Asia must lead a second green revolution
Frederic Neumann says Asia's vulnerabilities to food shortages - a looming problem as global production falls and diets become richer - must inspire it to lead a second green revolution
American farmers are not the only ones hoping for rain. Asians are, too. The drought in the US Midwest has global implications, raising the cost of food everywhere. In July, agricultural prices jumped 6 per cent and are again approaching their highs of 2008, when parts of Asia and Africa experienced social unrest as a result. The frequency of food price spikes in recent years highlights a deeper problem: more worrying shortages will occur unless Asia, home to well over half the world's population, dramatically improves its output.
There are a number of causes for the world's intensifying food crisis. Demand and supply are both to blame. Growing prosperity in the developing world, above all Asia, is driving up meat consumption, which imposes a much heavier burden on agricultural resources than traditional diets. Even in India, where vegetarianism has held sway for hundreds of years, rising incomes and changing tastes are leading to record demand for meat year after year.
Food production is falling behind. Across the region, growth in agricultural productivity has slowed since the green revolution of the 1960s and 1970s, when new varieties of rice and the application of more modern farming techniques turned countries such as China, the Philippines and Thailand into large surplus producers while dramatically easing shortages elsewhere. The single-minded focus on industrialisation since is partly at fault, prompting a policy neglect of agriculture and, even more damaging, environmental degradation that is now exposing the precarious state of farming in the region.
Rapid urbanisation, the engine of Asia's race towards a more prosperous future, is reducing the availability of arable land and rapidly ratcheting up the use of water by households and factories. Water tables in some parts of India have declined at the unprecedented rate of 33cm per year in recent years. Poor rainfall is only partly responsible, with overextraction due to polluted surface water being the primary reason.
In much of Asia, soil erosion is a growing problem as well. If it continues at its current pace, the Chinese government estimates that harvests in the northeast, the country's breadbasket, could fall by 40 per cent in 50 years.
Climate change, in the form of more extreme weather, along with higher local temperatures, could also reduce overall output growth. According to the Food and Agriculture Organisation, a 1 degree Celsius rise in average temperature above optimum during the growing season reduces yields by around 10 per cent. Estimates by the International Food Policy Research Institute suggest that over the coming four decades, growth in global cereal production could thus slow to 30 per cent, instead of the 38 per cent that would occur under other circumstances. The three G20 countries most vulnerable to the agricultural impact of climate change are India, China and Indonesia.
Asia thus requires another agricultural revolution to feed its growing and increasingly prosperous populations, and to stabilise food prices globally. The region's drive towards industrialisation requires a healthy counterbalance of accelerating agricultural efficiency and improved environmental protection. Officials should urgently tackle four policy areas.
First, to raise productivity, the property rights of farmers need to be strengthened. In China, smallholders still do not enjoy full ownership of their plots. Being generally given only 30-year lease rights, they cannot mortgage their land to purchase machinery or additional plots. Property rights are also ill-enforced in other parts of Asia, including the Philippines and India, where the lack of legal protection can compromise farmers' claims to their land and thus the incentive to invest in long-term production improvements.
Second, farmers still face limited access to financing. Whether in China, India or vast stretches of Southeast Asia, bank branches are under-represented in rural areas and the share of loans being extended to farmers falls short of requirements. Because rural areas are net providers of savings to urban centres, they are being drained of funds for investment.
Government development or cooperative banks have played an important role in the past. But private financial institutions should be encouraged to branch out to rural areas to provide loans, expertise and modern financial techniques, such as insurance products, that are currently lacking.
Third, more stringent environmental protection efforts are urgently needed. In many cases, the relevant laws are already on the books but require better enforcement. In other instances, additional statutes may be needed. Dedicated environmental protection agencies, with regulatory power, still do not exist in much of the region, but will ultimately have to be set up to monitor and regulate the environmental impact of both industrial and agricultural activities.
Fourth, the region needs research into farming techniques and crop varieties. While many advances have been made in laboratories, especially in the West, these have not made their way yet onto farms in Asia. Extra work is required to adapt these new approaches to local growing requirements and educate farmers in their use and encourage them to innovate.
Asia, in short, requires another agricultural revolution to match the advances that first occurred in the 1960s and 1970s but have since stalled. This is of global significance. The region's rapacious appetite for food and diminished ability to feed itself have vast implications for world agricultural markets.
Asia may not be able to face these challenges alone. The West will have to help with expertise and investment. It is too big a problem to be left unattended. The spike in cereal prices due to drought in the Midwest will otherwise be just a mild precursor of what's to come.
Frederic Neumann is co-head of Asian economics research at HSBC