83979 Food Price Watch YEAR 4 • ISSUE 15 • NOVEMBER 2013 Prices of internationally traded food commodities continued to decline—by 6%—between June and October. These declines have added to the falling price trend since the all-time high of August 2012. Record harvests in wheat, maize and rice, along with stronger global stocks, a weaker dollar and releases of public stocks of rice, have driven down prices. Yet, international prices are not far from their historical peak; wheat markets remain tight despite rebounding harvests; and unfavorable weather conditions in South America, Black Sea countries, and India are increasing concerns. Domestically, food prices show their typical large variations across countries, mainly the result of seasonal factors as well as procurement policies and localized production shortfalls. This issue of the Food Price Watch also explores the role that extra-large-scale farming, popularly known as super farms, may play in boosting agricultural productivity and poverty reduction. The jury is still out: social, environmental, and animal welfare concerns must be weighed with potentially promising benefits. Global Price Trends Figure 1. World Bank Global Food Price Index 180 food grains International prices of food continued to decline between fats & oils other food 160 June and October 2013, but remain high (figure 1). The 140 World Bank’s Food Price Index decreased by 6% during that 120 period. Price declines were sustained month-to-month until 100 September, but remained virtually unchanged in October. 80 The Bank’s Food Price Index in October was12% lower than 60 a year ago and 16% below the all-time peak in August 2012. 40 Hence, despite the steady declines in the last months, prices 20 of internationally traded food still remain high. 0 Prices of grains have driven the overall decline in food 2000M01 2000M08 2001M03 2001M10 2002M05 2002M12 2003M07 2004M02 2004M09 2005M04 2005M11 2006M06 2007M01 2007M08 2008M03 2008M10 2009M05 2009M12 2010M07 2011M02 2011M09 2012M04 2012M11 2013M06 prices between June and October 2013. Those prices were 19% lower in October than in June. Prices of fats and oils went up by 1% and those of others (which include sugar Source: World Bank, DECPG. Note: The Global Food Price Index weighs export prices of a variety of food commodities around and meat) ticked down by 0.3% (table 1). the world in nominal U.S. dollar prices, 2010 = 100. Note that the previous base, 2005 = 100, has now been changed to 2010. But prices within grains have moved in different ways. The price of internationally traded maize fell by 32%, with October alone. The Bank’s average price of crude oil went sustained drops in each of the last three months. Prices of up by 6% during this period, averaging US$105 per barrel rice (Thai 5%) also fell markedly—but less—between June in October after nearing US$110 earlier in September. and October, by 16%. In contrast, the international price of However, these increases have not translated into fertilizer wheat increased during this period. The increase between price increases.1 The prices of soybean oil and sugar have June and October was 4%, with a sharp increase of 6% in experienced less marked variations and in opposite Food Price Watch, produced by the Poverty Reduction and Equity Group at the World Bank, is a series that aims at drawing attention to trends in domestic food prices in low- and middle-income countries and their policy implications. Contact: José Cuesta (jcuesta@worldbank.org) Table 1. Price Change of Key Food Commodities among exporting countries, and anticipated production June 2013– Oct. 2012– increases have all contributed to marked price declines. Indices Oct. 2013 (%) Oct. 2013 (%) The largest increase in output is expected in India as a Food -6 -12 result of abundant monsoon rains, although the mid- October cyclone Phailin has seriously affected production Grains -19 -26 in eastern states.7 Furthermore, the release of rice from Fats and oils 1 -7 public stocks in Thailand8 has also resulted in decreases Other 0 -2 in the price of Thai rice exports, contributing to the Fertilizer -15 -27 overall decline in the price of the internationally traded Prices rice. Maize -32 -37 However, deteriorating weather conditions and other Rice (Thai, 5%) -16 -21 uncertainties might further affect price trends. Frost in Wheat (U.S., HRV) 4 -9 Brazil and Paraguay, dry conditions in Argentina, and Sugar (world) 9 -8 delayed plantings due to wet weather in producing regions Soybean oil -5 -16 in the Russian Federation and Ukraine all raise concerns for winter wheat harvests. China’s rice production is Crude oil, average 6 2 reportedly expected to decline—for the first time since Source: World Bank, DECPG. 2003—due to droughts in central provinces and excessive rains in northeastern and southern provinces. A recent directions between June and October (table 1). cyclone and subsequent heavy rains are affecting rice Nonetheless, the increase in the price of sugar in October harvests in India.9 alone was 7%.2 Another source of uncertainty comes from the use of Continued favorable weather conditions and maize to produce ethanol in the United States. Although improved production prospects have translated into the use of maize is expected to increase this year (by 5%, sustained price declines. Favorable outlooks for the after last year’s first-ever decline in two decades),10 the U.S. supply of cereals predict record harvests for wheat, maize, Environmental Protection Agency has recently proposed a and rice. In the case of wheat, sharp production recoveries reduction in the mandated volumes of maize-based ethanol among European Union