Towards a sustainable plan for agricultureSunday, June 13, 2021
THE race by economies around the world to recover from the novel coronavirus pandemic is becoming much harder given global inflation, which is raising prices on food, plastic, steel, lumber, and energy. Within the last six months the drought in Brazil, a cyberattack on JBS (the world's largest producer of meat protein), Russia's export tax on wheat, and surging shipping rates by China by 300 per cent, have dramatically affected the global supply chain.
In May average food prices and corn went up to nearly 40 and 90 per cent over prior year, respectively, the most significant rise in over a decade (UN Food and Agriculture Organization, FAO). Added to this supply chain crisis is the explosive increase in consumer demand based on the lifting of COVID-19-related lockdowns and curfews in large cities worldwide. This exponential demand for goods against the shortage of supplies is driving up prices of virtually everything, everywhere.
Jamaica is still a country which imports most of its food and the raw materials that go into food manufacturing. Therefore, managing the costs of foodstuff and other raw materials is not within our control, but is set by global commodity prices and the exchange rate.
According to the Economic and Social Survey Jamaica (2018) Jamaica's food and agro-based imports was over US$1 billion while the exports over the same period equalled US$326 million, or one-third the value of similar imports. In other words, we are importing three times more than we are exporting, even with the current import substitution “protection” policy which has been in place for the past 50 years.
In January, president of the Jamaica Exporters and Manufacturers Association Richard Pandohie signalled to consumers that price increases were on the horizon for Jamaica based on the nature of our small, open and import-dependent economy, as well as global supply shortages. Since then there have been several announcements of price increases for chicken, pork, and other products, including flour, from some of our largest food manufacturers and distributors.
As a short-term hedge against these rapid increases, GraceKennedy, through its CEO Don Wehby, announced it had commenced forward purchasing of raw materials to maintain their supply chains, lamenting the significant increased costs in cans for corned beef and Vienna sausage.
Sadly, the COVID-19 pendulum has hit the majority of our people's lives with catastrophic effects. Their fragile socio-economic circumstances cannot withstand any more hardship, especially when it comes to the basic need of feeding themselves.
In the midst of every crisis lies great opportunity. This pandemic has exposed the glaring structural weaknesses of our agricultural sector, which represents approximately 25 per cent of the value of output in our goods-producing sector, 18 per cent of our exports, and employs 17 per cent of our employed labour force (MAF).
At the most recent meeting of the Public Administration and Appropriations Committee, the Ministry of Agriculture and Fisheries presented its report outlining the Government's COVID-19 response towards recovery and stimulating production for the sector. For this financial year 2021/2022 the Government has allocated $1.2 billion towards a Production Incentive Programme: crops ($280 million); grant assistance ($210 million); the farmer buy-back programme ($200 million); climate change adaptation ($152 million); livestock ($80 million); equipment ($50 million); infrastructure support ($30 million). This support is needed; however, it does not go deep enough and, in the medium term, will redound to the same pre-pandemic reality or where we were before.
In order to have an agricultural sector which grows and provides more stable domestic prices we need to make some structural changes. To achieve this goal, we must have a comprehensive plan. Why is it that the majority of our farmers still earn a mere subsistence wage? It's not food prices, Jamaicans pay among the highest prices for food in the world, whether it is locally grown or imported. Jamaican farmers, in particular, are poor because our prevailing agricultural policy has resulted in reduced exports, no rationale in crop selection, price instability for farmers and consumers, little or no cold storage, little or no secondary processing of primary produce, no new technology, and we still end up dumping more than 30 per cent of our small farmers' production due to a mismatch between demand and supply.
The situation of Irish potato production and consumption illustrates the lack of a coherent policy. Jamaica neither has the climate nor the land terrain to produce potatoes efficiently. What's more, the Christiana Potato Growers Cooperative Association has never made money over the past 35 years, in spite of the high prices, yet Jamaicans continue to pay up to four times the world market for potatoes to achieve this “success”.
Our focus should be on exportable, value-added agricultural products, rather than being increasingly dependent on a wide range of food imports. When the pandemic hit our tourism industry there was an excess supply of pigs. As a consequence, farmers cut back on their production rather than supply animals that they could not sell. With the tourism market rebounding, there are currently no pigs available. What's more, the price of pigs has increased by over 20 per cent as a result of both the shortage and the increased global feed corn costs. If we had given farmers a guaranteed price for their pigs in March 2020, and the pigs were processed into bacon and ham cuts then stored for local and export consumption, there would have been no precipitous drop in the demand, our farmer's incomes would have been secure, and there would not have been such a massive price increase to consumers.
Our solution must be that we are selective in the products we grow, while ensuring we have agro-processing capabilities. Moreover, we should be reviewing the duty protection afforded to products that do not have sufficient local value-added components. We cannot have companies claiming they are local manufacturers, but when there is an increase in the exchange rate their prices rise in direct proportion to consumers, and when those same prices go down worldwide our Jamaican consumers do not benefit from the reductions.
There are three factors that encourage leaders to see false patterns which, in turn, cause them to make bad decisions. They refer to them as 'Red Flags'; namely:
(1) the presence of inappropriate self-interest which gives improper personal weight to information making them see what they want to see;
(2) the presence of distorting attachments; and
(3) the presence of misleading memories. ( Harvard Business Review 2009)
The fact that the Ministry of Agriculture's current Production Incentive Programme for 2021/2022 is almost identical to the previous financial year should be a red flag to our policymakers. Any objective measurement of our production output concludes that our agricultural policy has been failing over the past 35 years.
Let's not let this crisis go to waste. It is time to eliminate the red flags that have been hampering our agricultural sector and introduce a modern structured policy focused on exportable, agro-processed products for our economic growth and stable local food prices for our people.
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