Structure of the Book
Following the above, this book is structured into two parts. In the first part, a number of issues of food security are examined within the context of observed trends in international markets and of the operation of agro-food GVCs. In the second part, country case studies are presented discussing particular policy concerns within the broader context of food security and globalisation.
I: Issues addressed
In Chap. 2 Haniotis presents the exceptional developments taking place in international agricultural markets during the past several years and the behaviour of agricultural prices, discussing at the same time how these developments influence the food security debate. Price spikes or troughs, associated with excess price volatility, have been features of agricultural markets also witnessed in the past. But the exceptional characteristic of recent years has been that all these factors moved in the same direction, thus compounding their effect on the increase in agricultural prices.
Agricultural price developments since the mid-2000s have been characterised by a confluence of factors that have led agricultural and food prices to move in parallel with the prices of other commodities and, more importantly, to stay at a higher level than their historical past, even after declining. This chapter focuses on the multiple factors of market developments and attempts to place them in the broader context and perspective of the food security debate. And although convergence on the causes remains elusive, no other single variable better reflects food security concerns than prices—in terms of their exceptionally high levels, their volatility and their co-movement. The macro-economic environment, climate, trade, energy, the food chain or other factors affecting demand, such as population and income growth, especially in emerging economies, all play a role in the level of food prices. Finally, the chapter proceeds with an analysis of these factors and the identification of the most important market drivers contributing to recent price movements, providing a discussion and assessment of the policy responses addressing food security concerns.
In Chap. 3 Legg discusses green growth strategies in agriculture and their relation to food security. Agriculture is heavily dependent on natural resources, exerts a significant impact on the environment and biodiversity, and globally needs to double food production by 2050, despite pressures on land and water resources and climate change. This means the sector needs to increase resource use productivity and resilience to shocks, while providing acceptable living standards and poverty reduction. This has been characterised by the Organisation for Economic Co-operation and Development (OECD) as “green growth”—the pursuit of economic growth and development, while preventing or minimising environmental degradation, the greenhouse gas emission intensity of production, loss of biodiversity and using natural resources within their carrying capacity. In the specific case of agriculture this is often termed “sustainable intensification”—which focuses on increasing productivity with scarce natural resources, especially land in an environmentally sustainable way. Many countries are aiming to combine mutually supportive economic and environmental policies to spur economic growth and reduce resource pressures. In the European Union, the Common Agricultural Policy since 2013 includes a new “Greening Payment” for farmers who implement enhanced cross compliance linking production support to climate and environmental objectives. Businesses are also trying to ensure long-term financial viability while reducing environmental footprints. However, more attention needs to be paid by governments and businesses to research, development and the dissemination of best practices, and to internalising environmental externalities through getting the prices right. But this requires good data on the costs and benefits of externalities, the need for well-targeted policies with a commitment to a longer-term strategy, and tackling environmental issues that are global rather than only domestic in nature.
In Chap. 4 Narula and Wahed make some tentative observations about the role of MNEs in agro-food GVCs, paying special attention to the potential for actors from developing countries to engage as suppliers within these networks. They highlight that the shift away from direct engagement in developing economies through fully internalised MNE subsidiaries to non-equity modes and linkages with suppliers depends crucially on two factors. First, domestic actors need to be a formally organised sector, with access to financial and knowledge capital. Second, the host economy needs to make available the appropriate location advantages that allow MNEs to engage with the domestic economy. This means developing stable and consistent institutions that permit MNEs to enforce contracts and reduce shirking costs, in addition to the necessary infrastructure associated with public goods. Unfortunately, most developing countries—while well-endowed with natural resources—are deficient in both domestic actors with O advantages and the necessary L advantages.
In Chap. 5 Papanastassiou and Mergos discuss the interaction between the organisational structure of MNEs and food security. Globalisation has revolutionised international commodity trade and investment. GVCs control a rapidly increasing part of trade and investment flows. Major stakeholders in achieving sustainable investment and growth are Multinational Corporations (MNCs). In this chapter they analyse MNC- generated GVCs and they argue that the lack of understanding of how MNCs’ subsidiaries shape and change GVCs creates a theoretical and methodological void. They showcase their arguments by discussing the agro-food sector and food security as one of the Sustainable Development
Goals (SDGs), a major challenge for the global community. The authors assert that an effective response to generate sustainable GVCs in the agrofood sector requires an in-depth understanding of how the contemporary MNC GVCs operate and how the impact of the role of subsidiaries in the GVC governance is addressed.
