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10.03.2010

Crop Moisture Stress Index

Crop Moisture Stress IndexNational Oceanic and Atmospheric Administration (USA)The Moisture Stress Index for corn and soybean crops is a measure of the effects of drought and catastrophic wetness on national crop yield and is calculated through the use of a drought index (the Palmer Z Index) and annual average crop productivity values within each U.S. climate division. Moisture stress, either a lack or an abundance of soil moisture during critical phases of the crop growth and development cycle, affects US average crop yield, particularly when moisture stress occurs in the most highly productive crop growing areas. Soil moisture conditions in July and August were found to be the best indicators of average crop yield for corn and soybeans, and as such, are used in creating the Moisture Stress Index. The Moisture Stress Index for corn and soybean crops is a measure of the effects of drought and catastrophic wetness on national crop yield and is calculated through the use of a drought index (the Palmer Z Index) and annual average crop productivity values within each U.S. climate division. Moisture stress, either a lack or an abundance of soil moisture during critical phases of the crop growth and development cycle, affects US average crop yield, particularly when moisture stress occurs in the most highly productive crop growing areas. Soil moisture conditions in July and August were found to be the best indicators of average crop yield for corn and soybeans, and as such, are used in creating the Moisture Stress Index. Figure 1. Short-term drought conditions within each U.S. climate division as indicated by the monthly Palmer Z Index (February 2010). Calculations of the Moisture Stress Index are based on (1) the extent of severe to catastrophic drought or catastrophic wetness within the crop growing regions, i.e., those climate divisions with a Z Index value less than or equal to -2 or Z Index greater than or equal to +5, and (2) the average annual crop productivity* of each climate division within the crop growing region. Figure 1 is an example of short-term soil moisture conditions as measured by the monthly Palmer Z Index, while figures 2 and 3 show the 10-year average crop productivity values within the crop and soybean growing regions respectively. Figure 2. Non-irrigated productivity within Corn growing region by climate division (based on 1991-2000 average). Figure 3. Non-irrigated productivity within Soybean growing region by climate division (based on 1991-2000 average). Although the occurrence of drought during some months of the year would not be expected to impact crop productivity, the index was initially calculated for all months of the year. In cases when no climate division within the crop growing region has a Z index value less than or equal to -2 or a value greater than or equal to +5, the Moisture Stress Index equals zero. For months in which one or more climate division within the crop growing region has Z index values greater than or equal to +5, the Stress Index value for the month is calculated using a weighted average, with the average crop productivity values in the affected climate divisions as weights. For example, if severe to catastrophic drought or catastrophic wetness occurred during a particular month in X number of climate divisions that account for 20% of the crop growing region's productivity, the value of the Index would be 20 for that month. Not surprisingly the largest Moisture Stress Index values result when widespread drought or catastrophic wetness occurs in the most productive areas of the crop growing region. Although these Moisture Stress Index values were calculated for each month of the year, soil moisture conditions in months outside the growing season should naturally have less impact on crop yield than those months that are part of the growing season. It is also known that some months of the growing season are more critical to the final success of the harvest than others. For corn and soybeans, the growing season generally runs from May through September, the reproductive season from July to August, and the harvest season from October to November (Brad Rippey, USDA, personal communication). To determine the months in which the Moisture Stress Index was a better indicator of the success of the year's crop, the monthly index values were correlated with the annual crop yield for the period 1970-2000**. During development of the Moisture Stress Index, variations of the final index were evaluated. In addition to the Moisture Stress Index, which considers both drought and wetness, indices based solely on drought and another based solely on wetness were calculated. An index based solely on the effect that drought conditions have on crop yield was calculated (a Drought Stress Index) as well as an index based only on the effect that wetness (a Wetness Stress Index) has on crop yield was also calculated. In all cases, the effect of varying levels of drought and wetness severity was evaluated by using a variety of minimum drought and wetness thresholds (e.g., Z Index less than or equal to -2, -3 etc.. and Z Index greater than or equal to 2.5, 3.5, etc). Evaluation of the monthly correlations of the index with annual crop yield for each variation showed that the Moisture Stress Index based on the Z Index values of less than or equal to -2 and greater than or equal to +5 (as described in the preceding paragraphs) best reflected the year to year changes in crop yield. Figures 4 and 5 show the resulting monthly and seasonal correlations for corn and soybean respectively. In each figure the first inset shows the annual crop yield, the second inset the correlations for severe to catastrophic drought stress only (drought stress), the third inset the correlations for catastrophic wetness stress only (wetness stress), and the final inset the correlations for the combined impacts of drought and wetness (moisture stress). Average annual crop productivity was correlated with monthly crop index values and a plot of the correlations for each month created. Figure 4. Monthly and seasonal correlations of each corn crop stress index (using severe to catastrophic drought, Z index less than or equal to -2 and catastrophic wetness, Z index greater than or equal to +5) with annual corn crop yield. Figure 5. Monthly and seasonal correlations of each soybean crop stress index (using severe to catastrophic drought, Z index less than or equal to -2 and catastrophic wetness, Z index greater than or equal to +5) with annual soybean crop yield. The strong correlations in July and August (for the Drought Stress Index and Moisture Stress Index), are consistent with the understanding that conditions during the reproductive season (July and August for corn and soybeans) are most critical in determining the outcome of a crop growing season (USDA, personal communication). To determine if some combination of months could explain more variance in crop yield, the crop stress indices were calculated over the July-August two-month period and other combinations of the highly correlated growing season months, e.g., June-August and May-September. Correlations for the July-August Drought and Moisture Stress Indices were found to be more highly correlated than any single month or other combination of months (see Figures 4 and 5). The strong correlations (as shown in Table 1) as well as the understanding that conditions during July and August are critical to the success of the crop growing season led us to base the Moisture Stress Indices on the July-August average. Although the correlations of the Drought Stress Index and the Moisture Stress Index were similar, the decision to use the CMSI instead of an index based solely on drought conditions was based on our knowledge that catastrophic wetness (such as that experienced during the summer of 1993) has an adverse impact on crop prodictivity. We wanted to ensure there was some method of accounting for this type of event in our index. The inclusion of instances where the Z index exceeds +5 allows us to do this. Figures 6 and 7 contain the Stress Index values for corn and soybean, respectively, for the period 1900-2001. Table 1. Monthly and seasonal correlations as plotted in figures 6 and 7. Detrended annual crop yield versus detrended crop stress indices. Corn: Annual corn yield vs monthly stress indices (1970-2000) as well as a multiple correlation coefficient using the drought and wetness incices versus corn yield. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec May-Sep Jul-Aug Jun-Aug Aug-Sep DROUGHT 0.10 -0.03 0.31 0.14 -0.12 -0.37 -0.74 -0.43 -0.08 -0.13 0.00 -0.13 -0.57 -0.77 -0.69 -0.35 WETNESS 0.13 0.08 0.08 -0.00 -0.10 -0.17 0.06 0.07 -0.01 0.14 0.17 0.15 -0.00 0.08 0.03 0.05 MOISTURE 0.11 -0.02 0.33 0.14 -0.15 -0.41 -0.67 -0.44 -0.09 -0.10 0.08 -0.08 -0.60 -0.78 -0.71 -0.35 Soybean: Annual soybean yield vs monthly stress indices (1970-2000) as well as a multiple correlation coefficient using the drought and wetness incices versus corn yield. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec May-Sep Jul-Aug Jun-Aug Aug-Sep DROUGHT 0.10 0.07 0.22 0.03 -0.03 -0.37 -0.64 -0.56 -0.18 -0.08 -0.19 -0.30 -0.58 -0.77 -0.70 -0.49 WETNESS 0.18 0.02 0.09 -0.16 -0.07 -0.22 0.09 0.24 0.03 -0.03 0.23 0.06 0.08 0.16 0.10 0.18 MOISTURE 0.10 0.08 0.24 -0.01 -0.05 -0.41 -0.55 -0.53 -0.17 -0.09 -0.09 -0.26 -0.58 -0.73 -0.69 -0.46 Figure 6. Moisture Stress Index for Corn since 1900. Figure 7. Moisture Stress Index for Soybean since 1900. *Crop productivity values within each climate division were used in calculating the Crop Stress Indices instead of divisional yield values because the highly productive areas of the US have a greater impact on the average national yield than those areas that traditionally produce fewer bushels or pounds of a particular crop. Conversely, the index, although calculated using average productivity values within individual climate divisions, is more closely related to national crop yield (for non-irrigated acreage) due to the impact that year-to-year changes in acreage planting practices can have on nationally averaged productivity. USDA crop productivity numbers within each climate division for the period 1991 - 2000 were collected and averaged into mean crop productivity values. Irrigated acreage was excluded from all calculations. Midwest crops are primarily rain fed while irrigation practices increase in the Plains states, particularly in the crop growing regions farthest west. **The crop yield time series were linearly detrended before correlations were calculated to remove the effect of improvements in crop science, technology, etc. that have occurred over the years. Because trends due to improving crop technology could not be separated from trends due to other factors such as climate change, the crop stress indices were also detrended. Correlations were calculated for the period 1970-2000, instead of the full 101-year period, as this was a period of high productivity and large year-to-year fluctuations in crop yield.

02.02.2010

Sustainability and Scalability of Index-Based Insurance for Agriculture and Rural Livelihoods

Farmers face a variety of market and production risks that make their incomes volatile from year to year. In many cases, farmers also confront the risk of catastrophe, as, for example, when crops are destr oyed by drought or pest outbreaks or when assets and lives are lost to hurricanes and floods. These risks are particularly burdensome to the poor, including many small farmers. Unless adequately managed, they can slow economic development and poverty reduction and contribute to humanitarian crises. Covariate risks, especially those that involve catastrophic losses, pose special difficulties and costs. Past attempts by governments and relief agencies to help manage covariate risks have been costly and often ineffective. Today there is much interest in index insurance products that might provide a more effective and market-mediated solution. Index insurance Index insurance involves writing contracts against specific perils or events (such as drought, hurricane, or flood) that are defined and recorded at regional levels (usually at a local weather station). Insurance payout depends not on the individual losses of each policyholder, but rather on the regionally recorded index of loss, which serves as a proxy for the losses in a region. Because all buyers in the same region pay the same premium rate per dollar of coverage and receive the same rate of payment, index insurance avoids adverse selection and moral hazard problems. Also, since there are no on-site inspections or individual loss assessments to perform, it can be relatively cheap to administer. It relies only on regional index data, which are already available and generally reliable. In recent years a plethora of pilot index insurance programs have been launched around the world with the active engagement of a diverse range of players, including governments, donors, multinational agencies, international reinsurers, relief agencies, nongovernmental organizations (NGOs), private insurers, banks, input suppliers, food marketing companies, and farmer organizations. Emerging lessons The World Food Programme (WFP) and the International Fund for Agricultural Development (IFAD) recently conducted a review of 37 index insurance ventures in 15 countries and distilled a number of important lessons about the conditions under which index insurance is worthwhile and might scale up. One key lesson that has emerged is the need to distinguish between two fundamentally different objectives affecting the design and delivery of index products. Some schemes are designed to help poor people protect their livelihoods and assets and are primarily an alternative to more traditional relief programs. Other schemes are designed to help households with viable farm businesses manage their risks. These two types of insurance are called protection and promotion insurance, respectively, in this brief. Insurance that protects the livelihoods and assets of poor people from catastrophic losses inevitably must be subsidized and requires special delivery channels aligned with relief rather than development interventions (such as NGOs and public relief agencies). On the other hand, insurance that promotes agricultural development should be channelled through private intermediaries. It can sell on an unsubsidized basis if it is linked to a value proposition that enables farmers to obtain new productivity-enhancing technologies or to participate in high-value markets that can significantly raise their expected incomes. Mixing these two needs in the same program all too easily leads to insurance products that must be heavily subsidized for all and that serve social rather than development objectives. The WFP and IFAD analyzed a diverse range of index programs (see Annex 1 for full details). Within the promotion category, insurance programs range from privately provided and unsubsidized schemes linked to value propositions for farmers to publicly provided and heavily subsidized schemes with weak or no value propositions. Within the protection category, schemes vary from international insurance arrangements that directly underwrite government relief costs to programs run by NGOs that provide protection insurance directly to communities or farmers. They also vary with the type of index used. Although most programs use weather indexes, others use indexes based on regional estimates of crop yields or livestock mortality rates and estimates of range productivity based on weather indexes and biophysical models. Most of the programs were only recently launched, and it is still too early to judge their success. A small number failed to generate sufficient demand and had to be discontinued (such as in the Ukraine). But many others show promise and, while not yet achieving large scale, are providing valuable lessons for the future. Among the promotion programs, India has achieved the greatest success, with three insurance companies reaching 1.25 million farmers in 2009, up from a 350-farmer pilot in 2003. The total sum insured in promotion schemes around the world in 2009—that is, maximum payouts to farmers and herders—is US$1 billion. Of the protection schemes, the Mexican program has reached a large scale and continues to grow, indirectly benefiting 800,000 households in 2008, up from 600,000 in 2007. Other key lessons include the following: ·    Focus on a real value proposition for the insured. For protection insurance, relief agencies and vulnerable households need products that offer timely, credible, and fair relief in times of crisis. For promotion insurance, products that catalyze access to credit, technology, or new markets and help generate significant additional income can be attractive, even without subsidies. Products must also be affordable and cover the most relevant risks with minimal basis risk, and there must be opportunities to finance the premium with credit. An excellent example is the PespsiCo scheme in India. This weather-based index insurance program was designed to cover potato crop losses due to late blight disease, which is associated with weather events that can be indexed. The insurance is part of a technology package that comes with credit and a market contract and offers substantial income gains to participating farmers. ·    Find a champion or leader to overcome initial set-up problems and barriers. Many set-up constraints with index insurance make spontaneous market-driven development difficult. In nearly all cases, an outside agent or champion has been needed to initiate and catalyze action. These champions have included multinational agencies like the World Bank (in India, Malawi, and Mexico) and the WFP (in China and Ethiopia), NGOs (like Oxfam in Ethiopia), and brokers (such as MicroInsure in Tanzania). These agents have helped supply missing public goods (such as weather stations and insurance regulations) and establish reinsurance arrangements. They have also helped train local brokers and insurers and have assisted with the agro-meteorological research needed to identify viable insurance products. ·    Develop efficient and trusted delivery channels. Insurers selling promotion insurance to farmers rarely have their own rural distribution networks and typically must rely on intermediaries to sell and transact the insurance with farmers. These intermediaries need to be efficient, available, and responsive to farmers’ needs. They also need to be trusted, as must the insurance company itself. Where the insurance is tied to credit or farm inputs, the credibility of the supply system for the entire package becomes important. The groundbreaking BASIX deal in India in 2003, for example, was possible because the microfinance institution and livelihood supporter BASIX was already a trusted partner of farmer groups. ·    Develop weather data infrastructure. Initial insurance pilots can be established even without historical weather data or real-time weather data services. Serious mass market players (as opposed to local niche market players) in financial markets will not engage, however, unless they can be assured of good data on risk for pricing contracts and reliable and timely data on index values in order to settle contracts in a timely fashion. ·    Transfer risk to international risk markets. Reinsurance support is the entry ticket for any meaningful index insurance development and a crucial condition for scaling up. For example, INISER Nicaragua entered into a long-term reinsurance deal with Partner RE, and the index insurance products in Malawi are reinsured by French and Swiss reinsurers. Twenty out of the 37 index insurance deals are reinsured, representing 3.5 million cumulative policies, whereas the non-reinsured deals add up to a mere 34,000 policies. Since there are no moral hazard problems with index insurance, reinsurers are often ready to write up to 99 percent of the risk, compared with only 85 for other kinds of insurance. ·    Train all implementation actors. Index-based insurance programs that include training and capacity development have a clear advantage over those that do not. Training farmers in how to use index insurance as a risk-reducing investment can give them more realistic expectations about payments and greater familiarity with the nature of the product. In Ethiopia, Nyala Insurance started selling weather index insurance products for agriculture in close cooperation with the Lume Adama Farmers’ Cooperative Union, which helps educate farmers in how insurance coverage and payout works. Conclusions Evidence shows that weather index insurance can work, but few programs have demonstrated any real capacity to scale up. Spontaneous development by the private sector has been limited, and governments or international agencies like the World Bank have had to initiate activities. This reluctance by the private sector seems related to the high barriers to entry in this market—upfront research and development costs, basis risk associated with too few weather stations, and initial problems in getting access to international reinsurance. Insurers also need marketing intermediaries to reach farmers and need to partner with others in the value chain to create solid value propositions for smallholders. If index insurance is to be scaled up, governments and donors will need to play important enabling and facilitating roles by taking the following steps, among others: building weather station infrastructure and data systems and making that data publicly available on a timely basis; providing an enabling legal and regulatory environment; financing agro-meteorological research leading to product design and making the results publicly available; educating farmers about the value of insurance and the workings of index-based products; facilitating initial access to reinsurance; supporting the development of sound national rural risk management strategies that do not crowd out privately provided index insurance; subsidizing protection insurance where it is more cost-effective than existing types of public relief and using smart subsidies when needed to kick-start promotion insurance markets; and supporting impact studies to systematically learn from ongoing index insurance programs and to demonstrate their economic and social benefits. For further reading: www.wfp.org/disaster-risk-reduction. Ulrich Hess (uhess@worldbank.org) is a senior economist in Multilateral and Innovative Financing–CFPMI at the World Bank CFPMI. Peter Hazell (p.hazell@cgiar.org) is former director of the Development Strategy and Governance Division of the International Food Policy Research Institute (IFPRI). Ulrich Hess and Peter Hazell

