American Agriculture, Water Resources, and Climate Change

Gary D. Libecap & Ariel Dinar in this NBER paper analyse how American farming community has responded to changing climatic conditions:

This paper highlights the role of agriculture in the American economy and society over time and points to farmer historical and contemporary responses to varying climatic conditions. It indicates the importance of water as an input to agricultural production and identifies possible impacts of climate change on access to water. It then summarizes a set of eleven papers from an NBER research project on water, climate change, and the agricultural sector.

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The studies focuses on a subset of adaptation options and provides examples of possible directions available for varying farm types, regions, and water situations. Overall, the research indicates that the responses examined lead to positive changes in the performance of the
agricultural sector at the region or state level analyzed either in terms of yield or net revenue. A complete benefit-cost assessment of farmer adaptation strategies, however, would include any external costs associated with new crop and seed varieties, water efficient irrigation
technologies, resort to common groundwater, investment in water conveyance systems, and design and implementation of new institutional arrangements.

In the case of groundwater, where property rights are relatively complete, such as with tradable extraction rights to Southern California’s Mojave Aquifer (Ayres et al 2021) or where management institutions exist, such as in groundwater management districts in Nebraska (Edwards 2016), the losses may be minimal. Externalities are more significant where these conditions are lacking. Increased fertilizer application and associated downstream runoff is an example, and when costs are not privately internalized, fertilizer use may be excessive within a cost/benefit framework. Alternatively, where farmers adopt easements with downstream benefits, not all gains are privately captured, resulting in under adoption. In these respects, the research can be seen as part of an emerging and critical agenda for analysis of adaptation in the agricultural sector to greater water scarcity resulting from climate change.

Irrigation Management for Sustainable Agriculture

Rishabh Kumar, Jobin Sebastian and Arun Vishnu Kumar in RBI’s May-22 Bulletin analyse irrigation in 19 States:

In the backdrop of recurrent episodes of drought and declining ground water table, ensuring irrigation efficiency is of paramount importance for sustainable agriculture. This article analyses the trends in the area-weighted cost and efficiency of irrigation across 19 agriculturally important Indian states using the Comprehensive Cost of Cultivation data published by the Ministry of Agriculture and Farmers’ Welfare, Government of India for the period from 2002-03 to 2017-18.

Highlights:

• • The area-weighted cost of irrigation declined during the study period perhaps reflecting the impact of increased access to subsidised power in most of the states. However, the costs are still high in some states.
  • The estimated technical efficiency of irrigation suggests that majority of the states lie far from the efficiency frontier and have also recorded declining trends over the study period.
  • The inefficiency appears to be driven by the energy consumption in the farm sector and ground water accessibility.
  • The findings call for policy focus on energy and water efficient irrigation technologies, particularly in states where irrigation efficiency is declining.

Indian Agriculture: Achievements and Challenges

Atri Mukherjee, Priyanka Bajaj, Rishabh Kumar and Jobin Sebastian of RBI in this article highlights significant achievements of the agriculture sector. They also assesses new emerging challenges warrant a second green revolution along with next-generation reforms.

• The major achievements of Indian agriculture are marked by record production of food grains, diversification towards horticulture crops, growing importance of allied sectors and changing dynamics of agriculture trade.
• Although the key growth enablers, viz., productivity, mechanisation and irrigation have played an important role, they remain much lower compared to international standards indicating scope for further improvement.
• Alongside, Indian agriculture is confronted with emerging challenges in the form of climate change, agriculture waste management, fragmentation of farm holdings, disguised unemployment and volatility of food prices.
• The empirical analysis identifies significant role of supply-side interventions such as higher public investment, storage infrastructure and promotion of food processing industries for managing food inflation and its volatility.

I had pointed to an earlier paper on Indian agri over last 75 years.

Indian Agriculture @ 75: Past achievements and future challenges

Ashok Gulati, Ritika Juneja and  Ranjana Roy of ICRIER in this IPPR paper analyse Indian agriculture over 75 years and way forward:

India has experienced significant transformation in its economy since independence, especially agriculture.

From a severely food-deficit nation during mid-1960s to a self-sufficient one, and becoming the largest exporter of rice and the largest producer of milk in 2020-21 is not a small achievement.