and Black Sea producers3 have in the United States for 2014.11 Such downward led to the expansion of global production from last year’s adjustments are associated with technological limitations dry weather–affected harvests. But stronger demand for (a “wall” in the volume of ethanol that gasoline can be wheat, especially from China, a weaker U.S. dollar, and blended with) and weaker fuel demand in the United increasing concerns following recent adverse weather States. It follows that a decline in maize use for ethanol in a have affected prices. Initially, price increases were almost context of bumper crops will contribute to downward imperceptible in August and September, but then pressures on maize prices. However, if weather conditions increased sharply in October (by 6% as indicated above). were to deteriorate, the maize market may come under Global stocks are expected to partially recover from last pressure given the still substantive share of the U.S. maize year’s declines, but major exporters’ closing stocks crop used for ethanol.12 continue to remain low, still reflecting tight export The World Bank’s Commodity Market Outlook argues availabilities. that if history repeats itself regarding the time global stocks The anticipated record maize harvest in the world’s take to fully recover from large supply shocks, such as last top producer and exporter, the United States (after last year’s droughts, some level of vulnerability will remain in year’s sharp decline), the significant output increases in global markets (especially for wheat and maize).13 In fact, EU and Black Sea producers,4 and improved harvests in ending stocks for wheat this year are not expected to return China have all contributed to plunging international to 2012 predrought levels. On a positive note, crude oil prices in recent months. Along with production increases, prices are not expected to continue rising because of supply weaker demand5 is expected to raise stocks to levels increases (from Iraq and Libya) and “receding” risks unseen since 2000.6 In the case of rice, current and associated with geopolitical tensions in the Syrian Arab historically high stocks, generally weaker currencies Republic.14 POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 2 Domestic Price Trends Somalia (19%), Haiti (11%), and Niger and Mozambique (7%) because of good production, adequate levels of Domestic prices of grains have followed different patterns (cheaper) imports, appreciation of currency, and across regions, mostly reflecting seasonal trends. Prices of humanitarian interventions.24 staples in eastern and southern Africa generally increased (except in South Africa) between June and October 2013 Domestic price variations between October 2012 and due to tight supplies in anticipation of upcoming harvests October 2013 show the usual wide range in yearly prices. and last year’s production shortfalls. In contrast, prices of The price of wheat in October 2013 was 140% higher than cereals in western Africa declined during this period as 12 months ago in Argentina (Buenos Aires), 56% higher in harvests reached markets in the region.15 In Central America Sudan (Dongola), 48% higher in Bolivia (La Paz), 43% and the Caribbean, prices of maize have also declined as higher in Belarus and 42% higher in Brazil (both, national good main season harvests reached the markets. In South average), reflecting reduced supplies and the depreciation America, however, limited supplies and deteriorated of national currencies.25 Ukraine, the Democratic Republic prospects for upcoming harvests have driven up prices of of Congo, Colombia, the Kyrgyz Republic, Tajikistan, and wheat to record highs in several countries.16 In East and Afghanistan report more moderate decreases in the South Asia, a few countries have seen wheat prices increase domestic wheat price, between 9 and 23%, mainly due to markedly due to limited supplies and strong demand. In larger supplies. Large increases in the annual maize price contrast, rice prices remained stable from counterbalancing occurred in monitored markets in Malawi (Liwonde, forces: increasing supplies in anticipation of harvests and 130%), due to increasing transportation costs and localized released public stocks are being balanced by public production declines, Somalia (Hargeisa, 52%), procurement policies and flood concerns. Wheat prices in Mozambique (Ribaue, 50%), Bolivia, Ethiopia and Uganda, Central Asia continue to hold steady in the face of strong as well as in Zambia and Nicaragua, of between 30 and export demand and weather-related concerns in large 50%. These price increases are the result of multiple producing countries.17 factors: tighter supplies; increasing demand for imports by Between June 2013 and October 2013, the largest neighboring countries; and public procurement wheat price increases (table 2) took place across monitored programs.26 Maize prices declined over the last year in markets in Argentina (60%) as a result of recent bad Ukraine and Russia (national average, 36%), and, more weather; in Brazil (27%) and Bolivia (14%)18 because of moderately, between 12 and 15%, in monitored markets in tight imports from Argentina; and in Ethiopia (30%), Thailand, Rwanda, Mexico and Togo, generally due to Sudan (23%), and Belarus (22%) because of limited adequate or increasing supplies. The price of rice increased supplies associated with several causes.19 Sizable wheat in monitored domestic markets in Bolivia (42%), price reductions were observed in Ukraine (30%, national Bangladesh and India (28%), and increased around 20% in average) because of rebounding supplies, and in monitored markets in Chad, Malawi