23.10.2009

Quality Gaps in Crop Insurance

Mold and other quality losses are rarely severe enough to trigger crop insurance claims, as I found out when reporting today's news story on how growers will be compensated for their sub-par crops. Kernel damage and low test weights must meet thresholds before insurance adjustments trigger. In practice, crop insurers told me, it's hard for growers to get fully paid for dockage and they believe that will be the case with this latest outbreak of white mold in the Illinois and Indiana corn crops. Bill Klein, chief of the loss adjustment standards branch at RMA, emphasized that white mold is not insured as a "special case" like aflatoxin, which has its own set of quidelines because of its dangerous toxicity to humans and animals. Instead, white mold is considered kernel damage and lumped together with other kernel injury from hail, insects, odor or frost. Only grain at Grade 5 or worse qualifies for federal crop insurance quality adjustment. Once grain meets the minimum damage level, adjusters factor a discount to a grower's production. For example, 14 percent kernel damage receives a 9-percent discount on yield. A 30-percent kernel damage reduces crop insurance yield by 33.4 percent. Low test weights below 49 pounds also count toward a discount. (Calculations vary by county, but you can check the RMA tables to see how your damaged grain would score at http://www.rma.usda.gov/news/2008/05/qualityadjustment.pdf) For example, 1,000 bu. of corn with 25-percent kernel damage and a test weight of 47 pounds is designated as U.S. Sample Grade. Crop insurance adjusters would use a discount factor of 25.4 percent for kernel damage, 6.5 percent for low test weight and 12.6 percent for Sample Grade, or a total discount of 48.5 percent. Net result is that the 1,000 bu. would be adjusted to 515 bu. yield counting toward a grower's yield guarantee. Craig Henning, the field service manager who handles national claims for John Deere Risk Protection, says, "It would take a lot of mold on corn to deduct much from a grower's production count." It would be nearly impossible for someone with a 230-bu. yield like they are reporting in Nebraska to get any compensation, he added, even if they did experience some quality issues. Henning recalled that in 1988, when aflatoxin infected much of the Illinois crop, some elevator chains docked identical grain $2.50 per bu. and others only 15 cents. RMA guidelines treat crop quality losses as an adjustment to yield, but "they don't always pay growers for what they get deducted for," Henning said. "The government tries to keep thing on balance of what the grain is really worth," he added. Marcia Zarley Taylor

22.10.2009

Agricultural Insurance Schemes (Executive Summary, 2008)

This is an executive summary of the report. Please download report to full text (appr. 3MB) Agricultural producers face a series of risks affecting the income and welfare of their households. These are mainly production risks related to weather conditions, pests and diseases, market conditions, etc. Consequently, the income stability of agricultural stakeholders can be also affected. In recent years the European Union has been considering a possible integration of risk management in the common agricultural policy and is analysing risk and crisis management strategies to provide an improved response to crises in the agricultural sector. This report reviews the agricultural risk management systems in the EU (candidate countries Turkey and Croatia are also analysed) with a special focus on types of agricultural insurance, although no data could be collected for Malta. The most descriptive part of the study contains a collection of data on the realities and modalities of agricultural insurance in Europe. This information mainly comes from fact sheets filled in by experts or consultants from the different European countries and data from the European Committee of Insurers (CEA). Many of these data were unpublished because there is no obligation for the insurance companies to report to the EU institutions. Description of the current situation of agricultural insurance in the EU The EU has mostly classic insurance schemes (mainly single-risk and combined insurance, but also yield insurance), generally private except in Greece and Cyprus where insurance is public and compulsory. In many countries the market is in the hands of no more than two or three insurance companies. The level of development of agricultural insurance in each country is mainly linked to two decisive factors: - the needs faced in each country (risk level); - the economical support given by each Member State to the insurance systems. The role of governments is analysed for each country. Some do offer or subsidise insurances while others provide aid ex post given on an ad hoc basis through compensation schemes, calamity funds or futures markets existing in Europe, which can be partially financed by the agricultural stakeholders on a voluntary or compulsory basis. The different existing risk management tools are presented, analysed and compared in the report. This helps to understand better the evolution of the insurance systems in Europe, since the development of the insurance system depends very strongly on the presence of other risk management tools and on the role of the public sector, in particular ad hoc aid measures. Understanding and measuring the level of development of insurance The report gives an analysis of the volume of insurance and the market penetration or participation rates (in relative terms). Several comparisons are studied and shown through maps to conclude that the percentage of insured area does not give a sufficient measure to understand the importance or development of insurance in a country: it needs to be combined with the cover offered by the insurance schemes and with the market penetration in terms of insured value. Finally, we can point out that in Europe there is no comprehensive yield insurance without public support. For non-systemic risks, like hail, the private sector offers suitable insurances, but for insurance products offering a wide cover in yield reduction risk, there is a direct relationship between development of the system and public support. The amount of support provided by EU Member States to subsidise insurance premiums varies depending on the country’s policy to promote some particular type of cover. Some technicalities, like reinsurance, triggers and deductibles, are described. Reinsurance is usually done in the international reinsurance market, mainly in the modalities of stop-loss and quota-share reinsurance. Regulations, policies, State aid: towards a homogeneous system The definitions of crisis and disaster eligible for public aid in EU Member States are examined and compared with the ‘Community guidelines for State aid in br>the agriculture sector (2000–06)’ (EC, 2000). New Commission guidelines (EC, 2006b) and a new regulation (EC, 2006a) on the application of Articles 87 and 88 of the Treaty were adopted in December 2006. The definitions assumed are strongly shaped by WTO agreements. National experts provided information on the Member States’ definitions for disasters and crises which are eligible for aid, as well as the definitions of insurable risks, when they exist. Some countries forbid State aid in the case of crisis or disaster if the risk could have been insured. This is the case for Austria, Greece, Italy, Portugal, Spain, Sweden and Turkey for subsidised insurable risks and for France if insurance has reached a significant diffusion level. The regulation will partially condition State aid to buying some type of insurance from 2010 on. Most EU Member States follow the Community guidelines for State aid (EC, 2000) to decide when aid can be bestowed aid. We have classified the Member States in four groups according to their observance of the guidelines: some of them incorporate or explicitly mention the guideline definitions in their legislation; others just assume it without explicit mention; a third group have more restrictive definitions than those established in the guidelines, as it is the case for the calamity fund system in France. Lastly, some States have less restrictive definitions than those in the guidelines. These different attitudes of the Member States existed while the guidelines were only ‘advisory’. A few examples of definitions for disaster are shown below. (a) EU States with a more restrictive definition: France: crop losses above a higher threshold: 42 % of the production value of the damaged crop and 14 % of the whole farm gross revenue; also requires that no efficient preventive technique be available. Austria: disaster is defined by the public authorities related to the occasion; no aid for insurable risks. Portugal: damage on crop production of at least 50 % (…) of the yields usually obtained in the region. The Netherlands, Sweden and the UK: no aid is given for climatic risks on crops, only for livestock diseases. (b) EU States with a less restrictive definition: The Czech Republic: more detailed specification of defined risks called as ‘natural disasters’. Hungary: more risks defined as ‘natural disasters’; lower triggers, 15 % or 20 %, applying for some kind of support, like preferential credit or tax and lease reduction and cancellation. With the coming into force of the 2006 regulation this situation should change towards more homogeneous rules. Risk level: geographical analysis The variability of production and income is far from uniform across the EU: in some regions and sectors they are relatively stable, while in other regions or sectors they are highly unstable. Mapping the variability level has a twofold interest for the assessment of agricultural insurance: better understanding as for which geographical areas and sectors stabilisation is more important, and tuning the extrapolation of the premium rates in a hypothetical EU-wide system. The data required for analysing the variability of climatic risks, yield and income come from several sources: - meteorological databases and agrometeorological parameters computed by CGMS (crop growth monitoring system), which is the kernel of the JRC yield forecasting system for the EU; CGMS allows an analysis to be made at pan-European level of the status of the crops and on the harvest prospective and in this report it was used to develop climatic risk maps; - vegetation indexes computed on satellite images; - Eurostat’s REGIO database on yield of main crops; - the farm accountancy data network (FADN). Agricultural insurance systems in other countries The agricultural insurance systems existing in the world are reviewed. In Canada, the USA and other non-EU countries, some insurance instruments, such as index insurance, area insurance, whole farm insurance or revenue insurance, have been developed which are not developed in EU. In the United Kingdom there was a private revenue insurance product but it was soon removed from the market. In Canada and the USA there is yield insurance. In both countries, there is a basic cover for yield insurance which covers only for losses above the 50 % of the average yield (it is called catastrophic cover). It is highly subsidised by the government (almost entirely in the USA — where farmers pay only an administrative fee — and 50 % in Canada). The USA is currently the only country where revenue and income insurance exists; the report presents it in depth. In Canada there was an income insurance named Gross Revenue Insurance Plan which failed and now there is an income stabilisation programme, which is described in the report. The Canadian system is mainly led by public insurance agencies, from the provincial governments. It profits from subsidies, both from the federal and the provincial governments, which total EUR 425.5 million and which amount to 66 % of the premiums. Besides yield insurance products similar to those in the USA, it has an important income programme, Canadian agricultural income stabilisation (CAIS), which consists of stabilisation accounts. The stabilisation accounts are individual accounts where farmers put an amount of money every year, which they can withdraw in a year of big losses. They can be based on yields, revenues or other indices. Livestock sanitary and risk crises The report also reviews several studies made in the past few years to analyse the costs and impact of recent epidemic livestock outbreaks in Europe. We discuss the potential of livestock insurance to cover animal diseases and more general animal risks. Livestock epidemics can result in substantial losses for governments, farmers and all the other partakers involved in the livestock production chain. National governments and European institutions generally support the largest part of the direct losses, such as the value of destroyed animals and organisational costs. Consequential losses, such as losses resulting from empty buildings and movement standstills, are almost always completely borne by the farmers themselves if not insured privately. Few private insurance systems exist in Europe to cover the consequential losses due to livestock epidemics (e.g. they exist in Germany, Italy, Sweden, the Netherlands and the United Kingdom). Most general livestock insurance schemes cover death and emergency slaughter because of illness. The main reason for public concern is that certain diseases can be a large potential hazard for the economy and the health of the population; therefore public reaction is normally covered by legislation and there is less room for private insurance. Besides, forecasting high risks events is very difficult and insurers are reluctant to insure against ‘any disease’. Strategies of the public sector are rather focused on efficient risk-reducing behaviour, in particular through preventive measures. It seems possible to build a cost-sharing scheme only for covering losses caused by diseases with low or no externalities. Main figures of crop insurances at country level Approximately 23 % of crop value was insured in 2004 in the EU-27. Premiums amounted to EUR 1 583 million, i.e. 4 % of the insured value. Spain is generally considered as the country with the most developed systems and accounted for EUR 564 million although only 5.86 million ha were insured, showing relatively low market penetration (26 % of the cultivated area). In Germany, market penetration is higher (7.26 million ha, i.e. 43 % of the cultivated area), and the average amount of premiums accounted for EUR 129 million. This fact can be explained by considering that in Germany the insurance usually covers only a single risk (hail). On the other hand, the high value for Spain can be explained by the higher number of perils covered and the potentially higher risks there. Total subsidies amounted to EUR 497 million or 32 % of the premiums. Between countries, the amounts of subsidies to the premium are very different. We find the highest subsidy rates in Europe are in Italy and Portugal, for example the 80 % subsidy in Italy for yield insurance. In other countries, as in the UK, there is no subsidy at all. Average loss ratios — total claims paid by insurance companies during a certain number of years, divided by the total premiums of the same period — range from 60 % to 70 %. Feasibility of an EU-wide system of agricultural insurance We assess the feasibility of several scenarios with different types of insurances: single-risk insurance, yield insurance, index insurance, revenue/income insurance, etc. We consider socioeconomic criteria (related to decisions of the private sector: insurers, reinsurers and farmers) and technical criteria (cost/affordability, asymmetric information, easiness to control). Political criteria are essential, but beyond the scope of this report. The rough costs estimation of some of them indicates that a 50 % subsidy to the national premiums of all the countries, assuming an insurance demand of 40 %, would be approximately of the order of magnitude of EUR 1 billion for income insurance, EUR 0.5 billion to EUR 0.6 billion for yield insurance on arable crops, EUR 0.23 billion to EUR 0.37 billion for area index insurance for cereals and of EUR 0.20 billion to EUR 0.40 billion for fruits. The calculations were made assuming that the average premium rates would remain in a more developed system equal to current rates. However, these estimations require more in-depth analysis, because this assumption may be too strong. In the current situation, with very heterogeneous positions of Member States and very different levels of risk, it seems difficult to propose a common homogeneous insurance system, but some types could be of some interest: - revenue insurance: more expensive, but more efficient as income stabiliser; - indirect index insurance: cheaper and easier to manage and control, but usually less correlated with farmers’ income. Alternatives to a common agriculture insurance system A series of alternatives to a common system have been proposed and analysed; these should be simple to manage by the EU administration and easy to control. An alternative to a proper EU-wide insurance scheme could be a set of actions to foster national systems by: - facilitating/subsidising the composition of databases, preferably at farm level, in order to limit to the minimum any malfunctioning due to asymmetric information that leads to adverse selection and, to some extent, moral hazard; - reinsuring (many agricultural risks are considered non-insurable in most countries because they are too systemic); insurers and reinsurers are not willing to take this type of risk — the situation could change if there is strong public participation in the reinsurance scheme (USA and Spain); - clarifying the framework (in order to achieve a greater homogeneity of the national systems); this has been partly achieved with the new regulation (EC, 2006a); - partially subsidising national systems which are within the framework (this could be either insurance models, funds or other risk management tools — in any case, they should be within a common legal framework, establishing some control criteria and a common financing scheme). Maria Bielza Diaz-Caneja, Costanza Giulia Conte, Christoph Dittmann, Francisco Javier Gallego Pinilla, Josef Stroblmair