Similar break-throughs have been achieved in poultry, fishery, fruits and vegetables, and cotton. All this was made possible with liberal infusion of modern technology, institutional innovations that made small holders part of this change, and enabling right incentives to cultivators.

This holds lessons for many developing countries in south and south-east Asia as well as in African continent.

But India still faces many challenges on food security front. Malnutrition rates amongst children remain high, and agricultural production begs the question of sustainability as water table in most parts of the country is falling rapidly. Also, the food system needs to move from ‘tonnage centric to farmer centric’ as incomes of agri-households remain pretty low, largely because of small holding sizes.

It is high time that India opens up land lease markets, build efficient supply chains with Farmer Producer Organisations by infusing digital technologies to unleash next technological revolution that promotes efficiency, inclusiveness, and sustainability in agriculture through precision agriculture.

 

The Political-Economic Causes of the Soviet Great Famine, 1932–33

Andrei Markevich, Natalya Naumenko & Nancy Qian in this new NBER paper study the Soviet Great Famine (1932–33):

This study constructs a large new dataset to investigate whether state policy led to ethnic Ukrainians experiencing higher mortality during the 1932–33 Soviet Great Famine. All else equal, famine (excess) mortality rates were positively associated with ethnic Ukrainian population share across provinces, as well as across districts within provinces. Ukrainian ethnicity, rather than the administrative boundaries of the Ukrainian republic, mattered for famine mortality.

These and many additional results provide strong evidence that higher Ukrainian famine mortality was an outcome of policy, and suggestive evidence on the political-economic drivers of repression.

A back-of-the-envelope calculation suggests that bias against Ukrainians explains up to 77% of famine deaths in the three republics of Russia, Ukraine and Belarus and up to 92% in Ukraine.

 

How effective is e-NAM in integrating food commodity prices in India? Evidence from Onion Market

Rudrani Bhattacharya and Sabarni Chowdhury in this NIPFP paper:

A high growth plan for Indian agriculture

Ashok Gulati, Ranjana Roy and Shweta Saini have written a book on Indian Agriculture which one can download for free.  

The authors summarise the book findin

In a recent publication from Springer Nature, Revitalising Indian Agriculture and Boosting Farmer Incomes, which we have co-edited with Ranjana Roy, strategies for six Indian states — Punjab, Madhya Pradesh, Gujarat, Uttar Pradesh, Bihar and Odisha —have been proposed. We studied each of these states to identify factors that contributed to their growth and issues which constrained it. In addition to suggesting customised solutions, we also identify best-practices for replication in other Indian states.

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As a part of the roadmap, the book makes a case for states to move beyond production-centric approach to a value-chain approach with FPOs at its centre. It highlights importance and requirement of growing public investments in basic infrastructure, like roads, markets, power supplies, and agri-R&D. And finally, in the longer run, rationalising subsidies (both input and output) via direct income transfer is suggested, as that will not only empower farmer but will also give them right signals for efficient use of these resources (fertilisers, power, water). This will help put agriculture on a higher growth trajectory, augment farmers’ incomes, and promote sustainable development of agriculture.

If the Narendra Modi government follows this path of investing in infrastructure, ensuring a more diversified agriculture and linking small-holder FPOs with markets, it will pay rich dividends not only to the farming community but also the entire economy.

Agriculture After the Pandemic..

Martin Ravallion in Proj Synd piece say we could have a famine:

This is not solely the familiar, cruel, trade-off between economic welfare and personal health that many poor people face. It is also a trade-off between two aspects of health: illness due to the virus, and hunger and poor nutrition resulting from economic isolation and disruption to markets and institutions, including private social protection.

While the case for a sensible degree of social distancing to combat COVID-19 in developing countries is strong, the case for a lockdown is not. Lockdowns pose new threats, and could even turn the pandemic response into a famine in some poor places. I do not say this lightly; I believe it is a looming threat. Both research and experience demonstrate how famines can result from the sort of institutional and market breakdowns implied by a strict lockdown. We saw this recently in the wake of the 2014 Ebola virus outbreak in Sierra Leone, where starvation soon emerged as a new threat.

