When we talk about food access then first thing which comes to our mind is whether hunger which exists because of not having access to food is either production problem or distribution problem? From a dynamic perspective it is both. Before proceeding further let’s understand what does production problem actually mean and what does distribution problem actually mean.
What does production problem actually mean?
- There is imbalance between global food supply and demand trends
- Sufficient global food availability is necessary but not a sufficient condition for global food security.
What does distribution problem actually mean?
- Not everybody has sufficient access to food because of too low real income (including subsistence production).
Both, policies that increases food supply and policies that help increase the incomes of the poor are important for reducing hunger, improve access to food as well as in achieving food security. The world food equation has demand on one side and supply on the other. Variables on the demand and supply side are mentioned in the table below
| Demand Side
|| Supply Side
| Population growth
|| Agricultural land
| Income growth
|| Water and other natural resources
| Change in food preferences
|| Input Intensity
| Alternative uses (biofuel)
|| Climate change
Depending on which side grows stronger, food prices will increase or decrease.
Food Price Dilemma
In the picture above three actors are shown at all three corners of the triangle. Food prices are very important for the welfare of people to leave them to the market forces alone. But how the good prices should look like? (what type of price policies will help you stay in power as policymaker?)
Pricing Options in Developing Country
Protection of farmers through high market prices
- This is the policy that was typically observed in rich countries over the last few decades.
- Given the huge number of poor consumers, this policy is rather rare for staple foods in developing countries.
- For a long time agriculture was seen as a passive sector, with the task to provide cheap food, but otherwise no important role in the overall economy.
- Farmers in developing countries are rarely organized, they live in remote areas and have a low level of education. Hence do not constitute a strong lobby.
Protection of consumers through low market prices
- This has been dominant policy in most developing countries.
- Helps poor consumers, but taxes the farm sector (not all farmers as some farmers are net consumers).
- Helps promote industrial development through keeping wages low.
- Urban consumers are more visible to politicians. Together with industrialists they constitute a strong lobby.
- If agricultural commodities are being exported then government revenues through export taxes.
High producer prices, low consumer prices
- Explicit producer and/or consumer subsidies entail price wedge (higher price for farmers, lower price for consumers).
- Price wedge has to be paid from government budget and this can easily overstrain the financial capacity.
- Administrative problems, if market infrastructure is not well developed, since there are millions of producers and consumers (partly state procurement and marketing).
- Explicit consumer subsidies are sometimes implemented in a dual market structure with targeting (e.g in rationing schemes).