31.08.2009

Crop Damages by Wild Animals - Global View

Crop Damages by Wild Animals - Global ViewG.M. Wani, Ph.D ; D.V.M (Germany)Wild animal-human conflicts have started since beginning of human era from Adam and Eve. This conflict of wilderness made man to hide in caves and he was called as “Cave man”. Slowly, with his advancement it is he who invented Axe and other weapon in stone and iron ages to frighten the wild animals, initially. Later on he hunted them to save himself. This feeling of uncertainty and fear of wild animals and wilderness reduced with the invention of fire. He made sharp weapons of bones and iron. These initial weapons were the beginning of this conflict, Animal human conflict.Wild animal-human conflicts have started since beginning of human era from Adam and Eve. This conflict of wilderness made man to hide in caves and he was called as “Cave man”. Slowly, with his advancement it is he who invented Axe and other weapon in stone and iron ages to frighten the wild animals, initially. Later on he hunted them to save himself. This feeling of uncertainty and fear of wild animals and wilderness reduced with the invention of fire. He made sharp weapons of bones and iron. These initial weapons were the beginning of this conflict, Animal human conflict. Thirty thousand years ago, the human population rose to 6 million. They were still hunters. With the invention of fire, he set fire a vast majority of sanctuaries, which scared wild life and they migrated from his neighborhood. Many forests, hills and difficult terrains were still beyond the reach of man three thousand years before, although human population has increased to 60 million. Man has already started primitive agriculture. He had made his terrains and wild life scared by him left his close habitats and searched for fresh abodes. Man by now had lust for fur, horns, ornaments and other forest resources. He invented many means to frighten whole wild life. He became a “Danger “not only for wild animals but for his own species, environment and eco-biodiversity. Three hundred years ago he industrialized crop production and produced enough food, for nearly 600 million people. This continued and from 30 year now he is feeding 6000 million people. Today we have a global food security for 7.5 billion. Human food security gains resulted in reduction of all other wild species, thus, the origin of wild- life- human conflict is the lust of man for more food, more luxury or sometimes fun for hunting or fur. This reduced wild life reserves and now a open conflict came into existence. Many man-wild life conflicts have been reported from Gir forests of Gujarat, Rajaji National Park in UP and many other states where forest lands became cultivable lands. Elephants, wild boars, monkeys, squirrels, deer , birds like crows, parakeets, wild dogs, jackals, gaur, sambur, langure, fowls, pea cocks, neilgai, Hippos, biats, blackbirds, rodents, wild pigs, feral species, primates, beetles, foxes, pigeons, feral hogs and a variety of other species damage crops. The carnivores even attack human too. These attacks are for search of food or their loss of habitat. Many such accidents came to be known in Jammu and Kashmir. The bear leopod and other wild animals are reducing in number. Their habitats used by human. The human causalities are due to carnivorous species, but herbivores inflict economic and human losses too. The crop damages by wild life has been the new threat to agricultural productivity throughout the world. This also concerns us in Asia and India. This review is aimed to find out: 1. Extent of damage to crops. 2. Nature of crop damage 3. Ways and means to prevent these losses. 4. A strategic planning to drive a line between wildlife conservation and farm economics especially in India. Executive Abstracts and Strategic elementaries: [EASE] 1. Importance Species causing crop damages ranges from elephant’s wild birds, monkeys, squirrels, deer, parakeet, wild dogs, foxes, deer and many others like Neilgai. On an average this damage to crops by wild animals amounts to U$ 961 per hectare. It is much more than an Indian Farmer earns from a hacter annually. Therefore, by these estimates, the damages are spectacular and economically important. 2. Human Elephant conflicts (HEC): i) Economic Losses: Among elephants crop raiding is common. The crops near their home ranges are damaged more. Elephants damaging crops had twice big ranges than those who did not damage the crops. Thus, more proximity of the crops near their ranges are prone to crops damages. Train accidents instigate elephants more to crop or human damages. Indonesia saw more frequent raids of elephants on crops. Human elephant conflict (HEC) is frequent and poses serious challenges in Africa. Both male groups and family group attacks have been observed. HEC losses in West Bengal were worth 3.2 croses of Rupees. This damage occurred in 3368sq kms.radius. The numerical number of elephants was 62 only. Assam observes damages to the woodcutters by elephants Asian wild Elephants raid and damage crops in herds of 10-13 individuals or big herds comprising 50-74 elephants. In Darjeeling district alone over an area of 200 kms. East to west, in last two decades 277 houses were demolished by elephants, killing 66 people in 5 districts. As a result of this conflict 23 elephants lost their lives. In 2001, economic loss of the order of US fifty thousand dollars was estimated to be inflicted by elephants. This scenario necessitates comprehensive measures to be taken to lessen these damage. The review of the measures, around the world suggest following few studies to be undertaken and resultant measures to be applied to lessen these damages. ii) Mitigation of losses: Methods developed and used to mitigate crop damages by elephants consisted of frightening of animals by drum beating, firegracks or even air gun fires. Guarding the crops by fences or even using electric fencing or raising poles and wiring may be effective. Chemical based deterrents, and electric fencing have been found to reduce crop damages. High voltage electric fencing using energizers in west have prevented wild animals damaging crop but this preposition may not be applicable in areas where even habitations do not have access to electricity. However, this method may act as a temporary boundary separating wild and domestic habitats. This could prevent intrusions from sly vatic to domestic foci. Guarding fields, digging trenches, modifying cropping patterns have a possibility of reducing man elephant conflicts or Human elephant conflicts. A 30% open space between two habitats may help to avoid HEC. This means a distance to be maintained between cropping fields and elephant habitates. A proper investigation on these lines is needed. A grid based geographical information system (GIS) with a 25Km2 resolution may help to have cost effective data source to analyze these situations. There is urgent need of identifying spatial predictors of HEC. On the basis of this study one can suggest or plan mitigation strategies, early warnings of attacks, use of barriers and deterrents. The utility of the methods could be assessed for land use and livelihood strategies to limit HEC. 3. Dear-Nilgai Damages. A survey of 2500 farms in UK revealed that 69% (n=192) cereal crops were damaged by deer. This damage costed £500 per annum per farm. Damages varied with deer density. In USA too deer damages comprised of crop loss, landscape damages, car accidents and property damages. Nilgai damages alongwith deer damages are common in India too. Tree cover of Acacia in the area is generally used as shelter by Nilgai. We have encountered huge crop damage in Mathura (CIRG) and nearby area by Nilgai visits. Grazing and browsing of Nilgai inflict losses on farms. This is regarded as a mammalian crop threat by the farmers. This behaviour of their inflict ozone injury to the young sapling, so precious for the growth of trees in Indian semi-arid farms. Corn damages by deer in USA amounts to 6.6.% per hectare. In an area where a farmer owned 125 hectare on an average 55 hectares were used to sow corn. There is a 6.6% loss of the product which is a huge economic loss. Similar damages by deer in Ontario, Canada, Portugal, Japan, South America and other parts of the world have been reviewed. In Virginia too a study involving 1506 agricultural producer farmers revealed 58% of them experiencing deer damages. Ways and means to prevent such attacks on crops have been reviewed. Most of the possible measures to be adopted are similar to these described for elephants (HEC). 4. Other Mammal and bird damages Monkey damages maize, sweet potato and other crops. It is suggested to reduce or change cropping pattern or alternating with non-agricultural activities near location of monkey habitats. Various methods are reviewed. Bat damage, Hygo crop damages in Japan, Grape wine damages by bats in Andra Pradesh, India have been studied. Crop economic loss assessment has been reviewed in these pages. Clover rather than grass can reduce wild mammal damages. Alley cropping of black walnuts helped to save soyabean and maize crop damages. Pesticide damages wildlife and minimize their attacks, enclosures and other electric fencing help to avoid such damage. Can one use harmful means to save crops, need a suitable strategy to preserve ecology and biodiversity. Both crops and wild animals need security and conservation. A management strategy is needed to safeguard human and wildlife equally. A policy framework is envisaged. Blackbird crop damage in USA amounts to 5-8 million dollars. A considerable sum of crores of rupees have been estimated to be damages in the form of crop, human and property losses by wild animals, birds and other rodents in India. Many measures to reduce these losses are needed and have been reviewed. Review 1. Wild animals damaging crops To elephants wild boar, porcupine, rheus macaque (Macaca mulatta), hoary-bellied squirrel, barking deer (Muntiacus muntjak), red-breasted parakeet (Psittacula alexandri), and wild dog are wild animals damaging crops. Methods developed and being used to mitigate man-wildlife conflict include, frightening the animals; guarding the crops; and using some sort of scarecrow and traps (Miah et al 2001). Accurate estimation of crop damage by wildlife (raccoons, white-tailed deer, and coyotes) often requires labour-intensive sampling procedure. Variable area transect (VAT) sampling has been identified as a potential labour-saving alternative to quadrat sampling ( Engerman et al 2002). 2. Wild life Human conflicts Agricultural landowners suffer in the form of damage to crops, livestock, and other property. Some wildlife agencies maintained abatement and compensation programmes. A model of deer-inflicted crop damage used to facilitate agency decisions regarding deer densities and distribution, abatement use, and to forecast compensation. The model is applied to field-level compensation claims in Wisconsin, USA. The results are consistent with theory, ( Yoder J, 2002). 3. Crop Economic loss due to wild life People’s perceptions were discerned through participatory discussions covering 419 households distributed in 10 villages in the buffer zone. Traditional uncodified rights of local people were substantially reduced through policy interventions set in since 1860s. Local people as well as tourists have been excluded from the core zone covering an area of 625 km2 since 1982. Deterioration of rural economy due to damage to crop and livestock by wildlife and, termination of opportunities of income from wild medicinal plant resources and tourism in the core zone were the key negative impacts of conservation policy felt by more than 90% of respondents. Mean annual economic loss per household was estimated as Rs.1285, Rs. 1195 and Rs.156 due to damage caused by wildlife to food crops, fruit trees and beehives, respectively, Rs. 1587 due to ban on collection of wild medicinal plants for marketing and Rs.7904 due to ban on tourism in the core zone. The Reserve authority granted compensation for livestock killed by wildlife but it was hardly 5% of the market value of killed livestock as assessed by the people. People did not appreciate much the present benefits from the reserve management in the form of wages for carrying out afforestation work, partial compensation for livestock depredation and availability of solar power devices, wool, and spinning devices. Approximately 95% respondents identified empowerment of local people in respect of realizing income from timber from dead/diseased trees in community forests, income from medicinal plants in buffer zone and opening of the core zone for tourism as potential development options. Improvement in rural economy, the prime concern of local people, has not received as much attention as legal enforcement of protection by the reserve management. There is a need for developing policies and management actions that serve the economic interests of local people together with enhancement of environment conservation goal (Maikhuri et al 2001). 4. Crop selection: Damage was less (34%) in experimental carrot as multiple crop than carrots as only crop planted (62% damage). Staggered plantings of canola, which continuously produced flowers, was the most effective lure crop of the green manure crops we tested. Carrot producers should use electric fences or 2.4-m woven wire fences, perhaps combined with staggered canola plantings, to reduce carrot depredations ( Schwab et al 2001). The colver, rather than fertilized grass, is more effective cover crop on AFAs, against damage by migratory geese. The sward should be managed to encourage clover growth, which would probably involve frequent cutting but no fertilizer. Further research is needed on clover replenishment rate over the winter season and possible benefits of clover leys to other wild life (McKay et al 2001). Alley cropping of black walnuts and percent with maize and soyabean rotations may avoid will animal damages. Tree –crop ratio of 1:10 may help( Godsey, 2000). 5. Elephan- human conflicts: Conflicts between elephants (Elephas maximus) and human occur in Rajaji National Park (RNP), Uttar Pradesh, one of eleven reserves designated in India, to conserve Asian elephants. Elephant-human. The conflicts in RNP from 1996 to 1999 were studied, and all human and elephant deaths or injuries caused by conflict were recorded. The impact of human colonies on elephant movement was studied in 18 villages along 17 km of the sourthern boundary of the study site and 4 village in the Chilla-Motichur corridor. Three male and four female elephants were radio tracked for 1-2 years. Primary conflicts included crop raiding, competition between humans and elephants for vegetation, and elephant mortality due to train accidents. Adult males that raided crops had home ranges twice as large as adult males that did not raid crops. Elephants only damaged crop of fields that occurred within their home ranges. Field trails of chemical based deterrents and electric fencing should be tried to reduce crop damage. Train speeds need to be reduced to prevent accidental elephant mortality (Williams et al 2001). Wild Elephant damages: A rapid village and field assessments, data survey showed. Elephants raided crops at a rate of 0.53 elephants per day in Indonesia. The frequency of crop raiding was related to vegetation type along the park border, the size and presence of rivers, and the distance to the park’s Elephant Training Centre (ETC), which houses about 150 captive elephants. Wild elephants damaged at least 450000 m2 of maize, rice, cassava, beans and other annual crops, and close to 900 coconut, banana and other perennial trees in the area surveyed. Elephants killed or injured 24 .Villagers try to reduce elephant damage by guarding fields, digging trenches between the park and their fields, and modifying their cropping patterns. Elephants-human conflict decreases the probability of support from local people for conservation efforts. The approaches are suggested consist of elephant trenches, electric fences, external support to affected villages, and compensation to villagers for any damage caused (Nyhus et al 2000). This study explores land use conflict in south east Kajiado District, Kenya. The results of household surveys conducted with farmers and herders in 1977 and 1996 to examine changes in land management strategies are compared. The conflict reflects ongoing competition over access to scarce land and water resources between herding, farming and wildlife are the reason of damage of crops. This man-animal conflict needs understanding the conditions that have created the present conflicts (Compbell et al 2000). It is, therefore, suggested that 30% open space be used as a basic division for stratifying thickets into low –use and high-use categories for deer density estimation. The proportions of each type could be derived from grid-square measurements of aerial photographs (Latham J 2000). Human elephant conflict Human-elephant conflict (HEC) in Africa occurs wherever these two species coincide, and poses serious challenges to wild life managers, local communities and elephants alike. Mitigation requires a details understanding of underlying patterns and processes. Although temporal patterns of HEC are relatively predictable, spatial variation has shown few universal trends, making it difficult to predict where conflict will take place. Crop raiding was further subdivided into incidents involving only male elephants or family groups. A relatively fine-resolution, systematic, grid –based method was used to assign the locations of conflict incidents, and spatial relations with underlying variables were explored using correlation analysis and logistic regression. Crop raiding was clustered into distinct conflict zones. Both occurrence and intensity could be predicted on the basis of the area under cultivation and, for male elephant groups, proximity to major settlement. Conversely, incidents human injury and death were less predictable but were correlated with proximity to roads. A grid-based geographical information system (GIS) with a 25km2 resolution utilizing cost-effective data source, combined with simple statistical tools, was capable of identifying spatial predictors of HEC, At finer resolutions spatial autocorrelation compromised the analyses. Synthesis and application. These results suggest that spatial correlates of HEC can be identified, regardless of the sex of the elephants involved. Moreover, the method described here is fully transferable to other sites for comparative analysis of HEC. Using these results to map vulnerability will enable the development and deployment of appropriate conflict mitigation strategies, such as guarding, early warning systems, barriers and deterrents. The utility of such methods and their strategic deployment should be assessed alongside alternative land-use and livelihood strategies that limit cultivation within the elephant range (Sitati et al 2003). Human elephant conflicts (HEC) in west Bengal was an economic loss worth 3.2 crores. This much damage occurred in 3368 sq km radius inhibiting 62 elephants (Singh et al 2002) 6. Kerala Survey Crop damage by wild animals in Kerala, India, was studied from 1993 to 1996. Data were collected from the offices of the Kerala Forest Department, field survey and from the intensive study area at Marayur, Idukki District. Forty-five species of crops were destroyed by wild animals in Kerala, the species commonly destroyed by wild animals were paddy, coconut plam , plantains , cassava , arecanut, coffee, oil plam , pepper , jack tree, mulberry and manago. The main animals involved in crop damage were elephant (Elephas maximus), gaur (Bos gaurus),sambar (Cervus unicolor), wild boar (Sus scrofa), bonnet macaque (Macaca radiate), common langur (Presbytis entellus), blacknaped hare (Lepus nigricollis) and pea fowl (Pavo cristatus). Among these, elephants and wild board gave maximum damage . Of the total compensation claimed by the farmers, only 8.2% was sanctioned by the Kerala Forest Department. The highest crop damage (30%) was recorded from the forest ranges coming under the Northern Circle: pinapple (47%) , sweet potato (47%), tapioca (42%), alocasia (39%) , beans (25%) and plantains (23%) recorded highest percentage of damage. In the intensive study area at Marayur, 28 species of crops were damaged and highest damage was during the summer months. At maximum damage was due to elephant (72%) followed by gaur (62%) , sambar (17%) and wild boar (16%) . Tiger (Panthera tigris), panther (leopard) (Panthera pardus) and wild dog (Conine alpinus) were the main cattle lifters in the state. A total of 31 deaths and 64 injuries caused by wild animals were recorded from the state during the period 1983 to 1993. Thirteen indigenous methods used for controlling the crop damage had been identified. High voltage electric fencing using energizer was effective for stopping elephants and other herbivores from entering the agriculture fields. Crop damage is found to be linked to the cropping pattern and location of the agriculture fields. Short term and long-term measures needed to prevent the crop damage are discussed (Jayson EA,1999). 