Famine among poor and vulnerable people can result from multiple causes, as Amartya Sen demonstrated in his book Poverty and Famines. Sen cited examples in which there was no decline in the total amount of food available. The problem was its distribution among people and over time. And here, markets and other institutions play a crucial role. Lockdowns can disrupt the production and distribution of food, alongside a collapse in poor people’s earnings and higher food prices. We are learning that today’s food supply chains have vulnerabilities, even in rich countries. And even if famine is averted, spells of poor nutrition can have lasting consequences, including higher vulnerability to other illnesses.

Another piece by Wandile Sihlobo says we could see more automation in agri:

After suffering severe labor shortages due to the COVID-19 pandemic, it seems unlikely that advanced-economy farmers will return to business as usual. Instead, many will probably attempt to mitigate the risks stemming from dependence on foreign seasonal workers by automating more of their operations.

Dvara Research Blog Competition 2019

Dvara Research has put up the inaugural Dvara Research Blog Competition 2019. The competition is for students currently pursuing Bachelor’s and Master’s degrees in India. The last date for submission is 20-Oct-2019. It is giving great prizes with the first winner getting a cash award of Rs 35,000.

We are delighted to host the inaugural Dvara Research Blog Competition 2019 for students currently pursuing Bachelor’s and Master’s degrees in India. The competition is on the theme of “Suitable Finance for Agricultural Households“ and is aimed towards encouraging students to conduct analyses on the Agricultural sector in India, and how suitable finance can serve as a lever for lower-income agrarian households to improve their social as well as financial capital.

Through this competition, we hope to encourage and invite thinking on ways of applying suitable finance to the issues faced by agricultural households. Students are encouraged to submit their original analysis/insights as part of this competition which would be reviewed by an eminent jury and the top three entries will be featured on our blog and will also be monetarily rewarded. The resources section at the bottom has links that may help you get a rounded view of the theme, and we will keep updating this page with additional information during the course of this competition. In case of any queries or if you seek further clarity, please feel free to reach out to us at blog.research@dvara.com.

The theme:

Theme: Suitable Finance for Agricultural Households

The ill-effects of unsuitable finance tend to be felt more by workers in the unorganised sector, amongst which are those engaged in agriculture. Agricultural workers are unique among other unorganised workers in their livelihoods are dependant on circumstances that are highly unpredictable. This, as well as the cropping cycle usually means that they do not have a regular source of income. As a result, regular finance, with its calculations made based on monthly averages, falls short of being able to address the issues faced by agricultural households.

At Dvara Research, the Household Finance Research Initiative aims to rigorously understand the financial choices and decisions of low-income or excluded individuals and households, and their relation to achieving households’ objectives. We realise that one cannot look at the financial well-being of households without ensuring that they are protected from being prescribed unsuitable methods by which to achieve it. We believe that financial service providers must ensure that the customers’ interests are adequately and effectively protected as a matter of business process.

Pass on the word!

Agri finance: Another year, another panel. Will things change?

RBI released a report on Agricultural credit over the last weekend. I review the report in moneycontrol.

The Paradox of India’s Green Revolution

Marshall Bouton in this article:

More than five decades after India launched the Green Revolution, its war on hunger is far from won.

The impetus for the Green Revolution came from harvest failures and famine conditions in the mid-1960s. But its main goal was to ensure India’s national food security, more precisely its self-reliance in food grain production. We can see now that the policies adopted then, and left largely unchanged since, have not only failed to eliminate hunger but also made more intractable the challenge of providing adequate and appropriate nutrition for all of India’s people. These policies have included subsidies for fertilizer and groundwater extraction, minimum support prices for food grains (especially rice and wheat), and procurement and public distribution of grains (also mostly rice and wheat).

Most govt interventions have consequences both intended and unintended….

India has entered a regime of “permanent surpluses” in most crops and facing a great depression…

Reading Harish Damodaran is a must to get some idea on Indian agriculture.

In this piece, he writes on how there is a surplus in most crops in India. The policymakers continue to think we live in age of shortage leading to familiar responses of quotas and restrictions. What we need is a change in thinking as we are possibly facing a great depression in Indian agriculture:

The globally interlinked mandi..

