Food security — economic thinking

Economics will determine if global food security is even possible. What type of economic thinking do we need?

Afterbefore has a list of the 10 big things we must have to achieve global food security to 2050 and beyond

Here is a closer logic look at one of them

New economic thinking to diversify and shorten supply chains whilst at the same time encouraging trade and viable agricultural commodity markets.

Many a teenager would tell you that milk comes from the fridge.

This is itself new economic thinking that encapsulates the modern reality that most of us buy rather than grow items to meet our nutritional needs. Not too long ago a teenager was required to milk the cow, feed slop to the pigs, and spend endless hours minding the sheep. Any time left over was used to transport the produce to market or across to the neighbour to trade. There was very little free time.

Shortly before this small-scale agriculture solution, the supply chain was even more immediate. The teenager had to help gather as soon as he could walk and later, once he got over his petulant phase, help hunt.

Today’s teenager probably knows that milk actually comes from the cow. But he has very little idea of where that cow is, who looks after it, or what kind of commercial arrangement the producer has that sees milk arrive in the fridge for $1 a litre to the consumer.

Our teenager may know that the price of milk is $1 a litre in the supermarket. However, we move to unfathomable territory if we tell him that the dairy farmer entered into a contract with a wholesaler that not only fixed the future purchase price of milk but also that that price could be retroactively lowered making the producer in debt to the wholesaler. I also find this unfathomable.

Now there is no chance that a food security miracle will come about because teenagers start churning cheese or gathering berries. New economic thinking does not mean going back to nature. There are too many of us for that to be a viable option.

What it does mean is a better understanding of commodity supply chains. How they are organised, where the profit margins are and an awareness of perverse outcomes. Nowhere does it make economic sense for production to be at or below cost.

Nor does it make economic sense for the market to squeeze producers so that they are forced to mine the natural capital of the soil and land. This makes their business precarious and food supply less secure.

Moving up to scale, the same principles apply to commodity markets. Trade agreements that protect buyers and sellers underpin global supply. People like to trade with their friends and those they trust but they also want the best deal. If the trade agreement enhances both there is always a chance that it comes at the expense of efficiency. For example, growing the right things in the wrong place.

After our teenager has spent three year’s at university and many months vigorously waving his economics degree certificate at future employers, his thinking should be more mature and nuanced. He may understand now why the repeat clips in long supply chains erode farm gate prices or how scale brings the unit price down or how scale can also lead to monopolies.

What we don’t know is if he can link these traditional thoughts to the needs of future food security.

If food security means making sure that produce is grown at volume and consistently, that it is delivered to where it is needed, and that the system of production and distribution is stable, then his thinking could be stretched beyond the fridge.

Afterbefore can predict future agricultural production efficiency with and without the effects of climate change and production innovation at scale. We also model the stocks and flows of natural capital. Both benefit anyone investing in the future.

Contact us for more details.



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