and Mexico, influenced by markets in Moldova and Armenia (13%) because of unfavorable harvests, high import prices, public outstanding harvests and cheaper imports, respectively.20 procurement programs, and currency depreciation.27 In Domestic maize prices experienced large increases in contrast, the annual rice price dropped between 18 and monitored markets in Tanzania (74%), Mozambique 25% in monitored markets of Mali, Thailand, and (67%), Malawi (58%), and Ethiopia, Uganda and Chad Somalia.28 (between 31 and 36%) due to seasonal trends; strong demand; limited supplies from previous and current Super Farms harvests; and higher transportation costs.21 Decreases in domestic maize prices in excess of 30% took place in Despite several months of consecutive food price declines Ukraine, Russia, and in monitored markets in Nigeria and and significant improvements in extreme poverty reduction, Haiti as a result of increasing supplies from recent harvests. progress in the reduction of global chronic hunger is fairly Between June and October 2013, rice prices increased by modest, as recently reported by the Food and Agriculture 17% in monitored markets in the Philippines due to Organization (FAO), the World Food Programme (WFP), production losses associated with cyclones and flooding,22 and the International Fund for Agriculture Development and 14% in Peru, Togo, and Uganda.23 The largest declines (IFAD).29 The 842 million currently hungry people, and in the price of rice took place in markets in Rwanda (24%), future increases in food demand as the global population POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 3 Table 2. Largest Variations in Domestic Prices Quarterly Price Movements: June 2013 – October 2013 % % Wheat change Maize change Argentina, Buenos Aires, flour, wholesale, US$/kg 60 Tanzania, Dar es Salaam, wholesale, US$/ton 74 Ethiopia, Jimma, white, wholesale, Ethiopian birr/local 30 Mozambique, Nampula, white, retail, metical/kg 67 Brazil, natl. avg., wholesale, Brazilian real/kg 27 Malawi, Liwonde, retail, kwacha/kg 58 Sudan, Dongola, wholesale, Sudanese pound/local 23 Ethiopia, Diredawa, wholesale, Ethiopian birr/local 36 Belarus, Minsk, flour, retail, Belarussian ruble/kg 22 Uganda, Lira, wholesale, US$/ton 33 Bolivia, La Paz, flour, imported (Argentina), wholesale, 14 Chad, Moussoro, retail, CFA franc/kg 31 boliviano/local Pakistan, Karachi, flour, retail, Pakistan rupee/kg 10 Honduras, Tegucigalpa, white, wholesale, US$/kg -24 Bangladesh, Dhaka, flour, retail, taka/kg -6 Rwanda, Kigali, wholesale, US$/ton -28 Armenia, natl. avg., flour, 1st grade, retail, Armenian dram/kg -13 Togo, Anie, white, retail, CFA franc/kg -28 Moldova, Chisinau, retail, Moldovan leu/kg -13 Haiti, Port-au-Prince, meal (local), retail, gourde/local -30 Congo, Dem. Rep. of, Kinshasa, flour, retail, franc Congolais/kg -19 Nigeria, Kano, wholesale, naira/local -35 Russian Federation, natl. avg., offer EXW, wholesale, Russian Ukraine, natl. avg., 3rd class, bid EXW, processing, hryvnia/ton -30 -37 ruble/kg Ukraine, natl. avg., bid EXW, processing, wholesale, hryvnia/ton -40 % % Rice change Sorghum change Philippines, metro Manila, milled, retail, Philippine peso/kg 17 Chad, Abeche, retail, CFA franc/kg 82 Peru, Lima, milled, corriente, retail, nuevo sol/kg 14 Somalia, Mogadishu, red, retail, Somali shilling/kg 51 Togo, Korbongou, imported, retail, CFA franc/kg 14 Ethiopia, Addis Ababa, red, wholesale, US$/kg 39 Uganda, Kampala, wholesale, US$/ton 14 Sudan, Al-Damazin, feterita, wholesale, Sudanese pound/local 33 Nicaragua, natl. avg., 2nd quality, wholesale, cordoba oro/kg 11 Niger, Zinder, local, wholesale, CFA franc/local 18 Mozambique, Milange, retail, metical/kg -7 El Salvador, San Salvador, Maicillo, wholesale, US$/local -2 Niger, Niamey, imported, wholesale, CFA franc/local -7 Lesotho, Maseru, meal, retail, loti/kg -10 Haiti, Port-au-Prince, imported, retail, gourde/local -11 Togo, Cinkassé, retail, CFA franc/kg -23 Somalia, Mogadishu, imported, retail, Somali shilling/kg -19 Rwanda, Kigali, wholesale, US$/ton -24 Annual price movements: October 2012 – October 2013 % % Wheat change Maize change Argentina, Buenos Aires, wholesale, US$/kg 143 Malawi, Liwonde, retail, kwacha/kg 130 Sudan, Dongola, wholesale, Sudanese pound/local 56 Somalia, Hargeisa, white, retail, Somali shilling/kg 52 Bolivia, La Paz, flour, imported, Argentina, wholesale, boliviano/ 46 Mozambique, Ribaue, white, retail, metical/kg 50 local Belarus, natl. avg., flour, retail, Belarussian ruble/kg 43 Bolivia, La Paz, hard yellow, cubano, wholesale, boliviano/local 47 Brazil, natl. avg., wholesale, Brazilian real/kg 40 Ethiopia, Addis Ababa, wholesale, US$/kg 41 Uruguay, natl. avg., flour, wholesale, Uruguayo peso/kg 38 Zambia, natl. avg., white, retail, kwacha/local 40 Ethiopia, Debre Marcos, white, wholesale, Ethiopian birr/local 36 Uganda, Lira, wholesale, US$/ton 38 India, Patna, retail, Indian rupee/kg 27 Nicaragua, natl. avg., white, retail, cordoba oro/kg 33 Afghanistan, Kabul, flour, retail, afghani/kg -9 Togo, Anie, white, retail, CFA franc/kg -12 Tajikistan, natl. avg., flour 1st grade, retail, somoni/kg -12 Mexico, Mexico City, white, wholesale, Mexican peso/kg -13 Kyrgyzstan, Osh, flour 1st grade, retail, som/kg -16 Rwanda, Kigali, wholesale, US$/ton -14 table continues on next page POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 4 Table 2. Largest Variations in Domestic Prices, continued Annual price movements: October 2012 – October 2013 (continued) % % Wheat (continued) change Maize (continued) change Colombia, Bogotá, flour, wholesale, Colombian peso/kg -18 Thailand, Bangkok, wholesale, Baht/ton -15 