In Chap. 6 Sarris presents the investment needs and financial flows in developing countries and their relation to food security. He reviews the various financial tools that have been utilised in a variety of settings in the agricultural sectors of low-income countries, and identifies opportunities for expansion of innovative financial tool and ideas that have been piloted in some countries. His effort is to identify situations and settings where some types of financial institutions are more likely to be successful than others, and to identify gaps in financing needs. He starts by describing the rural smallholder setting and its particularities, the risk management and mitigation strategies and the different kinds of need for financial services, and then he reviews the structure and performance of a variety of informal institutions in rural finance in different contexts, and finally the outreach of formal financial institutions, as well as intermediary institutions will be reviewed. Finally, he indicates from the reviewed literature lessons and good practices, as well as gaps in the provision of financial and risk management services.
In Chap. 7 Navare presents an evaluation of the economic and social impacts of micro-finance on rural households’ food security. The dialectics on micro-finance is not new; however, the traditional focus has been on poverty alleviation more so than on managing social risk. In this chapter consideration is given to what might be a new modernity in enabling a shift from pure consumption values to productivity and welfare riskbearing. Many regions face significant environmental and economic uncertainty impacting not only on food access but also on food value. Access to financing services is not always as it seems. Food value creation demands consideration of pre-existing social risks and the creation of social worth impacting the expected effects of micro-financing. The chapter considers the risks faced by vulnerable (socially and financially excluded) households and risk-based factors that identify the roles that micro-financial service institutions play in enabling food security and in enabling income and consumption smoothing. In considering the relationship between food security and micro-financial services, it is seen that the vulnerable households are susceptible to both direct and indirect impacts. The chapter in conclusion unveils some cases that provide solutions in reducing vulnerability.
In Chap. 8 Chaniotakis presents the experience of a major bank in Greece in promoting an innovative agro-food value chain financing scheme. The chapter starts the discussion by trying to answer what the elements are that could differentiate an agro-finance model and make it considered as innovative. Before some years the answer would have focused on the combination of the parameters of a loan, such as the duration, the grace period, and the repayment schedule. Today, it is claimed, the answer should be identified in more complex solutions related to the total effect of finance not only on the borrower but also on the entire value chain where the borrower participates and even on the local economy. Then the chapter describes the Contract Farming Financial Plan that is offered by the bank to strengthen coordination and support contractual partnerships between primary agricultural producing units (farmers) and commercial/processing enterprises (integrators) in a closed and controlled financial ecosystem. More specifically, Contract Farming is the first banking programme in Greece that contributes to the rationalisation of agricultural production by matching primary production with demand, and financing both sides at the right time, with customised tools. Moreover, it boosts the modernisation of the transactional cycle, embracing the whole production—supply chain and undertaking payment administration. Through this programme the bank supports the agricultural sector and contributes to the economic and social development of the country.
In Chap. 9 Triantafyllou, Dotsis and Sarris examine the impact of extreme events in agricultural commodity prices using the empirical behaviour of the returns of three basic food commodity products, maize, wheat and soybeans. Their methodology makes use of simple statistical tools employed for modelling tail risk. Unexpected price changes and large upward/downward price swings have become very frequent and very common in the volatile agricultural markets. Sudden jumps in agricultural prices denote undesirable events for both policy makers and commodity producers, and create difficult situations for countries facing food security challenges. Unpredictable price increases raise the cost of food imports and aggravate the food security situation of food-importing countries. The chapter describes some simple tools from extreme value theory that can be used in order to quantify extreme events and applies these tools in the context of food import risk management for three basic food commodities, maize, wheat and soybeans. Finally the chapter concludes presenting the policy implications suggesting significant challenges for insuring food imports by food insecure countries.