Dr B K Mukhopadhyay
(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)
In the developing block, not only being a supplier of food, raw materials and employment, the farm sector is expected to contribute to the exports wing in a much better manner considering the need to bolster earnings vitally required for development financing. Side by side, a prominent feature of agricultural commodity exports in many developing countries is that relatively few commodities account for a large share of total export earnings. Often they depend, and would continue to depend, on a handful of agricultural commodity for their merchandise export revenues.
Side by side, the sluggish demand for primary agricultural commodities and the recurring conditions of boom and slump in their exports have created problems for commodity-dependent economies. Unstable commodity prices and export earnings are well known to make development planning more difficult and generate adverse short-term effects on income, investment and employment. What is more, with slow demand conditions, such economies specializing in production of primary commodities can be expected to have a declining share in world trade unless they have a major cost or quality advantage over competitors.
The Reality
Farm sector planning calls for a shot in the arm. The potentialities are to be made use of in a planned manner so that the vast market could be tapped in a better manner and the indigenous demand is met adequately. Let us look at the ongoing situation sharing the experiences and happenings in some of the sample developing economies.
Mango: Myanmar and others
It is a good example on this score. Mango season runs from April to July and the fruit is mostly exported to China via border trade, while other small shipments are also sent to Malaysia, Singapore and Thailand. The most popular variety – sein ta lone (diamond) – is mainly grown in Mandalay Region and southern Shan State and has earned a good reputation internationally.
The market is a tremendous one, but a number of problems inherent stand in the way. Myanmar can only meet about ten percent of the demand because it doesn’t produce enough high-quality fruit. Not only Myanmar, most of these economies suffer from traditional approach. Such economies could export significantly more mangoes if the quality and value-addition are taking care of. Markets like Japan only want fruit that has been carefully processed.
Re-exporting is another area by which others reap the benefit. China, Singapore and Malaysia buy mangoes from Myanmar, process them and then re-export the finished product.
Transportation problems are very common on this score. Farmers try to save money by overloading mangoes when they transport them, which damages the fruit and reduces their value. Besides, farmers also pick the fruit before they are fully ripe. Farmers sometimes rush to harvest their crops when they hear of a good price being offered in the market. Inadequate cold storage facilities have been another bottleneck. Actually, the industry needs capital investment to develop processing factories and better transport networks.
Africa: Coming Up
Examples are not difficult to locate so far as Africa is concerned. So far Ghana is concerned, cocoa plays the dominant role. Ivory Coast, the world’s leading producer of cocoa, and Ghana, the second after Ivory Coast, jointly produce around 53 percent of the world’s cocoa. More than half of the world’s chocolate comes from the cocoa plantations of Ghana and Côte d’Ivoire, where hundreds of thousands of smallholder farmers supply lucrative fair-trade markets in developed countries. Ghana produces high-quality cocoa that earns a premium price on the world market.
Cocoa is thus an important cash crop in some such economies - contributing around 7.5 percent of GDP in Côte d’Ivoire and 3.4 percent in Ghana. It accounts for as much as 70-100 percent of household incomes of cocoa farmers in Ghana.
But increasing temperatures will lead to massive declines in cocoa production by 2030 in Ghana and Cote d’Ivoire, both in West Africa. The CIAT’s (Colombia-based International Centre for Tropical Agriculture), in a recently published report, anticipated that areas of cocoa suitability will begin to decline by 2030, as average temperatures increase by one degree Celsius. It also disclosed that by 2050, a rise of 2.3 degrees Celsius will drastically affect production in lowland regions, including Western and Brong Ahafo.
Over a third of Ghana’s economy is agricultural. Products range from bananas, cassava (tapioca), cocoa, coffee, corn and peanuts to timber.
Ghana now plans to boost its exports by selling cassava, textiles and palm oil in foreign markets.Cocoa has to continue with its vital contributions.
Banana: India and others
Banana is again one such commodity where the business scope is a big one for a number of developing economies provided they are competent enough to grab the situation. Bananas are the fifth largest agricultural commodity in world trade after cereals, sugar, coffee, milk and cocoa.The contribution of banana to GDP of agriculture in India is around 3 per cent. It also provides livelihood security to millions of people in primary producing areas, trade and processing.
It is also one of the main fruits in international trade. In terms of volume it stands first among exported fruits, and second after citrus fruits in terms of value. The global production of banana is of the order of around 71 million tonnes, cultivated in about 4.5 million hectare.
In the world today, the major banana exporting countries are Ecuador, Colombia, Costa Rica and Philippines and the major importing countries are USA, Belgium, Germany and United Kingdom. From the emerging belt, India, Ecuador, Brazil and China alone produce half of the total bananas of the world. According to FAO estimates, India occupies the highest area under banana in the world. It may be noted here that around 11 percent of the total global area under banana belongs to India. India ranks first in banana production, contributing about 23 percent in world pool of banana production. Tamil Nadu, Maharashtra, Karnataka, Gujarat, Andhra Pradesh, Assam and Madhya Pradesh are the major banana-producing states of India.
In spite of these facts it is regrettable that though nearly 23 percent of total world output is produced in India, the export of this item has been negligible when compared to a number of countries. Presently, the exports of Indian Banana are mainly moving to UAE, Saudi Arabia, besides Kuwait, Bahrain, Oman and Qatar. Other major importers of this fruit from India are Nepal, USA, Iran, Maldives, UK, Canada and Bangladesh.
So far Bangladesh is concerned, agricultural trade has been an important contributor to improve food security and price stability. Efforts are on there to expand the scope of international trade in agricultural products. Bangladesh has been successful in exporting cereals and high-value products (e.g.shrimp and fish) in part as a result of preferential trade agreements. Policy reforms backed by investments could further enable Bangladesh to bolster exports in these areas whilemeeting relevant quality and safety standards, among others.
What is more, non-tariff barriers (known as NTBs that refer to any measure other than a tariff that restricts or distorts trade) were becoming increasingly important determinants of agricultural trade.
The FAO rightly opined- ‘The 1990s saw a decline in the growth of world cereal consumption. This was due not to limits in production capacity but rather to slower growth in demand, partly caused by exceptional and largely transient factors.
Growth in consumption will resume, leading to growing dependence on imports in developing countries. The potential exists for traditional and new exporters to fill this gap, but problems of food security and environmental degradation will need to be addressed….. Cereals are still by far the world’s most important sources of food, both for direct human consumption and indirectly, as inputs to livestock production. What happens in the cereal sector is therefore crucial to world food supplies. Since the mid-1960s, the world has managed to raise cereal production by almost a billion tonnes. Over the next 30 years it must do so again.’
The developing countries will become increasingly dependent on cereal imports in as much as by 2030 they could be producing only 86 percent of their own needs, with net imports amounting to some 265 million tonnes annually - almost three times present levels.
So, the challenges ahead are understood well. The developing world has to jumpstart to better the scenario.