Congo, Dem. Rep. of, Kinshasa, flour, retail, Congolais Russian Federation, natl. avg., offer EXW, wholesale, Russian -22 -36 franc/kg ruble/kg Ukraine, natl. avg., 3rd class, bid EXW, processing, hryvnia/ton -23 Ukraine, natl. avg., bid EXW, processing, wholesale hryvnia/ton -36 % % Rice change Sorghum change Bolivia, Cochabamba, grano de oro, wholesale, boliviano/local 42 Sudan, Al-Fashir, feterita, wholesale, Sudanese pound/local 77 Bangladesh, Dhaka, coarse, wholesale, taka/kg 28 Chad, Moundou, retail, CFA franc/kg 63 India, Patna, retail, Indian rupee/kg 28 Ethiopia, Addis Ababa, red, wholesale, US$/kg 53 Chad, N’Djamena, imported, retail, CFA franc/kg 18 Somalia, Mogadishu, red, retail, Somali shilling/kg 44 Malawi, Lilongwe, retail, kwacha/kg 18 Togo, Anie, retail, CFA franc/kg 35 Mexico, Mexico City, Morelos, wholesale, Mexican peso/kg 17 Niger, Maradi, local, wholesale, CFA franc/local 33 Haiti, Port-au-Prince, local, retail, gourde/local -10 Burkina Faso, Ouagadougou, local, wholesale, CFA franc/local -14 Costa Rica, natl. avg., 2nd quality, retail, US$/kg -11 El Salvador, San Salvador, Maicillo, wholesale, US$/local -15 Colombia, natl. avg., 2nd quality, retail, Colombian peso/kg -14 Mali, Bamako, local, wholesale, CFA franc/local -38 Somalia, Galkayo, imported, retail, Somali shilling/kg -18 Thailand, Bangkok, 25% broken, wholesale, Baht/ton -22 Mali, Sikasso, local, wholesale, CFA franc/local -25 Source: Food and Agriculture Organization (FAO) and Global Information and Early Warning System (GIEWS). Note: Currencies as originally reported by FAO. reaches 9 billion by 2050, continue to demand sustained this discussion. Much celebrated is the success of vast increases in agricultural productivity. farms in Brazil’s cerrado—some sprawling 100,000 ha—that Where will these increases in agricultural productivity have transformed once low-productivity land into a world come from? Currently the dominant view is that small- powerhouse of soybean production.36 More recently, a scale farming is critical to boost agricultural productivity current joint venture between China and Singapore is and reduce poverty.30 Yet, large-scale farming is increasingly projected to develop an extensive 145,000 ha “food zone” viewed as an attractive complement; some in fact argue in the northeastern province of Jilin, China. The motivation that both small- and large-scale farming practices are is that the US$18 billion 15-year project will reduce necessary to increase agricultural productivity and produce Singapore’s vulnerability to food-related shocks and enough food to feed the world’s poor.31 Advocates argue generate employment opportunities for Jilin residents. that large-scale farming benefits include efficiency gains China is also expected to benefit from adopting the highly from scale economies (at least for plantation-type recognized regulatory and export standards of Singapore.37 agriculture) and vertical integration32; favorable access to In Indonesia, large-scale operations in oil palm have credit, finance, and technology; capacity to satisfy product reportedly created between 1.7 and 3 million new jobs.38 certifications and standards; and ability to expand But there are also multiple risks associated with large- agriculture to previously uncultivated areas.33 But there scale farming. Opaque deals known as “land grabs,” are also those questioning the complementarity between involving severely food insecure areas, outrageous large- and small-scale farming (box 1) and pointing out conditions, and disappointing outcomes have attracted potential environmental, social and economic concerns, global interest.39 This was the case in attempts to lease 1.3 especially in the context of weak institutions and state million ha, or half the cultivable land of Madagascar, which fragility.34 is said to have contributed to the ousting of then President Super farms, typically exceeding thousands of hectares Ravalomanana, as well as vast land areas in South Sudan (ha) in the developing world35 (box 1), are at the center of (up to 400,000 ha).40 In Eastern Europe, rapid POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 5 Box 1. Q&A on Super Farms What is a super farm? There is not a widely accepted standard definition of the minimum area (or livestock head count) that a farm must have to be considered a “super” farm. Cotula et al. (2010)a use 1,000 ha as the threshold for large-scale agriculture, while Deininger and Byerlee (2011)b consider 10,000–15,000 ha the minimum range for a farm to be consider a super farm. Deininger and Byerlee (2011) report that the median farm size in Brazil’s cerrado is 1,000 ha, but many exceed 10,000 ha. In South Asia, a typical oil palm mill averages 10,000 ha. In Sub-Saharan Africa, some farms exceed 100,000 ha, while in Russia, some are larger than 300,000 ha. Are all super farms the same? Super farms are quite heterogeneous in terms of the capital involved (foreign, national, or mixed; private, public, or combined), property terms (lease or purchase), exploitation model (land concentration or independent small farms) and degree and terms of integration (vertical or horizontal integration), among other criteria. What brings them together is their large scale of operations, large investment flows, and an unambiguous profit orientation. Is a super farm the same as a land grab? No. Oxfamc defines a land grab as an acquisition of land that involves one or more of the following circumstances: violation of human rights; affected communities do not provide free, prior, and informed consent; lack a proper assessment of social, economic, environmental impacts; lack transparent and competitive