7. Bird crop damages Use of non-lethal method to avoid crop damages by bird have been reported. Blueberry damages by cedar waxwings (Bombycilla cedrotun were minimized. (Avery et al 2002). 8. Wild Bird damage In the northern Great Plains of USA, conflicts between red-winged black birds (Agelaius phoeniceus) and sunflower (Helianthus annus) growers have intensified since the late 1960s due to the expanded commercial production of sunflowers. We studied the potential population effects of the removal of up to 2 million red-winged blackbirds annually under a 5 year programme of baiting during spring with DRC-1339 (3-choloro-4 methalalanine) treated rice. They also examined whether lethal control, in combination with current levels of breeding habitat management, would be cost effective in decreasing depredation of sunflower crops during late summer. They evaluated the cost benefit ration for 4 culling scenarios involving (1) variable annual cullus, not exceeding 2 million birds, with and without density compensation (i.e. ,a positive density-dependent response) on adult survival and (2) culls of 2 million birds annually with and without density compensation .We constructed a red –winged blackbird population model represented as an age-based matrix and calibrated to stable growth. We assumed a total population of 27 million birds on 1 April (week 1), representing the red-winged blackbird breeding population staging in eastern Southern Dakota and migrating into North Dakota.Under each culling scenario, we reduced the stable red-winged blackbird population (Equally for females and males) and project the population through week 23 of the annual cycle (2 Sep). We then evaluated the associated costs of the management relative to potential sunflower crop losses, assuming $0.07 in damage per bird and 4% loss to other factors. Variable annual culls, likely the more biologically realistic model scenarios, yielded mean annual removals of 1 240 560 (SE=12 328) birds with density compensation and 1 231 620 (SE=28 811) birds without density compensation,, with cost benefit ratios of 1:2.3 and 1:3.6, respectively. Annual intrinsic rates for the model population over the 5 year period ranged from 1-4 to 4.8%. Considering potential variability in the effectiveness of the cull and the combination of direct and indirect costs,we contend that the realized benefits to sunflower growers by lethal control of red-winged blackbiards via spring baiting , in combination with current nonlethal management efforts, would likely be negligible (Blackwell et al 2003). The efficacy of hydrolyzed casein (HC) and retail products that contain HC in reducing deer damage to trees and shrubs was determined in a field experiments conducted in USA during 2004-05. The results of the experiments indicate the suitability of HC as a deer repellent. Technical grade HC completely eliminated browsing damage to evergreen shrubs (Gaultheria shallon) and conifers (Thuja plicata). Retail sources of HC were not as effective as the pure hydrolyzed protein (Kimball et al 2005). 9. Blackbird damages The economic impact of blackbirds can be severe to rice producers in the United States. One approach to managing this damage is the application of bird-deterrent chemical to the crop. Previous pilot trials suggested that caffeine offered potential as a safe, economical bird repellent. In this study, cage feeding trials with female red –winged blackbirds and male brown headed cowbirds confirmed that a treatment rate of 25000 ppm caffeine on rice seed reduced consumption as much as 76% . Trials with mixed species blackbirds flocks in a 0.2-ha flight pen resulted in just 4% loss of caffine-treated rice compared to 43% loss of untreated rice. . Field trials of a 10 000 ppm caffeine treatment in Louisiana revealed > 90% of caffeine-treated rice seed remained unconsumed on days 2 and 3 of the study whereas blackbirds consumed > 80% of the untreated seed. As a rice seed treatment to deter blackbirds, caffeine appears to be effective, economical and environmentally safe, although additional aquatic toxicity testing is desirable. Improvements in formulation will be needed to make the compound practical for general agricultural spray applications and to extend the adherence of caffeine to rice seeds in field conditions ((Avery et al 2005). 10. Deer damage A questionnaire was distributed to over 2500 farms to know damage caused by lowland deer to crops, trees and vegetation. Results from the questionnaire showed that 69% (n=1192) of responding farmers had deer on their holdings and that Roe and Fallow were the most frequently seen species. On those farms with deer present, cereals were the most commonly damaged crop (44%), but only 15% of these farmers claimed that the annual cost of damage to cereals exceeded £500 each year for the whole farm. Validation assessments were based on two visits to assess deer damage to the crop, with a deer species/density assessment during the March assessment and an assessment of grain yield and quality during the August assessment. Respondents were generally accurate in the density and species of deer reported. The percentage of the farm suffering damage attributable to deer was very variable, generally being higher at the first assessment than the second. The figures calculated for yield loss were generally low, Farmers were poor at estimating the economic impact of deer damage when compared to validation data, but a number of parameters may have changed in the two years between the questionnaire distribution and validation, including changes in deer density, crop rotations, and the marked drop in grain prices, which may account for some of the inaccuracies. There were no statistically significant relationships between deer damage assessments and yield loss, either for individual species or both species combined. The relationship between Roe deer damage at the harvest assessment and Roe deer density was significant (Post et al, 2001). Wildlife managers must consider the public’s preferences for wildlife population levels when determining management policies. 849 farmers, hunters and the general public of Maryland. USA, were surveyed in 1996 to determine their preferences for increasing, maintaining, or decreasing deer population numbers. Using a random utility theoretic framework, the factors that explain preferences such as residential location, socioeconomic characteristics, landscape damage, agricultural yield loss and vehicle accidents were analyzed. Results suggested that the majority of people benefit from deer and want to keep deer population at current levels. Other characteristics such as age, income, education, and residential location have minor or no impact on preferences. Property damage, crop loss, landscape damage, and car accidents appear to be the biggest concerns ( Curtis et al 2001). 11. Sika deer population in Japan Sika deer Cervus nippon population in eastern Hokkaido, Japan, increased rapidly during 1990-1998 . This increase appeared to have halted in 1999-2000, probably due to increased hunting and nuisance control. The period of rapid increase was associated with a disproportionately rapid increase in compensation paid for deer damage to crops. We studied changes in diet during 1990-2000, as reflected by stable isotope ratios of C and N in tooth collagen. We hypothesized that isotope ratios would demonstrate dietary shifts related to population levels and/or time, and that shifts in isotope ratios would be consistent with increasing individual consumption of pasture grasses at higher population levels, delta 13C isotope ratios of tooth collagen in 3 year-old sika indicated a diet dominated by C3 plants throughout the period, and that forage species other than pasture grasses and dwarf bamboo Sasa nipponica ( the main crop and woodland understory plants, respectively) were important elements. There was a significant decline in the delta 13C isotope ratio during 1990-2000 in both males and females, delta 15N values showed no trend with time for males, but increased over time in females. Indices of population (Sightings per Unit Effort, SPUE) were negatively correlated with female delta 13C, and positively correlated with female delta 15N, values indicating a shift in diet over the period , especially among females. This shift may be related to population and/or offtake levels, in particular the rapid increase in female offtake for nuisance control and hunting during the period. The data are consistent with a relative increase in pasture grass consumption per individual at higher population levels, however, other explanations of the data are equally plausible. Possible dietary changes, and other factors, influencing the observed shift in isotope ratios are discussed. Although statistically significant, the magnitude of dietary shifts nevertheless appeared small, and did not provide evidence which would justify modifying the current policy, of limiting crop damage through managed population reduction to about 25% of peak levels( Halley et al 2006). 12. White-tailed deer damages White-tailed deer (Odocoileus virginianus) may cause more damage than any other species of wildlife. These damages include crop loss, automobile and aviation collisions, disease transmission, environmental degradation, and destruction of ornamental plantings. One practical method of controlling deer damage is the use of exclusionary fences. The relatively high cost of labor and materials required to build effective fences has limited most applications to the protection of orchards, vegetable farms, other high –value resources, and mitigation of human health and safety risks. Improvements in fence technology resulting in less expensive, yet effective fence have expanded the use of fence to manage damage caused by deer. Fence typically installed to manage white-tailed deer damage include wire or plastic mesh, electrified high-tensile steel wire, and electrified polytape or polyrope fence. They reviewed the scientific literature on fencing to determine which fence designs would be the most effective for excluding deer in a variety of situations (VerCauteren et al 2006). The installation of fences to protect agricultural products, natural resources, or other areas from deer (Odocoileus spp.) can be expensive and potential benefits of fencing are difficult to quantify. A rational method is needed to help evaluate whether fencing can be cost effective and which fence designs will be optimal for particular applications. They describe an interactive, dynamic simulation model that conducts economic analyses and predicts economic benefit associated with fences for crops relative to area and perimeter of protected plot, value of crop, percentage of crop damaged by deer annually prior to fencing, efficacy of fence, and costs of fence materials and labor. Users of the model can easily adjust these variables to fit their individual situations and needs. By running a series of simulations, model users can answer questions related directly to fence efficacy and cost-effectiveness (VerCauteren K et al 2006). 13. Corn damage by wild life Corn damages in USA were estimated at 6.6 per hac due to wild life. The white tailed deer was the wild animal responsible for loss. The average hacters owned by farmers were 125 out of which 55 hectares were sown corn. (Tzilkowsi et al 2002). 14. Deer Damage Deer (Odocoileus spp.) can cause substantial damage to agricultural crops, resulting in economic losses for producers. They developed a deer activated bio-acoustic frightening device to reduce white-tailed deer (O, virginianus) damage in agricultural fields. The device considered of an infrared detection system that activated an audio component which broadcast recorded distress and alarm calls of deer. They tested the device against unprotected controls in cornfields during the silking-tasseling stage of growth in July 2001. The device was not effective in reducing damage: track-count indices (F1,4=0.02), corn yield (F1,9=1.27,P=0.289), and estimated damage levels (F1,10=0.87, P=0.374) did not differ between experimental and control fields. The size (F2,26=1,00,P=0.380), location (F2,25=0.39,P=0.684), and percent overlap (F2,25=0.20,P=0.818) of use-areas of radiomarked female deer did not differ between during and after treatment periods. They concluded that the deer-activated bio-acoustic device was not effective in protecting cornfields in this study; however, the device may be more effective in small areas such as gardens or for high value crops that do not grow tall enough to offer protective cover (Gilsdorf et al 2004). White –tailed deer (Odocoileus virginianus) cause millions of dollars of damage to agricultural crops annually . They tested the effectiveness of propane exploders and Electronic Guards (Pocatello Supply Depot, Pocatello, Id). For reducing deer damage in corn fields during the silking-tasseling stage of growth. Track-count indices (F2,7=0.70,P=0.532), corn yield (F2,6=0.14, P=0.873), and estimated damage levels (F2, 12=1,45 P=0.272) did not differ between experimental and control fields. The size (F2,11=0.08,P =0.924), Location (F2,9=0.30, P=0.750), and percent overlap (F2,9=0.46, P=0.644) of use –areas of radiomarked female deer in the vicinity of experimental fields did not differ among before, during and after 18 day treatment periods. In a related study, we placed propane exploders in cornfields within use-areas of 12 radiomarked female deer. The deer did not react appreciably to the devices; the size (F2, 17=0.08, P=0.921), location (F2,22=1.37, P=0.275), and percent overlap (f2,10=0.47, P=0.636) of deer use areas did not differ among before, during, and after 14 day treatment periods. They conclude that propane exploders and Electronic Guards have limited potential for reducing deer damage to corn at the silking-tasseling stage (Glisdorf et al 2004l. A welfare measure for wildlife damage to Ontario (Canada) field crop producers during the 1998 was. The welfare measure presented in this study provides a more accurate picture of losses from wildlife damage to agricultural. Other damage estimates based on yield loss overstate the damage since benefits from wildlife are netted out. Results for the Ontario field crop producers indicate that the magnitude of the difference between the value of the yield loss and the welfare measure of damage is approximately 50%. This difference indicates that most farmers were willing to tolerate the wildlife damage they experienced (Heigh et al 2001). 15. Grapevine damages In field trials in 1999-2000 in Gundla Pochampally, Andhra Pradesh, India , the incidence of damage to green grapevines was studied. Visits to the vines by bats begain around 45 minutes after sunset and foraging continued until 1 hour before sunrise. Damage occurred to ripe fruit only, and increased around harvesting time, percentage damage ranged from 0 to 100% (Bhargavi et al, 2001). 16. Hippo damage The introduction to the paper described the various ecological effects known to result from grazing, movement along paths, and wallowing by the common hippo. Hippopotamus amphibious. The study reported was carried out at Kainji Lake National Park., Nigeria, during the dry season periods {of 1991 and 1992} . The method adopted by Agnew, A.D.Q. (East African Wildlife Journal (1966) 4, 38-46) was used to assess hippo foraging footprints at three hippo pool sites. A total of 32 footpaths were enumerated out of which 18 were located at Kaii hippo pool site, while the frequency of utilization of paths was also higher for this site relative to those in other area. The upstream-downstream trend in hippo occupancy of dry season water pools could expose the hippo to crop damage conflicts at the peripheral areas. 17. Hygo-Japan-mammal crop damages Mammals inhabiting Hyogo consist of seven orders, 17 families and about 40 species. Except for Lagomorpha and Artiodactyla, the remaining five orders among them include species which need some protection and they total about 55% of all species excluding extinct, introduced and feral species. Ecological information in Hyogo prefecture has been accumulated in few protection-required species there is no recent information of spatial distribution on Oriental water-shrew, Japanese noctule-bat and Japanese dormouse; and little information on Japanese shrew, Japanese horse-shoe bat, Japanese large –footed bat. Schreiber’s bent-winged bat, Japanese tube-nosed bat, common parti-colored bat, Japanese squirrel, Japanese small flying-squirrel, Japanese giant flying-squirrel, smith’s vole harvest mouse and Japanese badger. Damage and population managements is also necessary in sika deer and Japanese wild boar, to reduce their crop–damaging, and comprehensive management in Japanese black bear, an endangered local population, to prevent human-bear fatal accident. Habitat alteration due to human activities, however, has affected the population sizes and spatial distribution of all these, mammals in Hyogo. Habitat management has priority over damage. Fundamental and applied scientific studies and understanding of ecology and wildlife management science needs promotion by citizens (Mitani M 2000). 