at an Asia & the Pacific Policy Studies conference at the ANU last week. The lowlight of an otherwise excellent conference was the final session on food security. Particularly ordinary was the presentation by Julian Cribb, a science communicator and journalist. The slides or papers aren't available yet, but his talk was consistent with this presentation and his book The Coming Famine.

Cribb's key point is how we can possibly double food production by 2050 (to meet expected demand due to population growth) when agriculture will also have to deal with:

• half as much water
• much less land (no topsoil)
• no fossil fuels (eventually)
• scarce and costly fertilisers
• less technology
• inadequate capital investment
• growing climate instability

Putting aside fundamental objections with the assertion of these as real 'problems' (see below), Cribb makes the same mistakes many scientists do when attempting to analyse economic issues—in particular, a lack of appreciation for the role of multi-factor productivity (and its growth) and the substitution of factors, or how producers arrange different factor inputs to optimise output, and how smart farmers constantly rearrange factor inputs whenever the relative prices change or as technology affects the optimal mix.

By way of illustration:

• if the recent low levels of agricultural productivity growth (at around only 2 per cent per annum) were to continue, agricultural production would still roughly double by 2040!

— this conservative scenario is still 10 years ahead of Cribb's demand forecasts and with no additional inputs required!— even using the recent very conservative OECD/FAO 10 year forecast for agricultural productivity growth of 1.5 per cent per annum would see production double by the mid 2050s!

• during the millennium drought, farmers in the Murray-Darling Basin managed to maintain the value of agricultural production with 70 per cent less water use—sure, there are price effects in there, profits suffered, and some of the adjustments may not have been sustainable in the longer term, but it is a remarkable demonstration of the role of multi-factor productivity and factor substitution all the same!

Nor does there seem to be much comprehension of the role of price in food markets, both as a signal to farmers for what and how much to produce, and as an outcome of the interaction between demand and (most importantly, in this case) supply. Such comprehension might highlight problems relating to the global production of food, and particularly the distorted signals provided to farmers coming from production subsidies, income support schemes, tariffs, statutory marketing schemes, biofuels, quantity restrictions on imports, scientific and cultural restrictions on imports ... and the list goes on.

So (relatively) higher food prices over recent years has been a result of the complex interaction of policy distortions (e.g. biofuel subsidies), higher input costs (e.g. energy prices) and short term supply problems (e.g. drought in key production regions)—and are not a demonstration of excess demand from population growth.To put food security in its longer term context, between 1961 and 2008:

• world population grew by 117 per cent
• food production grew by 179 per cent

This imbalance has resulted in a long run decline in real agricultural prices (see below) which, I would argue, is likely to continue over the long run.

Increased use of land and water contribute a relatively small proportion of the doubling in food production since 1961 (about 20 per cent of the total). From the 1960s to the 1980s, increases in other inputs (e.g. fertilisers, capital) accounted for most of the increase, but since the 1990s higher production has increasingly been coming from productivity growth (improvements in efficiency)—see my separate blog, Food Security 3.

That doesn't mean there aren't issues in the sustainable use of land and water—there are, but these would seem to be manageable issues of getting good policy in place.

Cribb's solutions to 'the coming famine' include growing algae in deserts (because that's where the most sunlight is! but what about the water intensity? what about all the other factors of production? what about the role of price/profit?), as well as skyscraper farms in cities (he has some nice futuristic graphics of this, but clearly doesn't have any concept of the opportunity cost of land or the opportunity cost of the very substantial capital involved). And as transport costs continue to decline and supply chain logistics continue to improve, there is less and less case for cities / regions / countries adopting autarkic agricultural policies.

In 2011, the Academy of Social Sciences in Australia organised a symposium on food security, following release of the PMSEIC report. I presented on the issue of agricultural production in the Murray-Darling Basin in the context of international food security. While not attacking the PMSEIC directly (I was chief economist at the Murray-Darling Basin Authority at the time), I pointed out that water (in this particular case) was just one factor of production, and farmers are adept at maintaining production, even in the face of very sizable changes in input availability or prices. I also noted the relentless decline in agricultural prices over a very long period, and that productivity growth has been (on the one hand) critical to increasing the value of (and profits from) agricultural production, and (at the same time) a significant contributor to the decline in food prices. In short, it didn't seem likely that widespread global food shortages were at all likely. My slides are in a separate blog, Food Security 2.

Scientists who wish to make a serious contribution to the food security debate would be well served investing a little time in first perusing an excellent primer on environmental economics by Jeff Bennett, Little Green Lies. In particular, the chapter on the myth of peak oil is of direct relevance to Cribb's asserted problems of peak oil, peak phosphates, peak land, peak water, and even peak fish! And something else I wasn't aware of until this presentation, apparently the world also faces a capital drought and climate extinction!

There are a lot of important issues to worry about in respect of global food security. These principally revolve around the policy distortions, issues of equitable distribution, over-consumption in advanced economies, and regional issues particularly to do with sustainable farming methods. Focussing on aggregate output completely misses the point!The seminar was part of the second annual conference of the Asia & the Pacific Policy Society convened at ANU on 11-12 March 2014.