contracts; and disregard of meaningful participation. There are legitimate large-scale farming operations that do not engage in these behaviors.d What are the benefits of super farms compared to small farms? For decades, small family-operated farms have been thought to be more productive than larger commercial units. Family workers are typically more motivated than hired workers and require less supervision; small farms are more flexible and better able to adjust labor supply to seasonal and annual variabilities; and operators/owners have intimate knowledge of local conditions. Yet, large-scale farming can potentially provide multiple benefits. The unit costs of acquiring and processing information and technology decrease as the farm size increases. The high costs of gaining safety, environmental, or product identity certification make large operating units advantageous. In some cases, large operations can fill gaps in public services, constructing their own port terminals for exports. They can also access international capital markets and conduct their own private research and development. However, corruption and weak land governance may produce negative impacts from large-scale investments by promoting land speculation, causing inequality in land ownership, and generating environmental risks and sanitary and animal welfare concerns. Do they have a positive impact on poverty and employment? Existing evidence points to the critical role that small-scale and family farming have in reducing poverty and employment because they are labor intensive in areas of high poverty incidence; favor food security in those areas; and have or may have strong economic links back into the community.e But this information should not be taken to imply that large firms do not have potential to impact poverty. Unfortunately, evidence on specific large-scale farming impacts is scarce: evidence points to sizeable employment and economic opportunities associated with these practices in Brazil, Indonesia, Liberia, Peru, and Ukraine. This is more so the case among relatively labor-intensive crops such as oil palm, sugarcane, rubber, or jatropha.f In Brazil, recent studies report increasing incomes, human capital accumulation, and poverty reduction in municipalities associated with large-scale sugarcane and soybean production. Yet studies also find in those areas increases in income inequality and social costs (for example, medical costs from respiratory illnesses associated with sugar burning).g But neither benefits nor harm should be assumed automatic or intrinsic and more evidence is needed. Can super farms complement small-scale agriculture? A view typically held among international institutions is that small- and large-scale farming can coexist because they have different comparative advantages depending on land and labor abundance, functioning of institutions and property rights, and the extent of yield gaps and types of crops.h Another, more critical, view—held by some academics— argues that the monopolistic bargaining power of large-scale farming, the increasing demands of certification schemes, and the scale of new technology may crowd out small farming.i box continues on next page POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 6 Box 1. Q&A on Super Farms (continued) Under what circumstances can super farms generate positive impacts on food security and poverty reduction? Multiple actions are needed from numerous stakeholders, such as governments, private sector, civil society, and the international community. Wide-ranging interventions include making information on land deals publicly available; prioritizing public investments on infrastructure and technology; improving competition and governance in land and agriculture markets; preventing skilled managers from going elsewhere; increasing use of truly participatory community tools; and designing, disseminating, implementing and monitoring responsible agroinvestment principles, among others. Sources: a. Cotula, L., S. Vermeulen, R. Leonard, and J. Keeley, Land Grab or Development Opportunities? Agricultural Investment and International Land Deals in Africa (Rome: IIED, IFAD, FAO, 2009). b. K. Deininger and D. Byerlee, Rising Global Interest in Farmland: Can It Yield Sustainable and Equitable Benefits? (Washington, DC: World Bank, 2011). c. Oxfam, “Our Land, Our Lives: Time Out on the Global Land Rush,” Oxford Briefing Note, October 2012. d. See Deininger and Byerlee (2011) and Cotula et al. (2009) for country-specific case studies. e. See references in note 22 in main text. There are, however, those who question the validity of evidence on small farms because of technical reasons, such as, for example, the fact that size and productivity analyses do not include truly large-scale farming. Those views argue that the superiority of small farms cannot be established without proper evidence on large farms (P. Collier and S. Dercon, “African Agriculture in 50 Years: Smallholders in a Rapidly Changing World?” Expert Paper for the FAO Conference on “How to Feed the World in 2050,” Rome, October 12–13, 2009). f. Deininger and Byerlee, “Rising Global Interest in Farmland.” g. L. K. VanWey, S. Spera, R. de Sa, D. Mahr and J. F. Mustard, “Socioeconomic Development and Agricultural Intensification in Mato Grosso,” Philosophical Transactions of the Royal Society Biological Sciences 368 (2013), http://dx.doi.org/10.1098/rstb.2012.0168; D. Weinhold, E. Killick, and E. Reis, “Soybeans, Poverty and Inequality in the Brazilian Amazon,” World Development 52: 132–143 (2013); L. Martinelli, R. Garrett, S. Ferraz, and R. Naylor, “Sugar and Ethanol Production as a Rural Development