Thinking Of Trade Offs

The annual chronic hunger report on how to repurpose harmful subsidies

I’m fortunate to be able to indulge in a homemade veggie pie… Photo by me.

Every year, the UN releases a report on the levels of chronic hunger and malnutrition around the world. It’s a flagship report of FAO, the UN food and agri agency, but is also a combined effort that includes the other two food agencies - WFP and IFAD - as well as the UN children’s agency UNICEF and the health agency WHO.

If you want to know more about the different UN food agencies and/or what last year’s report said, I’ve written about them in previous issues of Thin Ink.

Let there be bread

Add another ‘C’ for modern hunger - capitalism

What does this year’s report say?

As you can imagine, the news is pretty grim, but what’s even grimmer is this little caveat - these figures are for 2021, so they don’t include the fallout from Russia’s invasion of Ukraine and/or the recent spike in food prices that happened soon after. Keep that in mind when you read these numbers.

• The prevalence of undernourishment was 9.3% in 2020 and 9.8% in 2021. This mean 1 in 10 people went to bed hungry in 2021.

• In absolute numbers, this amounted to between 702 people and 828 million people were affected by hunger in 2021.

• This number has grown by about 150 million since the outbreak of COVID-19.

• Nearly 1 in 3 women of reproductive age are anaemic. There has been no progress on this statistics since 2012.

• Almost 3.1 billion people could not afford a healthy diet in 2020. That’s about 2 out of 5 people. (The issue, as we know, is not about availability but about affordability and access. Afraid we can expect this number to have increased significantly since then.)

• This is 112 million more than in 2019, before COVID-19 hit us.

• Hunger levels in 2030 are estimated to be around 670 million, about the same amount of people going hungry as in 2015. That’s the year when world leaders agreed to a set of goals to cut hunger and poverty by 2030. You might have heard of them. They’re called the Sustainable Development Goals (SDGs).

• At the same time, the world is seeing more overweight children “in around half of the countries”. Adult obesity has already doubled between 2000 - 2016. New estimates are expected at the end of this year.

Here’s a nifty little interactive story from the FAO on the new numbers.

So what about those trade offs?

A large chunk of this year’s report is dedicated to how to repurpose existing subsidies to food and agriculture, which amounts to $630 billion per year on average over 2013-2018, to make healthy diets become more affordable.

“Support to agricultural production largely concentrates on staple foods, dairy and other animal source protein-rich foods, especially in high- and upper-middle-income countries. Rice, sugar and meats of various types are the foods most incentivized worldwide, while fruits and vegetables are less supported overall, or even penalized in some low-income countries.”

“While governments are spending (this) amounts of public resources to support food and agriculture, “agrifood systems are not delivering on what is needed to achieve food security and nutrition objectives.”

Fish, caught wild or grown in farms, is also a critical component of jobs, food security and nutrition for billions of people around the world yet there are no consistent policy support indicators, according to the report.

A report last year by the FAO and two other UN agencies said such support often distorts prices, is harmful for the environment and human health, and does not promote the production of nutritious foods. Here’s another previous issue of Thin Ink on that report.

The $470 billion problem

This latest report, the SOFI 2022, has updated figures and went a step further - it came up with scenarios of repackaging such support between 2023 and 2028 and what the outcomes could be in 2030. And this is where the trade offs come in.

Baseline numbers to remember

• The average cost of a healthy diet globally in 2020 was US$3.54 per person per day, an increase of 3.3% from 2019 and 6.7% from 2017.

• Latin America and the Caribbean had the highest cost (US$3.89) per person per day, followed by Asia (US$3.72), Africa (US$3.46), Northern America and Europe (US$3.19) and Oceania (US$3.07).

• High-income countries are responsible for the bulk of support to food producers worldwide.

Current Scenario - Calorie rich but nutrient poor

Support in all forms, whether minimum prices, subsidies for inputs and outputs, or research and development, heavily favours staples such as wheat, maize and rice.

Such measures are implemented to improve farmer incomes, reducing the prices of cereals as well as beef and milk, and nudged farmers to use better technology and new inputs to achieve better yields.

On the other hand, they contributed to unhealthy diets, created disincentives towards producing nutritious foods, encouraged monocultures in some countries, and discouraged the production of some foods that do not receive the same level of support.

Hence more and more countries are having to tackle rising trends in both obesity and malnutrition simultaneously.

Scenario 1 - More affordable for consumers, less money for producers

If fiscal subsidies shift from producers to consumers in the form of cash transfers (more income) and food vouchers (lower cost of food), then the cost of a healthy diet falls significantly and the percentage of population who can afford it rises.

Results = reduction in extreme poverty, undernourishment levels and greenhouse gas emissions.

Problems = farm income will fall by 3.7% and agricultural production by 0.2%.

Scenario 2 - Less affordable but fewer trade offs than above

Repurposing support through border measures (import tariffs and quotas, etc) and market price controls (like the price governments pay to buy food from farmers) would also help make healthy diets less costly and more affordable, although not as much as in the case of repurposing fiscal subsidies.

However, this shift will cut emissions without the other trade offs.

Scenario 3 - More healthy food but also more emissions

If fiscal subsidies to producers are repurposed to target nutritious foods, there would be a lot more healthy and diversified diets. However, it could also lead to more greenhouse gas emissions.

How? Because dairy production in particular would have to increase to enable meeting certain dietary requirements, particularly in low-income and middle-income countries.

Generally, this could be “offset if countries shift towards technologies that are relatively lower in emission intensity and… production and consumption become more sustainable.”

Scenario 4 - Less rice, less emissions, but possibly also less food

Rice is my first love, but I agree that it “tends to be a high emission-intensive commodity, which provides calories but few micronutrients”. But, it is also a staple food for more than 3 billion people in the world. So before we start reducing the production of rice, we need to see what’s the best way to repurpose subsidies for rice.

Scenario 5 - No subsidies = reduced emissions, but possibly massive reductions also in production and jobs

“Eliminating agricultural support is not a feasible option,” said the report.

“Global model-based analyses warn that… (it) could lead to some reductions in GHG emissions from agriculture, and efficiency and net-global economic gains, but it would come at a high socioeconomic and human cost to society. Trade-offs may include significant reductions in crop production, livestock farming production and farm employment.”

Parting words

• Data is limited but subsidies to consumers apparently represent the lowest share of all the support to food and agriculture while evidence shows they have the potential to contribute to increasing consumption of nutritious foods.

• This is particularly true if interventions are well targeted (that is, to the poorest households or the most nutritionally vulnerable people), explicitly designed to have nutritional impactsand are accompanied by nutritional education.

• However the repurposing is done, governments should ensure small-scale farmers are in a position to produce nutritious foods.

• Repurposing subsidies alone will not be enough to get consumers to eat healthy diets. There must be complementing policies to achieve this.

• In addition, If repurposing lead to trade-offs that negatively affect some stakeholders, social protection policies may be necessary to mitigate them.

• Policies on environment, health, transportation and energy are needed to enhance the positive outcomes of repurposing support.

As always, have a great weekend! Please feel free to share this post and send tips and thoughts on twitter @thinink, to my LinkedIn page or via e-mail thin@thin-ink.net.