Transformation of food systems in the

developing world: Implications for

research and policy

Prabhu Pingali,
Head, Agricultural Policy & Statistics
Bill and Melinda Gates Foundation
 Drivers of Change

• Rising Incomes, Urbanization and

diet transition
• Changing patterns of trade and FDI
• Transformation of food markets
• Changing food and production
systems
 GDP per capita
annual average percent change
7
1980
1990
6
2001-2005
2006-20015
real GDP per capita, annual average percent change

Developing East Asia Europe and Latin Middle East South Asia Sub-
-1
Countries and Pacific Central Asia America and and N. Saharan
Caribbean Africa Africa
-2

-3
Urban Population to Outnumber Rural

Source: UN, World Population Assessment 2002

Rising Incomes, Urbanization and
dietary transition

• Cereal based diets to energy

dense diets
• Higher share of processed
pre-prepared food
• Growing concerns on food safety
• Dual problem of under and over
nutrition
 Change in per capita consumption of
different commodities in developing
countries
4

Cereals
1
Roots
Percent p.a.

Sugar
Pulses
0
Oilcrops
Horticulture
-1 Meat
1961-75 1976-90 1991-03 Milk

-2

-3

-4
 Consumption of different meat
commodities in developing countries

120

100

80
kcal/person/day

Bovine Meat
Mutton & Goat Meat
60
Pigmeat
Poultry Meat

40

20

0
63

65

71

73

77

81

85

89

91

95

97

01

03
61

67

69

75

79

83

87

93

99

◄
19

19

19

19

19

19

19

19

19

19

19

19

19

20
19

19

19

19

19

19

19

20
 The long run real commodity
prices have been declining
Real prices for commodity group
 The agricultural trade deficit of
LDCs is widening
Billion US$
14
12
10
8
6
4
2
0
61 65 69 73 77 81 85 89 93 97 01 03

total agricultural exports total agricultural imports

 Share in Agricultural Exports,
1981-90 to 1991-2000

Primary Products Processed Products

100% 100%

80% 80%

60% Least Developed 60%

Other Developing
40% Developed 40%

20% 20%

0% 0%
1981-1990 1991-2000 1981-1990 1991-2000

Source: FAO 2004, State

of Commodity Markets
 Agricultural trade is concentrated in
a few developing countries

• Half of all developing countries captured by Argentina,

Brazil, Malaysia and Thailand
• E.g., Brazil trade balance vs. other developing countries:

Source:
FAO 2004
 Changing patterns of trade

• Low competitiveness of domestic

cereal and livestock production
• Trade in processed products
expanding rapidly
• Capacity limitations in meeting
sanitary and phyto-sanitary
standards

◄
Food markets are changing
 FDI: The “other face “ of globalization

FAO: State of Food Insecurity, 2004

Supermarket share of Retail Food
Sales

◄
 The Changing Food System

Individuals Enterprises

Primary Processing Distribution

Inputs Consumption
production and and retail
packaging

Transport Services

Governed by Institutions:
Rules and regulations
Markets (Contracts)
 Evolution of food systems

Old New

System type Staple based Differentiated

Production
Technology + Post harvest
oriented
Local + science Highly science
Knowledge
based based
Management Tradition based Skill based
 New Rules for a New Game

• Centralization of procurement
– Squeezing of supplier lists
• Shift from spot markets to specialized
wholesalers
– New intermediaries and logistics

• Contract farming
– Exclusion of small farmers

• Rise of private standards

– Quality, safety
Who wins and who loses out?
 Food System Transformation:
Country-level heterogeneity
Traditional Modernizing Industrialized
Agriculture Agriculture Agriculture

Share of Ag
>30% 10%-30% <10%
in GDP
Share of Ag
>50% 15-50% <15%
labor in total
Market
Subsistence National International
Orientation
Output Food Staples Highly
Food Staples
Mix + Export Crops differentiated
Scale
Not Important Not Important Important
Economies
 Key issues for small farmers

• Size matters
• Location is crucial
• Land quality is important
• Public good investments are essential
 Issues for Agricultural R&D

• Intensification of cereal systems while

allowing for diversification out of cereals
• Focus on cereal productivity improvement
in marginal environments
• Research on small holder post harvest
operations – enhancing quality & safety
• Enhance environmental sustainability
• Deal with the rising costs of labor
 Policy focus:

• Policy redirection towards creating the enabling

environment
• Facilitate the transitional process
– Ensure those small farmers that enter modern food
systems, stay in for the long run (winners)
– Facilitate the entry of those farmers that have potential
(possibles)
• Exit strategies for the ones not able to enter the
food system (losers)
 Conclusions

• The transformation process can contribute

to agricultural and overall growth
• The transition is not frictionless and is
painful
• Governments need to concentrate on
being facilitators, regulators and providers
of safety nets
• Pay attention to inter-regional and intra-
societal differences