18. Monkey damage Forty-seven property owners in Entebbe, Uganda were questioned about vervet monkey activities on their property. The objective was to investigate the interactions between humans and vervet monkeys in an agricultural area adjacent to a forest zone. Other studies have reported that farms located within 300 m of a forested boundary probably incur the greatest risk of crop-raiding. Two other factors that may influence susceptibility to vervet crop-raiding were also examined: the types of crops grown and the types of direct preventive measures used. The effect of these two factors on vervet crop-raiding is not straight forward. However, the distance a property is located from the forest edge is an important factor influencing vervet crop raiding. Surveyed gardens 200 m from the forest edge received significantly less crop –raiding than farms located 100 or 50m (P=0.040,Saj et al 2001). 19. Bait damage The longevity of zinc phosphide (ZP) on whole wheat bait was determined at the end of the “dry” and “wet” seasons, is Western Australia.. While the total rainfall during the two trials was 74 mm and 155mm, substantial loss of ZP was recorded only after significant rainfall events. Irrespective of season, the loss of ZP from bait applied in bait stations was minimal. The maximum recorded loss was 17% and this occurred after 21 days’ exposure during the wet season where the bait stations were placed in-crop. Nevertheless, regardless of the application method, sufficient ZP always remained on the wheat bait. Theoretically it was lethal to rats for at least 8-14 days (Twigg et al., 2001). 20.Venezuela experience: In Venezuela, lethal control of wintering Dickcissels (Spiza Americana) is considered a threat to the species survival. To help farmers protect their rice and sorghum crops from by Dickcissels and to minimize the killing of large numbers of these birds, alternative non-lethal crop protection measures are needed. To that end, the responses of captive Dickcissels to three bird-repellent chemicals (anthraquinone,methyl anthranilate and methiocarb) applied to rice seed were evaluated. In one-cup feeding trials, treatments of methiocarb (0.05% g/g, applied as Mesurol 75% wettable powder) and anthraquinone (0.5%, applied as Flight Control) reduced consumption of rice by 70% relative to pretreatment consumption. Other anthraquinone treatments (0.05,0.1%) and methyl authranilate (0.05%) were inrffective. In two –cup trials, with untreated millet as the alternative food, consumption of rice treated with 0.05 and 0.1% anthraquinone was reduced by 90% relative to pretreatment levels. Overall, Dickcissels responded to the repellents similarly to the red-winged blackbird (Agelaius phoeniceus). Because Flight Control has been used successfully to reduce blackbird use of rice fields in the USA, the prospect is good for successful reduction of damage to repening rice by Dickcissels in Venezuela, particularly if repellent use is coupled with the establishment of alternative feeding sites ( Avery et al 2001). Deer selected carrots over all green manure crops. 21. Nilgai damages in India Crop-damage by nilgai has been widely reported from India. Are give Nilgai is for increasing in this region. Lack of natural predators, deforestation overgrazing and the protection of these animals from Hindu communities are reasons for their overpopulation. Tree cover of Acacia are generally used by nilgai as a day time shelter but not food, therefore it goes for crop-raiding in the late evening and at night, jumping across 6-7 feet high stone wall, barbed fencing and fences of dead or live thorny plant material and any other fencing/barrier made to protect the crop-. Due to habit of both grazing as well as browsing they devore every kind of farm species (both rabi and kharif crops). It has been observed that eating less but destroying more by trampling and causing damage are therefore regarded as serious mammalian crop pest and farmers wants to get ride of this unconventional pest. The farmers chase them away by just following them by making loud sound by crackers or air gun fires, following through tractors, empty tin or dried pumpkin filled with small stones and connected with strings. Technically, carrots(enclosures), trenching or power fencing are suggested to mitigate the crop damage. Secondly, animals could be translocated to wildlife sanctuaries from the sites they seen overcrowded or severe crop raiding problems (Goyal et al 2000). 22. Pesticides and wildlife A range of monitoring activities has shown impacts of anticholinesterase pesticides on UK wildlife, and continued risks are evident from laboratory and field experiments, together with the scale of use in the field. Along with other broad spectrum insecticides, many organophosphates have adverse direct effects on non-target arthropods in farmland, and so are likely to contribute towards indirect effects of pesticides on farmland biodiversity. The anticholinesterase insecticides have both lethal and sublethal effects on aquatic wildlife, however the history of recent incidents of damage to river ecology following the wider use of synthetic pyrethroid sheep dips, illustrates the need to consider the implications of changes in the use of alternative products when reviewing these insecticides ( Burn 2000). The use of anthraguinone-based flight control and methyl anthranilate-based non toxic avian foraging repellent we used to avoid crop damage by sandhill cranes. Thought both repellents were effective at deterring cranes from treated corn, neither has been tested on corn under field conditions. (Blackwell et al 2001). Oak seedlings were scientifically raised. Seedling mortality and wild life browse damages were minimal when certain herbicide mixture was used. Biologically and aesthetically, the procedure was extremely successful (Ezell et al 1999). Pre-commercially thinned (forests are less prone to moose damage (McLaren et al, 2000). 23. Pesticide use in conflicts Pesticides can cause damage to man and beneficial organism. Some sub-lethal effects of pesticides were studied in birds with a view to identifying characteristic biochemical responses that may be useful for the monitoring of exposure to sub-lethal levels in the field. Pesticides were used; demeton-S-methyl, (DSM),chlorpyriphos, chlorfenviphos, triazophos, pirimicarb, methiocarb and permethrin. Blood was collected before dosing, and 2,6,24,48 and 72 hours after the treatment from the brachial vein of birds. Enzyme, activities were assayed in the plasma or serum samples obtained. The assays used were GOT,MHD, GDH, SDH,GAMMA GT and ChE. The results showed an increase in plasma and serum GOT and gamma-GT levels were found in all animals treated with the previous pesticides. The level of ChE increased in birds after treatment with permethrin. It was concluded that the pesticides cause structural and functional changes in the liver and also, the measurement of the previous parameter activities may be useful for assessing exposure and sub-lethal effects of pesticides on the wildlife (Dahamna et al 2004). 24. IPM and crop losses The queensland sugar, industry has recently implemented a comprehensive integrated pest management (IPM) system to minimize crop losses from two antive rodent species, Rattus sordidus (canefield rat) and Melomy burtoni (climbing rat). These species inflicted approximately $25M of damage in a major outbreak in the 1999-2000 seasons. Both of these rodents are listed as common wildlife under the schedules of the queensland nature Conservation (Wildlife) Regulation 1994. The IPM programme is based on understanding the ecology and biology of each species. It incorporates a large-scale monitoring programme aimed at providing early warning of imminent rodent build up to avert major outbreaks. The industry has also developed a memorandum of understanding with Queensland State Government, which delivers on the industry’s pest management needs, while providing an improved system of accountability for the taking of two of Queenslands native wildlife species. The consensus reached between the cooperating parties (The Bureau of sugar Experiment Stations, CANEGROWERS, regionally-based Cane Productivity Services, and the outcomes can be negotiated between rural industry and environmental interests (Hunt et al 2004) . In Areas around Lake Mburo National Park ,large wild animals wander in close proximity to human settlement . This poses serious conflict in terms of crop damage. The integration of conservation with other land uses is difficult where densely settled agricultural land surrounds a protected area potentially containing problem animals, as is the case for several parks in Africa and Asia. The intensity of crop raiding was quantified through the use of random crop quadrants/plots and area estimation techniques in a portion of raided fields. The animal species concerned were documented from observations, footprints and any other marks left behind. Three variables were tested as predictors of damage; human population density, distance from the park boundary and season. In this study data is presented regarding crop loss in the different seasons of the year, analysis of crop damage variation and animal species involved in crop loss. A diverse assemblage of animals foraged on subsistence crops and analysis of crop damage revealed significant crop depreciation by wildlife( Kagoro et al 2004). 25. Hawai Pest The apple snail, P.canaliculata, is an aquatic freshwater snail native to South America, Originally imported to Hawai’i as pets for the aquarium trade, they were soon introduced into wetland plots known as “lo’s” where taro (Colocasia esculenta), an economically and culturally significant crop, is grown. Some individuals reasoned that the snails, being edible, could be harvested as food, and that raising the snails along with the taro in the “Io’s” would provide income supplemental to the taro harvest with minimum additional input. This introduction of snails into the taro “lo’i” however, proved to be a disaster. Farmers failed to take into account the voracity , reproductive potential, and rapid growth of the snails. Because of the ideal conditions in the taro “lo’i”, the snails multiplied rapidly and fed heavily on the taro shoots and corns in many cases, destroying a complete crop before harvest time. Hindisight has shown that the snails are dissipated via the irrigation system throughout the “lo’i” and then spread to the surrounding wetland areas. Large breeding populations are now established in wetland areas on the islands of Hawai’e, O’ahu, Kaua’I, and Maui. Some of these wetlands are wildlife preserves with state and federal mandates that restrict the potential methods of eradication. Background information is provided on both P.canaliculata and taro to fully explain the challenges and opportunities that this situation presents (Tamaru et al 2006). 26. Chemical repellents Chemical feeding repellents applied to ripening sunflower might help reduce blackbird (lcteridae) damage, which is a chronic agricultural problems from seed information harvest. However, cost are high to develop and register new repellents for agricultural use. In 2003 and 2004, we evaluated feeding repellency of 8 pesticides registered by the Environmental Protection Agency for use in sunflower. Caged red-winged blackbirds (Agelaius phoeniceus) were fed unshelled sunflower seeds treated with the following pesticides: 5 pyrethroid insecticides, an organochlorine, an organophosphorus, and a gungicide. Compared to untreated refernce groups, feeding rates were reduced for 4 of the 5 pyrethroid insecticides. Only the organophosphorus (chlorpyrifos), however, significantly decreased feeding rates. More research on repellency effects of this product in field efficacy trials is probably warranted based on the results of our cage experiments. Depending on timing of application, registered insecticides with blackbird feeding repellency could provide supplemental economic benefits to sunflower producers through dual purpose use ((Linz et al 2006). 27. Persistent organic pollutants (POPS) Persistent organic pollutants (POPs) have spread throughout the global environment to threaten human health and damage ecosystems, with evidence of POPs contamination in wildlife, human blood, and breast milk documented worldwide. Based on data from the US Food and Drug Administration, this article provides a brief overview of POPs residues in common foods in the USA food supply. The analysis focuses on 12 chemical compounds now targeted for an international phase out under the Stockholm convention on POPs. The available information indicates that POPs residues are present in virtually all categories of foods, including baked goods, fruit, vegetables, meat, poultry, and dairy products. Residues of five or more persistent toxic chemicals in a single food item are not unusual, with the most commonly found POPs being the pesticides DDT ( and its metabolites, such as DDE) and dieldrin. Estimated daily doses of dieldrin alone exceed the US Environmental Protection Agency and US Agency for Toxic Substances Disease Control reference dose for children. Given the widespread occurrence of POPs in the food supply and the serious health risks associated with even extremely small levels of exposure, prevention of further food contamination must be a national health policy priority in every country. Implementation of the Stockholm Convention will prevent further accumulation of persistent toxic chemicals in food. Early ratification and rapid implementation of this treaty should be an urgent priority for all governments (Schafer et al 2002). 28. Netherland experiences Traditionally, pink-footed geese Anser Brachyrhynchus wintering in Denmark, the Netherlands and Belgium have used the Danish sites only during mild winter, rapidly moving southwards in case of cold spells. Since the 1980s, an increasing number of geese have remained on the Danish wintering grounds despite cold spells, foraging on pastures Because winter wheat represented a reliable and profitable food source even in sever winter, the recent change in Agricultural practice has enhanced the development of a new wintering strategy of pink-footed geese, allowing a northward expansion of their winter range. Potentially, this will increase the crop damage conflict and may lead to further population growth ( Therkidsen et al 2000). Enclosure trials near Huron, CA in the San Joaquin Valley from 12 to 23 January 1999 , determine the efficacy of Flight Control TM (50% anthraquinone) and Mesurol R (75% methiocarb) in preventing horned lark damage to lettuce seedlings. Flight control TM (FC) and Mesurol R were evaluated as foliar sprays at application rates of 2.79 and 2.27 kg ha-1, respectively. Horned lark damage to lettuce seedlings treated with anthraquinone was greater (p=0.015) than for methiocarb R, 60 versus 20% , respectively, and seedlings in control plots were 100% destroyed. While this level of damage is probably unacceptable to lettuce growers, it should be remembered that the enclosure situation caused an artificially high bird pressure on the crop. Further studies in open fields under a more normal bird pressure are warranted ( York et al 2000). 29. Ozone injury Incidence and severity of visible foliar ozone injury on cutleaf coneflower (Rudbeckia laciniata L.) and crown-bread (Verbesina Occidentalis Walt). Were determined .It is thus a matter of consideration that zone injury may harm vegetation harmed by browsing or even cutting. Ozone injury was greatest on the lower leaves for both species sampled with over 95% of the injured leaves occurring on the lower 50% of the plant. This is the first report of foliar ozone injury on these plant species in situ, in the Park, illustrating the great variability in symptom expression with time, and within and between populations ( Chappelka et al 2003). 30. Protected arrears and humans Knowledge of conflicts between people and protected areas is required for the design of sustainable conservation strategies for the management of most protected areas. The study identifies the causes of conflicts between local people and the Benous Wildlife Conservation Area (BWCA), which includes the Benous National Park, In northern Cameroon. Informal interviews and questionnaires were administered to 114 households in three communities, and to 17 park staff and 7 professional hunting guides from July –October 1997. Crop damage affected 86% of the surveyed household, with 31% of crop income lost on average, and with the damage varying significantly between communities. Elephants, baboons, patas monkeys. Warthogs and green parrots accounted for 97% of crop damage, with the staple food maize and millet being most affected. Of the respondents 27% experienced livestock depredation, with 18% of livestock income lost on average. The civet cat was the main predator. The involvement of local people in illegal activities, their lack of access to natural resources, and damage by wildlife were identified as principal causes of conflicts. Local people, park staff and professional hunting guides had diverse and differing perceptions about the causes of the conflicts and made various suggestions for reduction of wildlife damage including animal scaring and controlled shooting. We conclude that, under current wildlife policy, conflict between people and BWCA (Bonous Wildlife Conservation area) is difficult to resolve. To reduce conflicts and promote sustainable conservation, we suggest co-management of wildlife involving all stakeholders, establishment of crop damage control teams, and promotion of tangible benefits to local people. There may be a requirement for site –specificity in management strategies (Weladji et al 2003). 31. Low technology use to avoid damages It is suggested that an integrated, community-based, low technological approach will be the most sustainable solution to this conflict ( Osborn et al 2003). Blackbirds (lcteridae) annually damage US$5-8 million of ripening sunflower in the northern Great Plains. Baiting blackbirds with avicide-treated rice during spring migration might reduce the regional breeding populations. birds can be successfully baited with avicide-treated rice placed in corn stubble (Linz et al 2003). Plant debris accumulation is viewed as a key factor determining small mammal abundance and potential damage in low-till agricultural ((Stermer et al 2003) areas. The projected total value of crop yield losses due to wildlife damage for buffer zone villages located in Garhwal Himalaya in about Rs.5 38 620 (US$15 389). Besides food grain, horticultural crops i.e apple, also suffered.