Strategy in Brazil: Evidence from the State of São Paulo,” Agricultural Systems 104: 419–28 (2011). h. World Bank Group Statement on Oxfam note, “Our Land, Our Lives,” October 4, 2012, Press Release No. 2013/100/ARD. See, for discussion, Deininger and Byerlee, “Rising Global Interest in Farmland,” and J. D. van der Ploeg (“Poverty Alleviation and Smallholder Agriculture: The Rural Poverty Report 2011,” Development and Change 43[1]: 439–48 [2012]). i. Van der Ploeg, “Poverty Alleviation.” concentration of farming land in a context of land-use contexts that are starting with high levels of corruption contraction has been associated with rapid increases in the and fragile institutions. It is in these contexts that price of land and lower productivity growth compared to abusive purchase or leasing conditions, monopolistic smaller farms.41 Super farms—including also large livestock positions, and geopolitical frictions are more likely to agribusiness—have also raised serious concerns regarding emerge.46 the environment, spread of disease and animal welfare, Hence, it is unlikely that super farms will bring about associated with waste disposal, monocultures and zero- agricultural and overall economic growth, food security, grazing practices, respectively.42 and poverty reduction in the absence of strong institutions, But contrary to small-scale farming, there is little or without at least effective safeguards and responsible reliable evidence assessing the impacts of super farms or investment practices in place (even though there is not a establishing meaningful comparisons with small-scale dearth of such initiatives).47 But this also applies to strong agriculture.43 What it is known, however, does not institutions in the context of small-scale farming. In short, necessarily point to a larger size as the only or main while the jury is still out, it is clearly too early to brand factor responsible for either positive or negative impacts super farms a solution to hunger and the world’s increasing on productivity. The spectacular productivity food demand. The stakes are too high, however, to rule out achievements of the Brazilian cerrado are largely any potential source of agricultural productivity growth, attributed to breakthroughs in the treatment of acidic production, or income. soils and the adaptation of pasture varieties to such soils and soybeans to tropical latitudes.44 Furthermore, even Notes in abundant land contexts, performance of large-scale farming might be more closely associated with their 1. In fact, fertilizers prices dropped 15% between June and October, reflecting declining production costs from cheaper natural gas (World Bank, Global establishment in areas better endowed with quality soil Economic Prospects: Commodity Markets Outlook [2013]). and infrastructure and their use of superior management 2. The price of sugar has recently increased due to unfavorable weather skills than necessarily with economies of scale.45 The conditions in the center-south region of Brazil, although in a context of abundant supplies. The decrease in soybean oil prices reflects good prospects, risks of large farms aggravating corruption, bad although recent weather concerns among key producers and firm demand in governance, and economic and social distortions to local China led to slight price increases in September (which decreased again in communities constitute a more considerable concern in October; FAO, Global Food Price Monitor, September 2013; Agricultural POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 7 Market Information Systems [AMIS], Market Monitor, October 2013, No. 12; 23. FAO, Global Food Price Monitor, November 11, 2013; FAO, GIEWS Country AMIS, Market Monitor, November 2013, No. 13). Briefs, several countries, http://www.fao.org/giews/countrybrief/ (2013). 3. FAO (Crop Prospects and Food Situation, October 2013, No. 3) forecasts annual 24. Currency appreciation occurred in Somalia and humanitarian distribution in increases in wheat production for 2013 of 8% in the European Union; 36% in Niger (FAO, Global Food Price Monitor, November 11, 2013; FEWS NET, Price the Russian Federation; 34% in Ukraine; and 66% in Kazakhstan. Watch, September, October 31, 2013. 4. These increases constitute complete recoveries from last year’s reduced 25. Currency depreciation occurred in Brazil and Sudan. harvests due to dry conditions. Production increases in 2013 are forecast to be 26. Increased demand of imports from neighboring countries affected Uganda 12% in the European Union; 13% in Russia; and 15% in Ukraine (FAO, Crop and Zambia, while public procurement programs also had an impact on Prospects). domestic prices in Zambia (FAO, Global Food Price Monitor, November 11, 5. Weaker demand for imports is reported in Indonesia, Malaysia, Nigeria and 2013; FEWS NET, Price Watch, September, October 31, 2013). the Philippines, all large importers (AMIS, Market Monitor, November 2013, 27. Public procurement programs in Bangladesh and India and currency No. 13). depreciation in Malawi (FAO, Crop Prospects). 