Preeti Edakunny, a PhD candidate at Birla Institute of Technology and Science, Pilani in this piece cautions about moving to a global agri mandi:

The farm support policies and subsidies offered by rich nations, including the United States and the European Union, protect the interests of the wealthy in their own countries, while they distort farm produce prices globally. This hampers the possibility of the farmers in developing countries to earn a sustainable livelihood, as well as their access to markets.

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The call to cease all subsidies in the farm sector is the mantra of the hour, the demand coming in both from external economies and from domestic corporates. There is an increased pressure through mechanisms such as the WTO to dismantle (albeit inefficient) agricultural intervention systems and expose the already battered Indian farmer to the distorted market. The urgent pressure is met with responsive eagerness by the government, a fact that needs to be explored through multiple frameworks to understand the reasons for the reciprocity.

Market reforms do not automatically ensure distributive justice. If we dismantle the existing intervention structure, without developing an alternative support system to take its place, we are creating an opportunity for heavily subsidised produce from external economies to enter our markets, killing the only source of employment and sustenance for over 60% of our nation’s population who have no other means of livelihood.

There is continued need for agriculture to receive the protection of the community and the state. Removing these protections would only create an uneven playing field for the farm sector. Without the provision of a real alternative, this will result in the farm sector bearing the brunt of the ever-growing inequity. If such financial unsustainability continues, there will continue to be an exponential migration of farmers out of farming. This comes with multiple societal costs, including loss of national food security. In the absence of the rich nation subsidies, the farmers could be competitive, and even environmentally sustainable food producers.

It is interesting how little things have changed despite several years…

These tractors show 150 years of farming history

Nice photo essay showing history of tractors in US.

The word tractor came from traction engine:

After protest over pepper imports, Government fixes Minimum Import Price for pepper

One just blogged about how Indian pepper farmers have asked government to intervene against cheap pepper imports from Vietnam.

And as expected, the government has decided to intervene by fixing minimum import price:

The Union Ministry of Commerce and Industry has approved the proposal of the Spices Board for fixing the cost, insurance and freight (CIF) value of ₹500 per kg as the Minimum Import Price (MIP) for pepper to protect the interests of pepper growers.

In recent times, decline in the domestic pepper price owing to cheaper import of pepper from other origins has been a major concern among pepper growers. Pepper prices have gone down by nearly 35% in one year and have resulted in a lot of hardship for pepper growers.

Since most of the pepper-producing countries are in the ASEAN region, there have also been apprehensions of pepper from these countries, being routed through Sri Lanka taking advantage of lower duty under SAFTA and ISLFTA, for availing concessional import duty. Farmers’ associations have demanded taking of stringent measures, including fixing of Minimum Import Price for pepper, to prevent cheaper imports of pepper into the country from other origins, a release from the Press Information Bureau stated on Wednesday.

Fixing of Minimum Import Price will help in improving the domestic price particularly when the harvesting season of pepper is fast approaching, it said.

Meanwhile, Nalin Kumar Kateel, MP, welcomed the decision on Wednesday. In a release, Mr. Kateel said that pepper growers had been urging the government for the same. 

…..Price of Indian pepper which was ₹650 last year has dropped to ₹380 a kg now.

Eventually politics triumphs over everything else.

India’s farmers seek restriction on import of Vietnamese black pepper…Good economics?

Consortium of Pepper Growers’ Organisation have argued for import restrictions on Vietnam pepper:

Was agriculture the greatest blunder in human history?

Prof Darren Curnoe of Univ of New South Wales:

Twelve thousand years ago everybody lived as hunters and gatherers. But by 5,000 years ago most people lived as farmers.

This brief period marked the biggest shift ever in human history with unparalleled changes in diet, culture and technology, as well as social, economic and political organisation, and even the patterns of disease people suffered.

While there were upsides and downsides to the invention of agriculture, was it the greatest blunder in human history? Three decades ago Jarred Diamond thought so, but was he right?

Prof argues that Diamond was indeed right but we can do nothing about it:

How Netherlands has become an agricultural giant by showing what the future of farming could look like.

Interesting piece and stunning pictures in Nat Geo’s Sep edition:

In a potato field near the Netherlands’ border with Belgium, Dutch farmer Jacob van den Borne is seated in the cabin of an immense harvester before an instrument panel worthy of the starship Enterprise.