31.07.2009

Winds of Change for Agricultural Risks

Winds of Change for Agricultural RisksThomas Heintz is chief underwriter, agriculture, Partner ReThe impact of warming atmospheric and ocean temperatures on agriculture is neither consistent nor easily predictable, but there are a number of definable consequences linked to higher temperatures. These can be subjectively divided into positive and potentially negative effects for farmers and insurers of agricultural risk. Given the changes underway – relating not just to temperature but also to other factors, in particular commodity price inflation – and simultaneously the growth of the agricultural sector, exposures are being reassessed and a number of new insurance and alternative cover concepts have emerged to support agricultural risks. The impact of warming atmospheric and ocean temperatures on agriculture is neither consistent nor easily predictable, but there are a number of definable consequences linked to higher temperatures. These can be subjectively divided into positive and potentially negative effects for farmers and insurers of agricultural risk. Given the changes underway – relating not just to temperature but also to other factors, in particular commodity price inflation – and simultaneously the growth of the agricultural sector, exposures are being reassessed and a number of new insurance and alternative cover concepts have emerged to support agricultural risks. Positive consequences • Thermophilic plants (requiring a warm environment for normal development) may spread into more northerly producing regions; • Farmers may be able to grow crop varietieswith a longer vegetation phase, leading to higher yields; • A longer pasture growth phase extends the grazing period; • Higher atmospheric CO2 concentrations favour photosynthesis; • Increased precipitation in some areas, enhancing yields; Negative consequences • Temperatures exceeding 350C for extended periods in the subtropics will expose grain to heat stress during flowering; grain yields in these areas could fall by up to 70%; • Higher temperatures in northerly latitudes will increase evapotranspiration, significantly disrupting the water balance in the soil and plants; • Higher evaporation rates in the tropics and subtropics will dry out the soil causing salinisation and a reduction in the amount of arable land; • Higher temperatures speed up the flowering process of fruit trees, putting the blossom at greater risk of damage from late spring frosts; • Warmer ocean temperatures have direct consequences for aquaculture, one of the fastest growing food production sectors, with an increase in output from 35 to 48 million tons). Among the most dangerous effects for aquaculture are the proliferation of marine algal blooms and jelly fish, as well as the warming of streams that have been diverted for aquaculture. As water warms it contains less dissolved oxygen and can stress fish species and other organisms; • Infestation patterns change and may increase in terms of organism density and geographical range. For example, in recent years, mild winters have caused the mountain pine beetle population in British Columbia to explode. The infestation has now devastated at least 13 million hectares of pine forest. Winter temperatures reaching -350C are the only thing that will bring the population back down to manageable levels; • Decreased precipitation in some areas will reduce yields; • Increasing precipitation intensity will increase runoff and reduce yields. Warmer temperatures also impact precipitation distribution and intensity, with diminished rainfall in some areas and/or increased precipitation intensity reducing yields. Many locations have reported reduced yields due to a change in precipitation pattern, principally relating to more frequent, heavy rainfall and a more irregular distribution of the total rainfall over the vegetation period. In rain-fed agriculture (more common than irrigated agriculture), at least 50 - 75mm of precipitation needs to be stored in the top soil before sowing, followed by a further, evenly distributed 250 - 300mm during the vegetation period to achieve even modest grain yields. Specifically: • In many grain producing regions, melting snow supplies a large proportion of the soil moisture urgently needed by crops in the spring. Warmer temperatures increase the amount of precipitation that falls as rain rather than snow. Rain drains faster, meaning that moisture in the upper soil layers is exhausted more quickly. For example, in North America, warmer winters have resulted in reduced snow cover, which means farmers and foresters in the United States and Canada are likely to see more dry years and a significantly higher risk of forest fires; • Water stress during spring flowering impairs pollination and can cause complete crop failure; • Where there is diminished rainfall, agriculture will have to shift. In Australia, for example, observational evidence suggests that warmer temperatures are responsible for lower rainfall in grain producing regions of the south east. In the long term, agriculture in this part of the continent may, therefore, shift to the north west. Indeed, a new pioneering phase in the northwest has already begun. Key factors Even if it were possible to predict shifts in precipitation distribution, this would not help farmers, as sowing cannot be delayed or brought forward at will. Other key factors, such as optimum temperatures and daylight hours, restrict their window of opportunity for sowing. Connected to precipitation patterns, there are also predicted changes in windstorm activity. For the northern hemisphere, for example, the Intergovernmental Panel on Climate Change (IPCC) global climate models indicate an increase in “storminess” (daily variability of high and low pressure systems) in the northeastern Atlantic. Increasing storm track density, measured in cyclone days per season, in northern Europe and wetter extra-tropical storms have also been suggested by recent research. A strong growth market The world’s core areas of agricultural production insure crops and livestock. Penetration of insurance for forestry and aquaculture is, however, not as high. For example, only 4% to 5% of global aquaculture production is currently insured; this low figure mainly reflects difficulties associated with market access and the fragmented, small scale nature of aquaculture operations. Where natural catastrophe exposure allowed affordable premiums, hail insurance for crops and disease insurance for livestock evolved 150 years ago, without subsidies. Over the last 50 years, subsidized premiums have increased and extended the scope of agricultural insurance cover. Globally, as a percentage of total government support for agriculture, however, premium subsidies have remained at a relatively modest 2% to 3%, compared with approximately 10.5% in the United States. Growth opportunities in agricultural insurance are, therefore, particularly high. High agricultural commodity price increases, driven by population growth, increased buying power in emerging markets and biofuel demand, are also pushing up sums insured and premium income. For example, premium income for hail portfolios containing a large proportion of grain increased by 30 to 40% between 2007 and 2008. Against this background of shifting risk profiles, commodity price increases and market growth, there have been a number of developments in crop, forestry and aquaculture insurance, as well as in insurance linked securities for agricultural risk and CO2 trading. Price protection In recent years, rising commodity prices have bolstered demand for insurance solutions coupled with partial price protection, such as “revenue cover” in the United States. Farmers who sell a portion of their harvest in advance on a futures market need to hedge against commodity price fluctuations; if a natural catastrophe were to destroy the “pre-sold” crop, they would have to buy in replacement crop at a time when prices would be inflated due to reduced supply. In times of high inflation, the potential loss to the insured is greater, and solutions that mitigate this risk will increase in popularity. New concepts in crop insurance include cover for new varieties of plants for biofuel production at the experimental stage. Traditional crop insurance covers can also be restructured to include a double trigger, such as natural catastrophe loss event plus simultaneous price increase. When calculating the premium, insurers need to make sure that commodity price fluctuations are priced with an appropriate fluctuation loading. Windstorm Windstorm is a catastrophe risk for Europe’s forests, as experience with Lothar and Martin in 1999 and Kyrill in 2007 has shown. A major storm can be expected to bring down about four to five years’ worth of low grade timber which floods the market and causes prices to collapse, often for several years. An insurance solution would need to guarantee the price of timber before an event to ensure that forest farmers are indemnified for the entire fall in value caused by a storm. To arrive at the full loss potential to a forestry portfolio from any windstorm event requires the combination of the respective wind field data and vulnerability functions, which calculate loss ratios on the basis of wind speed. With vulnerability functions, wind field data and portfolio data, individual storm covers can be priced and portfolio-specific probable maximum losses (PMLs) modeled. EXAMPLES OF EUROPEAN WINDSTORM DAMAGE Lost timber by volume and value Year Windstorm Region Forest damage m³ Monetary damage ?bn 2005 Erwin Sweden 75 - 1999 Lothar and Martin Europe 193 2,7 France 140 1,0 Germany 30 1,0 Switzerland 12 0,5 1990 Vivian and Wiebke Europe 120 - Source: PartnerRe Aquaculture An aquaculture portfolio is primarily exposed to marine natural catastrophes such as tsunami, storm, algal bloom and pollution, but the loss experience only extends back about 20 years. Reinsurers are now increasingly asked to break new ground by carrying development risks relating to new markets, unknown fish species and production techniques. The sustainable support of this risk requires a PML method that addresses the key issues, including maximum liability per event and estimated return periods for specific events. Aquaculture insurance will soon spread to the Asian market. This means that insurers will have to revise the natural perils, social and technical risks, and risk management components of their existing PML calculation to ensure that their estimates correspond to the new risk profiles and locations. Parametric alternatives Parametric covers may be an alternative in regions where traditional crop insurance is not suitable, as they reduce the insurer’s startup cost. They have been successfully employed in agriculture to manage precipitation, flooding, accumulated temperature and frost risks. In many crop producing regions, water is the single most important factor in determining yield. Drought index products are designed to pay out on a sliding, parametric scale depending on the rainfall deficit. This deficit is measured at an official weather station that is protected against manipulation. On-site checks to verify crop loss are not needed, thus reducing individual loss assessment costs. These new, customized solutions require development work and intelligent product architecture. Expectations in terms of price and loss assessment accuracy must represent an acceptable compromise with the development cost. They also settle on an index that may not perfectly reflect a given farmer’s loss and, thus, the original insured has a basis risk. While parametric products are new, there is a growing trend toward their development, particularly in emerging markets. Advantageous to both traditional and alternative parametric solutions, remote sensing can now perform traditional risk acceptance and loss evaluation tasks. Satellite images, for instance, can be used to monitor crop covers that are only supposed to incept once the seed has successfully emerged. This saves on expensive on-site risk inspections. Remote sensing can also measure damaged surfaces and negative yield effects very accurately. There has recently been significant momentum at all levels of the agricultural sector (production, markets, politics and regulation), and there is broad agreement that agricultural production will continue to attract substantial investment backed by banks and re/insurance companies. Such investment however must be supported by highly effective risk management, necessitating a thorough analysis of the exposure and loss potential from all related environmental, economic and agricultural production factors.

