Peter Timmer, visiting professor at the Freeman Spogli Program on Food Security and the Environment, and Michigan State University professor Thom Jayne debated how to promote “food security” in developing countries on Thursday. The lecture was the fourth session in a series presented by the program that brings experts in food economics to speak at Stanford.
“What should we actually be doing in this crazy market for consumers, producers, especially for the bottom billion, those that are barely able to feed their families?” asked program director Rosamond Naylor.
Timmer suggested that smoothing out food prices might do the trick.
“There is a food price dilemma: farmers like prices high and consumers like prices low — there’s always going to be some controversy,” Timmer said.
“Something between too high and too low can be the right price,” he added.
“A lot of us would like to be able to go there directly,” Timmer said. “There’s a real incentive to try to do that, and the problem is market economies don’t work that way.”
Long-term food security, he said, requires investments that are accessible to get out of poverty.
“My question today is: couldn’t we think about this a little more systematically?” he asked.
On a macroeconomic scale, he suggested that governments prepare buffer stocks and set import and export controls to manage prices.
“One of the major factors in the long run in poverty reduction is making sure food is accessible to the poor…lower real prices are important,” he said.
He noted that price instability is a problem both at the household level, where consumers have trouble adjusting their budgets, and for investors.
“When investors can’t clearly see the price signals…you can’t make good investments,” Timmer said. “And when the rate of investment falls, economic growth slows.”
Timmer concentrated primarily on the staple grains in his talk. Large food reserves, he said, are an instrument to stabilize prices. Throughout Asia, there are efforts to build village reserves.
“Social safety nets, to be honest — I don’t think they work for food crises,” Timmer said. “They have a terrible track record for coping with sudden crises.
“The real solution is clearly higher agricultural productivity,” he said.
A main problem is that it may take 20 to 30 years before investment leads to a visible global response. He added that slowing down the “financialization” of food commodities might help reduce price volatility for food.
But what’s the right price of food?
According to Timmer, the answer is $400 per metric ton for 25 percent broken rice — a conclusion that Jayne contested.
“I find myself in a very ironic position disagreeing with a lot of what [Timmer] said today,” Jayne said.
He agreed that food price instability is a major political and economic problem, but differed in many respects on the solutions.
“Price stability definitely seems to contribute to economic growth,” he said. “But price stabilization efforts don’t necessarily contribute to price stability. And government’s track record in stabilizing prices has been mixed at best.”
The two countries in Africa with the highest instability are the two that have governments most actively involved in price stabilization in the region, he added.
“A lot of things that are done in the interest of price stability just represent patronage and rent seeking,” he said.
Furthermore, high prices could have much more of a negative impact than instability per se.
“Over two thirds of the small farmers in Zambia don’t sell maize — they’re buyers,” Jayne said. “Poverty is rampant among the buyers. Now think about what will happen when the government comes along and pushes up prices ostensibly to help producers.”
Efforts to raise food prices tend to be regressive, he argued, and appropriate actions are to shift public budgets away from price stabilization and into investments that promote economic growth, such as macroeconomic management, crop science, basic education and health and infrastructure.
“These are the kinds of investments that we need to keep making,” he said.