Sunday, September 11, 2011

High Food Prices: Problem Or Opportunity?

An important conference took place this week at the National Research Institute which brought together policy makers, farmers, food manufacturers, scientists, academics, researchers and interested members of the public. It was the Food Security Policy Conference on High Food Prices In Papua New Guinea.

The major concerns addressed by conference participants were:

1) What are the drivers of unprecedented food prices?
2) What are the impacts of escalating food prices on consumers? and
3) What can be done to reduce food prices for the benefit of the population?

Presentations were made under several sub-themes. These were:

1. Global and regional perspectives: trends in food prices and volatility, trade and international relations;
2. Food production and processing: industry and farmer perspectives, challenges, costing and pricing issues;
3. Food provision: food imports, packaging, marketing, transport and distribution;
4. Food consumption: impacts, affordability and coping mechanisms; and
5. Stakeholder interventions, strategy and options: the way forward.

The major lesson that has emerged from the conference is that food prices have been rising both internationally and domestically, and they are likely to escalate further. The concern in Papua New Guinea is not only that food prices are expected to rise, but the general price level for all goods and services (i.e. inflation) is expected to go into double-digits (meaning in excess of 10%) for the first time since 2003. The sum total of these developments is that people in the country will have to fork out more money from their pockets for food and others goods and services.

My presentation was on the major impediments or constraints, problems and challenges faced by food producers in the Highlands. High food prices indicate that there is a lot of demand for all kinds of food, but supply is low. In other words, high prices are supply-related.

There are many challenges faced by all farmers in producing and supplying food in the country, and the ones I highlighted are in fact common throughout the country. These are:

1. Market access. High prices of food indicate that there is a huge market for locally produced food, but access to those markets is a major impediment faced by farmers, due to reasons such as very bad road conditions, unavailability of transport and high fuel costs.

2. Increasing lawlessness discourages farmers from producing food. Many food gardens are destroyed during tribal conflicts. Food gardens, small-scale piggeries and poultries are also the subject of theft, and most farmers are subject to harassment by unemployed youth roaming in towns, drug addicts, and criminals.

3. Food producers are faced with high costs of imported production inputs such as fertilizers, weedicides, insecticides, seeds, feed, etc. Import duties contribute to high prices of these inputs.

4. In many parts of the Highlands arable land is becoming scarce with the increase in population. This is particularly so in areas which are near the main centres where access to markets is relatively easier. Land shortage is not yet a problem in more remote areas, but farmers in such areas have to carry farm produce on their backs for long distances in order to get to the main roads.

5. Generally, people who have been producing food and keeping the rest of the country fed have grown old over the years. Dwindling physical strength reflects itself in smaller quantities produced. Young people would rather look for jobs in the major centres than go back and work on the land. This may be a result of plain laziness or the mental programming they are subjected to while in school which conditions them to seek employment.

6. Efficient marketing systems are absent. Most farmers waste time and money transporting their produce to markets in Lae, Madang and Port Moresby. In the process they not only pay high costs of transport but also experience losses due to improper packing and handling, break down of trucks, bad market timing, etc. For instance, it costs about K70 to transport a bag of kaukau from a village in Mount Hagen to Port Moresby. When farmers lose money in the process, they get discouraged and stop producing altogether. It’s a case of ‘once bitten, twice shy’.

7. Food producers and farmers in general lack business skills such as farm planning, budgeting, costing, pricing, financial management, investing, etc. Highlands farmers tend to make huge gardens, plant and harvest them in one go, and when they make money, they tend more to spend the income than to save it. When they have money, they take long holidays. Farming is therefore ad hoc and unsustainable.

8. Commercial banks view farming as very risky and unbankable, so farmers don’t have access to credit.

I concluded by stating that food security equals national security. Papua New Guinea cannot go on importing food from other countries in the face of wars, terrorism, bio-terrorism, pollution, diseases, contamination, unfavourable weather due to climate change etc. The country lives a hand-to-mouth lifestyle; what it produces or imports, it consumes, hoping that food will keep on coming. There are not many food manufactures in the country, and no warehouses with strategic stocks. This is a very risky lifestyle.

Policy makers and other relevant authorities must create an environment that is conducive for food producers in the country, because everybody from the Prime Minister downwards eats on a daily basis. This becomes more imperative in light of an ever growing population. The farmers have land, time, labour and capital to produce, and they are willing to work because they too live in a world where they need money. If the major impediments are effectively addressed, our farmers can rise to the occasion and keep us all fed and healthy.

The title of this article is a question I posed at the conference: Is high prices a problem or an opportunity? The answer depends on which side of the market you are on. If you are a consumer, high prices of food is a major problem, because now you have to spend more money for the same quantity or basket of food you normally purchase for your household. Either that or you go for cheaper, lower-quality food, thereby placing your health and general welfare at peril.

But if you are a producer, high food prices is a great opportunity to take advantage of. I have been going around the country encouraging people, particularly young people, to till the land. To me, now is an opportune time for farmers in the country to make money. It is their time to become fully engaged in the cash economy, because now they have what the whole country needs: food. They have the opportunity to share in the wealth of the nation by working on their land, not receiving hand-outs.

High prices of food also provides an opportunity for the hundreds of thousands of unemployed young people to return to their villages and work the land. My assessment of the whole situation in the country is that people who will be handling most of the money coming out of the LNG and other resource projects are those who are self-employed: business people and farmers. Working class people will miss out, because they will be spending more, seeing the average family in PNG spends between 50 and 60% of their income on food.

I see rising food prices as an opportunity for PNG to experience a shift from rural-urban migration to urban-rural drift. I foresee unemployed young people as well as working people returning to their village as they realize that there is more money to be made there than in the towns. At least the land is rent-free, and the income is tax-free also.

The way I see it, politicians and policy-makers have no choice but to be more serious and committed in addressing the impediments faced by food producers in the country, whether they are farmers or manufacturers. It is in the personal interest of decision-makers to do it, because high food prices are hitting them in their hip pockets and just above their belts! It is now going to be a case of “address the problems of food producers and eat” or “neglect them and starve”!

My encouragement to unemployed young people and students reading this article is that they must seriously consider farming as a means of living. In fact I should extend it to working class people as well. Imagine a farm as your private pipeline into the economy. It is definitely not like sitting in an office for ten days and receiving a pay cheque, but you will never go wrong producing food. High and rising prices of food present a great opportunity to make a sustainable, comfortable, healthy and wealthy living. At least that is the way I see.

Finally, if you are already into producing food crops and livestock, you are doing the right thing at the right time. I encourage you to keep on keeping on. Do more of what you have been doing. The country needs you now more than ever. Shortage of food is the country’s problem; your problem may be money. Solve the country’s problem, and your problem will be solved. How about that?

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