20.04.2009

USA - Pollination fees jump in 2008

Thanks in large part to the California almond industry, pollination fees for Northwest honeybee hives continued to climb at a good clip in 2008. According to Oregon State University's Pacific Northwest honeybee Pollination Economics Survey, the average rental rate for a colony of bees in Oregon and Washington in 2008 was $81.15, up almost 15 percent from the year before. In the last 10 years, average rates have jumped a little over 250 percent. During the last 19 years, average pollination fees have increased by 440 percent. "This year's survey continues to illustrate the critical reliance of Pacific Northwest beekeepers on income generated from colony rentals," said Michael Burgett, who has been collecting data for the report annually since 1986. He writes about the 2008 survey in the March issue of The Bee Line, official newsletter of the Oregon State Beekeepers' Association. It was in 2005 that competition for bees in California almond orchards became heated and the per-colony fee jumped to $79.40, up dramatically from the year before. Three years later, in 2008, that fee had nearly doubled to $148.15. Subsequently, almonds accounted for 37 percent of all Oregon and Washington rentals and 67 percent of all rental income. Next to almonds, Northwest tree crops are the biggest money earners for beekeepers, with apples accounting for close to 20 percent of all rentals and 11 percent of reported income. The 2008 survey shows that the average honeybee colony was rented out 1.9 times during the spring and summer, down from 2.5 rentals a year in 2007. So are more Northwest beekeepers driving new pickups and vacationing on the Riviera these days? Hardly, Burgett said. Along with the increase in rental income came a corresponding increase in the cost of maintaining hives. According to the survey, the average hive maintenance cost was $178 per colony. When stacked against the average yearly rental income of $154.20, that leaves a net hive rental loss of $23.80."This illustrates that the net operational profit needs to be generated by sources of income out side of pollination rental - most importantly, honey production," Burgett said in his article.His survey does not cover income earned from honey, wax and other byproducts. California almond pollinations, which occur in late February and early March, are crucial to the Pacific Northwest beekeeping industry not just because of the income they provide. They also allow beekeepers to bring their hives up to full strength before tackling Northwest crop pollinations. Since the combined colony numbers of commercial beekeepers who responded to the survey represent only about 30 percent of the colonies in the Northwest, Burgett stresses that his projections are only as accurate as the data provided by responding beekeepers."For individual beekeepers the survey results are most useful as benchmarks against which they should compare their individual operations," he said in his article. Burgett went on to say, however, that average rental figures for almonds and Pacific Northwest tree fruits "should be considered very realistic" because of the large number of beekeepers and rentals reported for the crops. John Schmitz, freelance writer, Salem, USA

02.04.2009

The Impact of Climate Change on Coffee

Climate change is not something new to coffee. It has already hit the coffee farmers hard in a dramatic manner. It is happening right now, in front of our very own eyes. A combination of factors like extreme heat and cold, unseasonal rains, severe droughts and floods, prolonged high daytime temperatures and sudden drop in night time temperature has significantly affected the ecology of plantation belts. Water resources, agriculture systems, cultural operations, plantation economics and loss of plant genetic resources has taken a severe toll, not only on coffee but also on the multiple crops grown inside ecofriendly coffee forests. Little do we realize that the very future of millions of coffee farmers is at stake? At the outset it is important to understand that the growth and development of the coffee bush is complex and encompasses a variety of anatomical, morphological, physiological and biochemical processes. Events Like shoot and root growth, hard wood formation, flower initiation, pollination, fertilization, embryo development, and fruit ripening, each of these processes, is a culmination of a series of events, many of which are microscopic. All these processes in turn are governed by a particular set of environmental conditions. In fact plant physiologists are certain about the influence of environment on the phyto hormones and biochemical processes during growth and differentiation of the coffee bush. Under ideal and stable environmental conditions the coffee bush is programmed to complete a set of processes like growth and differentiation. A certain degree of flexibility is allowed. However under a different set of environmental conditions (CLIMATE CHANGE) the life cycle may be shortened or lengthened. Combating climate change inside coffee forests is the main challenge facing the present generation of coffee farmers worldwide. This article highlights the impact of climate change on coffee. Coffee is a woody perennial shrub and requires great care in order for farmers to pick consistent and high yields. In the early part of the century, the weather patterns inside coffee forests was predictable and most of the operations like fertilizing, composting, liming and sprinkler irrigation was carried out anticipating the rains. In most cases the farmers were right, even though they were not assisted by computer controlled satellite weather stations. The stable Weather patterns resulted in high yields and most importantly the farming community was a contended lot. However for the past 10 -15 years the unpredictable global weather patterns has had a direct bearing on Indian coffee forests. It has reached such unmanageable proportions, that many farmers have moved away from plantations seeking refuge in urban areas. Especially, the mindset of the younger generation is in turmoil and utter chaos. The return on investment has seen a sharp decline, resulting in the abandonment of coffee farms. CELEBRATION TIME Feb, 10th, 2008 was a red letter day for a majority of coffee farmers in Karnataka. The Districts of Coorg, Chikmagalur and Hassan where ecofriendly shade grown coffee is grown received unexpected early and heavy blossom showers followed by backing showers after a period of three weeks. This phenomenon of timely blossom showers and subsequent backing showers was not witnessed in more than 30 years. The showers at the right time and in a well spread manner gave hope to a record crop where more than 70 % of the Country’s coffee is grown in Karnataka. This ideal moisture regime was supposed to yield bumper crops and the expectation from the farming community was running high. However, a majority of the farmers overlooked the fact that on day 10 of the blossom opening, both Arabica and Robusta plantations received mild and constant rain right from the morning up to late afternoon. The dense pockets of mist during pollination also added to the misery of farmers. Even though, the rains disrupted the 2007-08 harvest and triggered early flowering of the 2008-09 crop, farmers were happy that the coming year bumper crop would make up the losses of the previous year. DEATHLY SILENCE Ten months later, the Arabica picking commences and farmers are in for a rude shock. Their expectations of the blossom estimates did not translate into yield. In well maintained plantations the yield was significantly reduced to 4 bags of parchment coffee (Each bag weighing 50 KG). At the present International price (New York terminal) the returns could not even cover half the cost of cultivation. Since a vast Majority of the coffee farmers own both Arabica and Robusta in the ratio of 40:60, they were of the opinion that the Arabica yields were an aberration and that they would make up for the loss with a higher yield of Robusta. However, Robusta yields were also very low, hardly 3 bags of parchment per acre. Added to the low yields, most of the coffees has a significantly lower out turn because of the infestation of berry borer. Coffee farmers were a desperate lot, on one hand the yields per acre were below their actual cost of cultivation and on the other high berry borer infestation resulted in penalties at the curing works. REASONS ASSOCIATED WITH BERRY BORER INFESTATION Due to the early rains, there was a considerable delay in harvesting of Robusta coffee and a major portion of the ripe berries dropped to the ground. The delay in harvest and the fact that gleanings could not be completed in time resulted in berry borer going out of control. In fact, the ideal conditions for the growth and reproduction of the berry borer resulted in its spread like wild fire from one region to the other. CLIMATE CHANGE-IMPLICATIONS PHYSIOLOGICAL, INTERNAL & EXTERNAL FACTORS The coffee bush is a very sensitive plant and requires utmost care. The change from vegetative to reproductive growth marks a major change in the life cycle of the plant. The bush receives various internal and external stimuli that interact with the genetic information to cause changes in metabolic activity and structural organization. Physiological parameters such as plant growth, flowering, fruit set, fruit drop, fruit ripening, bean disorders, soil moisture stress, drought, and shade management play a crucial role in maintaining a healthy bush in both Arabia’s and Robusta’s. Apart from physiological aspects, both internal ( genetic ) and external factors like, climate and edaphic factors like light, temperature, rainfall, humidity, soil nutrients, soil moisture, aeration and soil temperature play an important role in the productivity of the bush. However, our observations point out that the most important point for the functioning of the coffee bush is the translocation of photosynthates to different parts, which leads to a healthy balance between vegetative and reproductive growth. HOW DOES A COFFEE BUSH BEHAVE UNDER NORMAL CIRCUMSTANCES? The Central Coffee Research Institute (CCRI), at Chikmagalur district has carried out pioneering work with respect to understanding the physiology of the coffee plant. Their findings suggest that under South west monsoon conditions, the pattern of shoot growth is typically of sigmoidal nature with a slow growth from March/April to July and a period of rapid growth from august to October. Vegetative growth slows down with the onset of the dry period from November and it will be minimum during December-February and once again growth is resumed in March after the receipt of blossom showers. BEHAVIOUR DUE TO CLIMATE CHANGE The advancement of the south west monsoon by almost 45 days (2008); lead to a chain reaction of disturbing events. The first to be affected was the internal clock of the coffee bush. It resulted in the imbalance of the biochemical constituents of the coffee bush. It also disturbed the diurnal temperature patterns. The production of growth regulators and promoters was off balance. The bush which was programmed to synthesize and transport chemicals and nutrients to both the vegetative and reproductive parts behaved erratically resulting in more of vegetative growth. The bush appears to be quite healthy but in reality is in an utter state of confusion. The coffee research Institute clearly indicates that the quantum of wood that is produced both in terms of new flush and extension growth including the number of nodes and foliage formed, plays a vital role in crop production as it becomes bearing wood for the succeeding year. However, climate change resulted in fewer nodes, less amount of productive wood, reduced spikes, giving rise to poor yields. FLOWERING IN COFFEE Our research work for the past 2 decades clearly indicates a strong relationship between temperature and flowering. Furthermore, the presence or absence of appropriate temperatures during this critical stage determines the success or failure of flowering and fruiting. The importance of temperature and the promotion of reproductive development is a key factor in stabilizing coffee yields. According to research carried out by the CCRI, flower bud initiation takes place from September onwards, under south Indian conditions. The factors responsible for floral initiation are short days (less hours of daylight), carbon nitrogen (C/N) ratio, intermediate temperature and hormonal balance. After elongation to certain length ( 7-8mm), there will be cessation of growth for a few weeks till the receipt of blossom showers. Then flower buds resume their growth faster, change color and open in about 8 to 10 days after the showers. Plants which are depleted of carbohydrates will also show floral abnormalities. As a consequence of climate change our observations point out that from the month of September onwards coffee growing regions of South India witnessed short day periods with high daytime temperatures and sudden drop in temperatures during the night time. This resulted in abnormal floral initiation. The translocation of carbohydrates was also affected resulting in floral abnormalities. In simple terms, attainment of short day periods does not automatically lead to the initiation of flower primordia. Certain set of environmental conditions must follow. These same environmental conditions, if presented to coffee that is not ripe to flower, elicit no flowering response. FRUITING According to the research work carried out by CCRI, The growth of Arabica fruits under south Indian conditions shows a bisigmoidal curve with two grand periods of growth during 118 to 152 and 183 to 212 days after blossom. Robusta coffee takes 6 to 8 weeks more than Arabica coffee for fruit maturity and ripening. The effect of climate change has impacted the fruiting pattern in both Arabica and Robusta. As a result the farmers commonly observe premature fruit drop. Due to the uneven distribution of rainfall (Sudden down pours & long spells of drought) the plant is subjected to wet feet during monsoon periods and drought during the summer months. The soil pores are waterlogged. A combination of favorable factors for high pest and disease incidence. The resulting defoliation and leaf rust significantly affects the crop. The change in climatic conditions like sudden drop in night temperature, cloudy weather, high relative humidity especially at the time of flowering results in multiple blossoms leading to different stages in berry growth and development. The plant is physiologically stressed and the imbalance in the Biochemical constituents leads to premature fruit drop. BEAN DISORDERS At the time of picking, coffee farmers are perplexed as to the low outturn in the coffee picked. The reasons for low outturn are mainly due to the short supply or depletion of carbohydrates leading to less sugar and starch in beans when compared to healthy beans. We have also observed a higher proportion of single beans in Robusta whenever the bush is exposed to low light intensity due to cloudy weather in the months of august, September and October. LEAF TO FRUIT RATIO The internal biological clock determines the effective leaf to fruit ratio. The metabolic changes include a redistribution of water, growth substances, sugars, nitrogenous compounds, organic acids and inorganic ions from roots, stem, and leaves. According to the research work carried out by CCRI, the leaf to fruit ratio on Coffee Arabica cv S 795 and Coffea canephora cv S 274 was found to be 1:3 and 1:6 respectively. This ratio may vary from season to season depending on berry drop and defoliation. Their further studies revealed that 17 cm2 and 27 cm2 of foliar areas were required to produce one fruit in Arabica and Robusta respectively. In effect their findings point out to a very important fact that a proper balance between leaves and number of fruits will sustain a crop over a number of seasons without adversely affecting the health of the plant. We have noticed that in both Robusta cultivars, old Robusta and S 274 the photosynthates are increasingly being earmarked for vegetative growth leading to lower fruit ratio. The leaf size is above normal, thickened with a waxy coating and internodes too are shortened. In Arabica, the carbohydrates are diverted towards berry formation leading to regular fruit drop and defoliation. SUMMARY OF EVENTS FOR THE CROPPING PERIOD 2008-2009 -  Premature rains in the early part of February on Good standing crop on the bush, resulting in undue stress on the plant. -  Ripe berries could not be picked because of the initiation of the 10 day flowering period -  More than half the crop could not be harvested because it fell to the ground and got mixed with the soil. -  Coffee on the floor of the forest accelerated the spread of the berry borer pest -  Early and continuous blossom showers resulting in forced and running blossom. -  Running blossom spaced with a time interval of more than a month. -  In some coffee growing belts, heavy and sudden downpour of hail stones. -  No proper time gap for induction of stress which is a prerequisite for healthy blossom -  Disproportionate size of the flowers due to excessive soil moisture regime. -  Rain from morning to dusk on day of flowering -  Entry of rain into spikelet’s resulting in abortion of one ovule in Robusta leading to multiple bean defects. -  Absence of honey bees affecting cross pollination -  Long spell of drought after application of the first round of manures and fertilizers. -  Longer breaks between rainy periods. -  Cloud burst resulting in runoff and erosion. -  Sudden dry spell resulting in non application of second round of manures and fertilizers. -  Formation of weak Nodes and internodes. (Bush in a state of shock) -  Small cluster of berries of different sizes spread all along the length of the branches, instead of tightly packed clusters. - During monsoon unexpected high winds causing severe defoliation in young Arabica and Robusta plants and loss of forest cover due to uprooting of trees. Untold economic misery. -  Defoliation in Arabica cultivars and excessive vegetative growth in Robusta. Imbalance in the vegetative growth and cropping wood. -  Premature fruit drop and low yields due to uneven growth and development of berries. -  No time gap for soil to dry, resulting in wet feet. -  Berry drop at regular intervals due to excess moisture in the soil. -  Over production in young plants resulting in defoliation. -  Premature ripening in Arabica (Almost one and a half months in advance) coincides with the north east monsoon. Picking was next to impossible and ripened fruits starting splitting open and falling to the ground due to rain. -  Drying both cherry and parchment coffee was a herculean task because of the unpredictable rain and cloudy weather -  Accumulation of afflatoxins and other species of moulds leading to deterioration in quality -  Coffees of very poor quality, Lower outturn. -  At time of picking Arabica and Robusta, excessive weed growth due to continuous soil moisture regime. -  Berries which fell to the ground, acted as hosts for berry borer infestation. (HIGH INCIDENCE OF BERRY BORER) -  Robusta berries with different sizes leading to different maturities, making picking difficult. -  Early drying up of juices inside Robusta ripe berries leading to lower outturn -  Selection Robusta (S 274) exhibiting significant blossoms (> 15 %) during rainfall in the month of November. (In effect the blossom should be less than 2 %) -  Both Arabica and Robusta exhibiting patterns of nutritional disorders -  Activity of high pest and disease incidence -  Prolonged and intense cold weather favoring high pest and disease incidence. -  Early flowering results in the formation of smaller and single beans. -  Early flowering can also result in flower drop during harvesting of beans. -  Heavy rains and hanging mist results in wet feet conditions-leaf and root diseases. CONCLUSION Environmental factors like sunlight, moisture and temperature plays a crucial role in the growth pattern of coffee that leads to formation of roots, shoots, leaves, flowers and other structural entities characteristic of the plant. Even a slight deviation from the normal pattern can have great impact on the yields of coffee. All biologically important reactions taking place inside the coffee bush are governed by a set of stable environmental conditions. In particular the bush is quite sensitive to temperature variations. If temperatures are too low, biological reactions are stifled by inadequate energy, while the complex structures of proteins become disrupted by temperature extremes in either direction. The engine of growth driving the coffee forest ecosystem is the solar radiation. Due to the impact of climate change the entire range of forests is subjected to an unpredictable regime of light and temperature. This impacts most of the biological processes. resulting in low yields and high pest and disease incidence. Climate change has directly affected coffee farms worldwide. The monsoon dynamics has totally changed. A time may soon come where coffee may not be the preferred crop inside coffee forests. This can result in serious ecological damage across the length and breadth of the coffee mountain. The future of 25 million coffee farmers and workers in underdeveloped and developing countries is also at stake. It is in humanities best interest to save the coffee forest. Dr. Anand Titus and Geeta N. Pereira