From his perch 10 feet above the ground, he’s monitoring two drones—a driverless tractor roaming the fields and a quadcopter in the air—that provide detailed readings on soil chemistry, water content, nutrients, and growth, measuring the progress of every plant down to the individual potato. Van den Borne’s production numbers testify to the power of this “precision farming,” as it’s known. The global average yield of potatoes per acre is about nine tons. Van den Borne’s fields reliably produce more than 20.

That copious output is made all the more remarkable by the other side of the balance sheet: inputs. Almost two decades ago, the Dutch made a national commitment to sustainable agriculture under the rallying cry “Twice as much food using half as many resources.” Since 2000, van den Borne and many of his fellow farmers have reduced dependence on water for key crops by as much as 90 percent. They’ve almost completely eliminated the use of chemical pesticides on plants in greenhouses, and since 2009 Dutch poultry and livestock producers have cut their use of antibiotics by as much as 60 percent.

 

Is data the new oil or is data the new soil? Case of Bhutan Hazelnuts..

Superb article on how different institutions and companies are ushering the data driven world. Bruno Sánchez-Andrade Nuño, Data Scientist at World Bank tells you data is being collected from Bhutan’s hazelnut farms:

Are farm loan waivers really so bad? The elite RBI view vs an alternate view..

The farm loan waivers have been criticized severely by one and all.

He says people understand that farmers are under distress but hit out at loan waivers. The view is elite and best summed by RBI:

Oddly enough, the media and other commentators recognise the reality of farmers’ distress, but take serious exception to farm loan waivers as a means of addressing the problem. The position taken by India’s elite is best summed up in the words of the Governor of the Reserve Bank of India (RBI):

“I think it (farm loan waiver) undermines an honest credit culture, it impacts credit discipline, it blunts incentives for future borrowers to repay, in other words, waivers engender moral hazard. It also entails at the end of the day transfer from tax payers to borrowers. If on account of this, overall Government borrowing goes up, yields on Government bonds also are impacted. Thereafter it can also lead to the crowding out of private borrowers as higher government borrowing can lead to an increase in cost of borrowing for others. I think we need to create a consensus such that loan waiver promises are eschewed, otherwise sub-sovereign fiscal challenges in this context could eventually affect the national balance sheet.” (Press Conference, 6 April 2017).

 

These are ominous words. Different aspects of this view have been picked up by different interlocutors to create a new and frightening urban legend. What is worrisome is that no one seems to have deemed it fit to critically examine the validity of these claims in the very specific context in which the loan waivers are being considered. Perhaps it is time to do so.  

The first point that needs to be made, and made forcefully, is that this is not the first time that farm loan waivers are being given. Therefore, it is possible to subject its effects to empirical validation. The second is that even if all such effects are valid, they need to be evaluated against the counterfactual – namely, what is the likely outcome if these waivers are not granted? Third, surely somebody should ask whether these repeated instances of farm loan waivers are a symptom of mindless political populism or do they point to a more fundamental problem in the design of farm loans in India?

Pronab Sen provides an altenate view to the ongoing criticism. He says this time the distress and call for loan waivers is mainly due to demonetisation, an action which was mainly enforced by Govt and RBI:

There is a certain ‘holier than thou’ flavour to the words of the RBI Governor which finds echo in the Finance Minister’s flat refusal to assist the states with the loan waivers. This is cynical at best, since there is now a consensus that the present crisis is largely the outcome of demonetisation, in which both the Minister and the Governor were complicit. It almost equals in arrogance the famous American dictum: “it may be our currency, but it’s your problem”¹⁰. 

At the heart of this problem are Constitutional provisions whereby the health of the banks is the Centre’s concern while the health of the farmers is that of the states. This division of responsibility is asymmetric in that if states protect the interest of farmers, they also protect the banks; while the Centre can protect the banks without concern for the farmers. As a result, the ball is always in the states’ court, and the Centre can simply stand back and watch if it so desires.

This state of affairs is not conducive to the health of the country as a whole. The Centre and states need to work together to evolve a farm loan model which protects both the farmers and the banks without bringing politics into it. This is the essence of ‘cooperative federalism’ that this government sets such store by. Until such time, farm loan waivers need to be viewed less ideologically and with more compassion. 

The alternate view point is always important. The political economy of India’s agriculture remains as precarious as ever..