6. FEWS NET, Price Watch, September 30, 2013. Especially strong is the 28. Prices went down in Mali due to increased imports and improved security rebound in major exporters’ stock to disappearance ratios (FAO, Food Outlook, situation; public stock releases and decreased export prices in Thailand; and November 2013). above average level harvests in Somalia (FAO, Global Food Price Monitor, 7. The damage caused by cyclone Phaillin and subsequent heavy rains in the November 11, 2013; FEWS NET Price Watch, September, October 31, 2013). states of Andhra Pradesh and Orissa have led to downward revisions of the 29. FAO, IFAD, and WFP, “The State of Food Insecurity in the World: The forecasted production in India, with some analysts even suggesting that the Multiple Dimensions of Food Security 2013” (2013). year’s rice harvest may fall below last year’s (B. Mukherji, “Indian Rice Harvest 30. See among others, T. W. Schultz (Transforming Traditional Agriculture [New to Fall This Year, Official Says,” The Wall Street Journal, November 7, 2013; Haven: Yale University Press, 1964]); C. Barret (“On Price Risk and the Inverse FAO, Food Outlook). Farm Size-Productivity Relationship,” Journal of Development Economics 51[2; 8. The release of public stocks is justified by the need to accommodate for 1996: 193–216]); R. Eastwood, M. Lipton, and A. Newell (“Farm Size,” in additional public purchases of the new harvest under the rice mortgage Handbook of Agricultural Economics, ed. P. L. Pingali and R. E. Evenson [North program extended into 2014. In addition to public stocks releases, the Thai Holland: Elsevier, 2010]); the World Bank (World Development Report 2008: baht has also depreciated, thus contributing to the overall fall in export prices. Agriculture for Development [Washington, DC, 2007] and “Agriculture Action 9. United States Department of Agriculture (USDA), World Agricultural Supply Plan,” http://go.worldbank.org/6JHOE507J0); IFAD (The Rural Poverty Report and Demand Estimates (WASDE), November 8, 2013. 2011 [Rome; IFAD]); and FAO, IFAD, and WFP (State of Food Insecurity in the 10. USDA, “Corn-Based Ethanol Expansion in the United States Has Slowed in World New Realities, New Challenges: New Opportunities for Tomorrow’s Recent Years,” Economic Research Service, http://www.ers.usda.gov/data- Generation [Rome: FAO]). products/chart-gallery/detail.aspx?chartId=40078; USDA, WASDE, 31. World Bank Group statement on Oxfam note, “Our Land, Our Lives” September 2013. (October 4, 2012, Press Release No. 2013/100/ARD). 11. U.S. Environmental Protection Agency, “EPA Proposes 2014 Renewable Fuel 32. Whether agricultural production is subject to economies of scale is far from Standards/Proposal Seeks Input to Address ‘E10 Blend Wall,’ Reaffirms settled. Even though such increasing returns are conceptually plausible, there Commitment to Biofuels,” Press Release, November 15, 2013, http:// is, at best, not much conclusive empirical evidence supporting this claim (K. yosemite.epa.gov/opa/admpress.nsf/bd4379a92ceceeac8525735900400c27 Deininger, D. Nizalov, and S. Singh, “Are Mega-Farms the Future of Global /81c99e6d27c730c485257c24005eecb0!OpenDocument. For analyses on Agriculture?” World Bank Policy Research Working Paper 6544, July 2013). the potential consequences of downward adjustments in biofuel mandates, see 33. This is especially important in land-abundant contexts with low population C. Podkul (“RPT-Ethanol, Oil Groups Blitz White House as Biofuel Rule density and scarce immigration (K. Deininger and D. Byerlee, “The Rise of Nears,” October 30, 2013) and N. Snow (“AAA, API ask EPA to Lower 2014 Large Farms”). Ethanol Mandates,” Oil and Gas Journal, October 28, 2013). 34. J. D. van der Ploeg, “Poverty Alleviation and Smallholder Agriculture: The 12. World Bank, Commodity Markets Outlook. Rural Poverty Report 2011,” Development and Change 43 (1): 439–48 (2012); 13. Ibid. Oxfam, “Our Land, Our Lives: Time Out on the Global Land Rush,” Oxford 14. United States Energy Information Administration (EIA), “Short-Term Energy Briefing Note, October 2012; GRAIN, “GRAIN Releases Data Set with over Outlook: Market Prices and Uncertainty Report,” October 2013; World Bank, 400 Global Land Grabs,” http://www.grain.org/article/entries/4479-grain- “Developing Trends: October 2013,” Development Prospects Group. releases-data-set-with-over-400-global-land-grabs (2013). 15. Famine Early Warning System Network (FEWS NET), Price Watch, September 35. It is also worth noting that super farms are not unique to the developing world. 2013, October 31, 2013. There are sprawling farms with vast tracts of land and large animal headcounts 16. Argentina, Bolivia, Brazil, and Paraguay (FAO, Global Food Price Monitor, all over the world, from the United States, the United Kingdom, and Australia November 11, 2013). to middle-income countries such as Brazil, Chile, and Vietnam as well as poor 17. FAO, Global Food Price Monitor, October 9, 2013. and fragile countries such as the Democratic Republic of Congo, Liberia, and 18. Figures for Brazil and Bolivia refer to national average prices. Sudan, to name a few. Neither do super farms imply that investments 19. Those causes refer to reduced production from last year’s harvests (Ethiopia); exclusively flow from rich countries into developing countries. For example, currency depreciation and foreign exchange shortages to buy imports (Sudan); China has engaged in large-scale farming in Africa, while also developing large and decreased production this year (Belarus; FAO, Global Food Price Monitor, farms at home. Similarly, Brazil is exploring new deals in Mozambique in November 11, 2013; FEWS NET, Price Watch, September, October 31, 2013; addition to the already discussed cerrado. Trinidad and Tobago has been FAO, Crop Prospects; FAO, Global Food Price Monitor, November 11, 2013). exploring the possibility of developing such activities in Guyana (Straits Times, 20. In places like the Democratic Republic of Congo (19%) and Bangladesh (6%), “Super Farm,” July 25, 2013, http://www.straitstimes.com/sites/straitstimes. price declines are associated with increased supplies and continued public com/files/20130725/ST_20130725_FARMFINAL_3761443.pdf; Trinidad distribution, respectively. and Tobago Newsday, “Mega Farms Not Competing with Local Farmers,” 21. FAO, Global Food Price Monitor, November 11, 2013. August 22, 2013; UNAC, Via Campesina Africa, http://viacampesina.org/en/; 22. This price increase in the Philippines does not reflect the impact of the GRAIN, “Brazilian Megaproject in Mozambique Set to Displace Millions of unprecedented and terribly devastating cyclone Haiyan. Peasants,” November 29, 2012). POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 8 36. The Economist, “Brazilian Agriculture: The Miracle of the Cerrado,” August 43. Deininger and Byerlee (Rising Global Interest in Farmland) is an exemption, 26, 2010. As a result, Brazil, within a couple of decades, has become a peer of providing a comparative analysis in terms of unitary yields, costs, labor, and the traditional top five global grain exporters—Argentina, Australia, Canada, wages/incomes between small- and large-scale farms across crops in seven the European Union and the United States—and the only one with a tropical countries. They show that even for the small sample used, there is not a weather. systematic superiority of either large- or small-scale agriculture across the 37. Straits Times, “Super Farm,” July 25, 2013, http://www.straitstimes.com/ analyzed parameters (that is, yields, costs, and wages/incomes). infographic/story/super-farm-20130725; Future Directions International, 44. Embrapa, Brazil’s agricultural research corporation, had a critical role in those “Singapore Secures China as Future Food Source,” Strategic Analysis Paper 24, technological breakthroughs (The Economist, “Brazilian Agriculture”). Some September 2010.” Investment in high-tech research and development and the analysts also indicate that local small and medium scale farmers may have also development of a complete industrial chain serving other parts of China and played a significant and pioneering role in the spectacular development of the region are also benefits expected from this project. Brazil’s cerrado. 38. K. Deininger and D. Byerlee, Rising Global Interest in Farmland: Can It Yield 45. Also, the initial concentration of land affects the pattern of entry and exit of Sustainable and Equitable Benefits? Washington, DC: World Bank (2011). farms over time. Deininger, Nizalov and Singh (“Are Mega-Farms the Future of 39. These operations also typically include massive land acquisition and large Global Agriculture?”) report these results for Ukraine, making use of 10-year foreign investors (K. Deininger and D. Byerlee, Rising Global Interest in farm panel data. Furthermore, there is increasing evidence that yield growth Farmland). This report indicates that only 203 out of 414 deals tracked may not be monotonic with respect to farm size, but rather that productivity between 2004 and 2009 with information on land size could be complied. describes an inverted U pattern (V. Lapa, A. Lissitsa, and A. Tovstopyat, Disappointing outcomes refer to failure to engage in expected activities; “Super-Large Farms in Ukraine”; Deininger, Nizalov, and Singh, “Are Mega- levels of investments or employment promised; or failures in engagement Farms the Future of Global Agriculture?”) with local communities in meaningful ways (L. Cotula, S. Vermeulen, R. 46. Collier and Dercon, “African Agriculture.” Leonard, and J. Keeley, Land Grab or Development Opportunities? 47. Examples of these efforts include the “Voluntary Guidelines on the Agricultural Investment and International Land Deals in Africa (Rome: Responsible Governance of Tenure Land, Fisheries, and Forests in the IFAD). Context of National Food Security (VGs)” and the “Principles for 40. Cotula, Vermeulen, Leonard, and Keeley, Land Grab or Development Responsible Agro-Investment (PRAI),” with the wide participation of Opportunities?; P. Collier and S. Dercon, “African Agriculture in 50 Years: international organizations, bilateral donors, governments, and civil society Smallholders in a Rapidly Changing World?” Expert Paper for the FAO organizations. In addition, the Land Governance Assessment Framework is Conference on “How to Feed the World in 2050,” Rome, October 12–13, a diagnostic tool developed by the World Bank and several partners that 2009. assesses the status of land governance at the country level. “Grow Africa” is 41. A. Kramer, “Russian’s Collective Farms: Hot Capitalist Property,” New York another multistakeholder platform to accelerate investments in agriculture Times, August 30, 2008; V. Lapa, A. Lissitsa, and A. Tovstopyat, “Super-Large in Africa under the umbrella of the Comprehensive Africa Agriculture Farms in Ukraine and Land Market,” paper presented at IAMO Forum (2008); Development Program. Among private stakeholders, The Guardian reports K. Deininger, D. Nizalov, and S. Singh, “Are Mega-Farms the Future of Global the recent commitment pledged by Coca-Cola to conduct third-party Agriculture?” social, environmental, and human rights’ assessments of the major sugar 42. Collier and Dercon, “African Agriculture”; Deininger and Byerlee, “The Rise suppliers for its products and enforce the principle of free, prior, and of Large Farms”; POST (UK Parliamentary Office of Science and Technology), informed consent across its operations and partners (M. Tran, “Coca-Cola “Livestock Super Farms,” POSTNote No. 404, March 2012; Cotula, Vows to Axe Suppliers Guilty of Land Grabbing,” The Guardian, November Vermeulen, Leonard, and Keeley, Land Grab or Development Opportunities? 8, 2013). POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 9 POVERTY REDUCTION & EQUITY GROUP • WWW.WORLDBANK.ORG/POVERTY POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK THE WORLD BANK GROUP 10