28.03.2009

Present framework of agricultural insurance

The international agricultural insurance market has an important dimension. The experience of economically developed countries revealed the fact that without a stable development of agricultural insurances, there is no chance for high performance agriculture. This will require the establishment of a framework for responding to severe systemic events affecting agricultural production, and establishing an appropriate regulatory environment to foster private sector innovation and investment in services for less catastrophic events. During the last few years, at the international level, a variety of new financial mechanisms present the capacity of solving many issues related to the traditional projection of agricultural insurances. New instruments operate based on the configuration of the insurance indemnity payment, thus it will be paid when it reaches a certain level determined by statistic calculations and designed as the “index”. Risk is an unavoidable but manageable element in the business. Concern for risks that stifle investment and contribute to vulnerability of the rural poor is a driving force behind various types of agricultural insurance (typically “crop insurance”). Insuring small-scale farmers against crop losses to adverse weather or other hazards has attracted public sector involvement in the provision of agricultural insurance in many countries. With few exceptions, such interventions have encountered severe problems owing to high administrative costs, moral hazard, and adverse selection. Government interventions should be aimed at improving the accessibility and quality of private sector insurance. This will require the establishment of a framework for responding to severe systemic events affecting agricultural production, and establishing an appropriate regulatory environment to foster private sector innovation and investment in services for less catastrophic events. Agricultural insurance is a financial tool to transfer production risk associated with farming to a third party via payment of a premium that reflects the true long-term cost of the insurer assuming those risks. Past public sector interventions to provide insurance and enable the poor to cope in times of hardship typically have failed. Government response in times of severe calamity has been ad hoc and has lacked precise criteria for what “triggers” an insurance payment, thus leading to high potential for political interference and reduced opportunity to obtain reinsurance. As a result, comprehensive publicly supported crop insurance programs have been disastrous, being both ineffective and fiscally burdensome. They have involved heavy subsidization of premiums, large delivery and service costs, and high aggregate losses. To be profitable, the ratio of average administrative costs plus average insurance payouts to the average premiums paid must be less than one. However, for most countries the ratio has far exceeded one, indicating that the programs have been unsustainable without heavy subsidization. Traditional publicly supported crop insurance is all-risk or multi-peril, covering either all the supposed production risks or a very broad spectrum of those risks. All-risk insurance usually involves payments to the grower as compensation for any shortfall when yield declines below a level set in the policy. In some instances, this has encouraged inappropriate use of insurance and has led to excessive risk taking or moral hazard, such as growing crops in high-risk regions, thus increasing farmers’ exposure to future losses. Assumption by the public sector of massive insurance losses in turn reduces opportunities to participate in broader reinsurance markets. The ad-hoc nature of government policy has frequently been coupled with an ineffective and uncertain regulatory framework that increases uncertainty for private sector providers. Policy and implementation issues Agricultural risks vary in terms of severity and frequency. For the more severe and less frequent events (for example, intense and widespread flooding, prolonged drought), markets typically fail to provide adequate insurance services because of limited credible long-term statistical information, an inability to reinsure on international markets, and the possibility of having to make large payments in years of catastrophic loss (especially in the early years of the program). Because of this market failure (undersupplied risk management services for catastrophic events), the private sector is also likely to fail to provide services for the less severe, more frequent disruptive events (such as localized drought, pest outbreak) that services would otherwise be provided for. When it does, services often bypass the poor or smaller farmers. Thus there is a role for the public sector to intervene (at least initially) in the area of catastrophic risk management, as well as facilitating private sector service provision for more frequent, statistically documented disasters that they are better able to insure against. The following characteristics distinguish these various kinds of risks, and potential problems:Distorted incentives. When insurers know that government will automatically cover most losses, the incentive to pursue sound insurance practices when assessinglosses is reduced. Insurers may even collude with farmers in filing exaggerated or falsified claims. Asymmetry of information. Successful insurance programs require that the insurer has adequate information about the nature of risks being insured. However, this is very difficult for farm-level yield insurance where farmers will always know more about their potential crop yields than any insurer.Adverse selection. Only those who are more prone to risk will purchase public crop insurance, posing a challenge to the viability of an insurer and initiating a cycle oflosses. Conversely, the private sector could leave the “bad” risks to the government. Administrative costs. Providing services to small-scale farmers can raise costs, as data for individual farm-yield based insurance are deficient, and monitoring andinspection costs are high. Moral hazard. Insurance payout based on individual low crop yields as opposed to the causes of reduced crop yields leads to moral hazard - when a farmer’s own behavior or management negatively influences crop yield. Recommendations for practitioners The overall objective for agricultural insurance should be a private sector-led and demand-oriented system in which farmers (including smallholders and the landless) can access (1) services supplied by the private sector and (2) insurance products for mainly less systemic and more independent risks, at a premium that reflects the true long-term cost of assuming those risks. Given this, and given the market failure associated with private sector supply, public sector involvement is important but should be limited to establishing a favorable environment for private sector initiative, establishing mechanisms for management of catastrophic risk that the private sector is unable to offer insurance against, and building the capacity of the private sector. Good practice for establishing private sector-led insurance is still evolving, but important implementation issues include:Public sector initiation of agriculture risk management services. A critical public sector priority is to address large systemic risks that affect agricultural production and allow the private sector to develop insurance products for less severe events and for individual, independent farm risks. Large systemic risks must then be identified, and appropriate insurance mechanisms to manage these risks where markets fail to do so must be developed. Essential to public intervention in this area is making the government’s role explicit and transparent. An unambiguous threshold to trigger government payout (identifying what will and will not be covered and to what degree) must be specified. This trigger must be quantifiable, and ideally it can be measured by an independent, competent, and credible third party. Farmers’ participation in publicly supported schemes should be voluntary, the service provider should purchase reinsurance on international markets where possible, and administrative costs must be controlled. Data collection and actuarial modeling. In designing insurance products for any type of risk, insurers (both public and private) must understand the relevant statistical properties. This requires both credible long-term statistical information and actuarial models to define the relevant risk probabilities and to predict the likelihood of various events. Various indices (for example, area rainfall or soil moisture indexes) may be particularly attractive for their practicality and cost effectiveness.Using weather-based index and area-based yield contracts to insure against natural disasters offers increased affordability and accessibility of insurance services for the rural poor. Because triggers can be verified independently, vulnerability to political interference and manipulation of farm losses is reduced. It is practical to implement and has low administrative and transaction costs, so the private sector can provide it with little or no government subsidies. Weather-based index insurance makes payments proportional to the difference of a measurable weather event (rainfall, temperature) from a certain trigger, as measured at regional weather stations. Area-based index insurance makes payments proportional to the decline of area yields below a certain trigger at the county or district level. For each of these, contracts are written against specific perils/events (area-yield loss, drought, or flood) defined and recorded at a regional level (local weather station). Insurance is sold in standard units (for example, 10? or 100 payouts), with a standard contract or certificate for each unit purchased. The premium rate is the same for all buyers, who all receive the same indemnity if the insured event occurs. Buyers are free to purchase as many units of the insurance as they wish. The insurance is written against the average yield for a region (county/district), and a payment is made when the measured regional yield falls below a defined limit (say 80 percent of normal). An important area of public sector support can be the development of information sources such as risk maps that improve the institutional capacity of both public and private sector providers to identify and analyze risk. This information can form a common foundation upon which the transparent identification and pricing of risk (premium rates) can be based. Donors can support both the development of information systems and of the capacity of institutions (such as the ministry of agriculture) to build databases that can overcome information-related constraints to private sector participation. Creating a favorable regulatory environment. To encourage private sector initiative, the policy and regulatory environment must be deemed by all stakeholders as fair, credible, stable, and enforceable. Toward this end, donors can contribute useful policy advice and capacity building support.Educating stakeholders. Education of stakeholders is important if farmers are to understand the benefits of insuring against certain events. Workshops, information packages, media, and other mechanisms are needed to explain the characteristics of insurance schemes and the different opportunities available. Further, technical assistance should be provided to both public and private sector suppliers to ensure that the needs of producers (particularly the most vulnerable) are met. Such assistance might be best provided through cofinancing for business service providers. Develop effective financial systems. Generally, when the poor do not have access to credit, there is less incentive and capacity to secure insurance and pay up-front premiums. Development of financial markets should be promoted where possible to facilitate saving and borrowing and complement the insurance schemes that are established. The ability of resource-poor farmers to access these services should be at the forefront of public sector involvement. This will also contribute to improving access to funds required for making up-front margin deposits on futures and options contracts for managing price risk. Linking finance to index-based insurance is an innovative approach that has emerged from recent work. REFERENCES 1. Mahul, O. Optimal Insurance against Climatic Experience, American Journal of Agricultural Economics 83(3), 2001 2. Miranda, M., Vedenov, D. Innovations in Agricultural and Natural Disaster Insurance, American Journal of Agricultural Economics 83(3), 2001 3. Mitu, N. E. Asigurari ai reasigurari, Ed. Universitaria, Craiova, 2006. 4. Popescu, J., Cristea, M. Asigurari ai reasigurari – Teorie ai practice, Ed. Universitaria, Craiova, 2003. 5. Zorrilla, J.L. Extensive Herbaceous Cultivation and Cattle Risks: Possibilities that Agricultural Insurance Offers for their Management, The international conference on Agricultural Insurance and Income Guarantee, Madrid,13 May, 2002. Narcis Eduard Mitu, University of Craiova, Faculty of Economics and Business Administration, Craiova, Romania

06.03.2009

USA - Recent development of crop insurance program

As its proponents hoped, crop insurance has become the largest single source of financial protection to farmers. From insuring 182.2 million acres in 1997, the program has grown to cover more than 271.7 million acres in crop year 2007, an increase of almost 12 percent, or about 30 million acres, over the 2006 crop year. According to National Crop Insurance Services, the program is meeting the Congressional mandate of insuring 80 percent of insurable farmland. There are two kinds of crop insurance: crop-hail, which is provided by the private sector, and multiple peril, an all-risk coverage underwritten by the private sector and the federal government and serviced mostly by the private sector. Crop-hail insures against loss of the value of a crop as a result of damage by hail. Multiple peril insurance covers loss of crop value as a result of all types of natural disasters, including drought, excessive moisture and unusually hot weather. There have been sweeping changes in the federal multiple peril crop insurance program in recent years. Up to 1995, only about one-third of farmers bought federal multiple peril crop insurance because, in the event of a disaster, they could generally rely on Congress to bail them out with disaster assistance and emergency loans. With the passage of reforms in 1995, Congress made it harder to justify legislation granting disaster. It also took other steps to encourage farmers to buy insurance against loss of income due to natural disasters, requiring new types of products, such as revenue protection, to make crop insurance more attractive and subsidizing a portion of the basic traditional coverage that protects against loss of yield. RECENT DEVELOPMENTS Premiums and Losses: As of the beginning of January 2009, total multiple peril crop insurance (MPCI) premiums for crop year 2008 (catastrophic and additional business combined) were well ahead of last year, due in part to rising commodity prices. The tally for 2008 MPCI business was $9.86 billion, an increase of almost 50 percent over the previous 12 months, according to data from the Federal Crop Insurance Corporation (FCIC). The livestock insurance program is also expanding. In 2008 the number of cattle insured was 1.3 million, twice the 2007 number. Data from the Department of Agriculture’s Risk Management Agency (RMA), which manages the program for FCIC, provide 2008 state MPCI premium rankings. North Dakota topped the premium list, followed by Iowa and Illinois, the leading state in both 2007 and 2006. In North Dakota, the state that saw the greatest change, premiums almost doubled. Tennessee also registered a significant change, with premiums rising more than 80 percent from 2007. In Florida, the only state to see a decrease, premiums dropped more than 10 percent. According to the National Crop Insurance Services, which collects data for the private crop insurance business, 2008 was a year of significant crop-hail losses. Historically, the loss ratio has hovered around 66 percent. The loss ratio is the percentage of each premium dollar spent on claims. In the 2008 crop year, preliminary estimates put the loss ratio at about 80, reversing the trend of the last five years. Nebraska topped the crop-hail insurance premium list for crop year 2008, at $95.8 million, and also suffered the largest losses, at $107.3 million, producing a loss ratio of 112. However, New Jersey, Pennsylvania and South Carolina had the highest crop-hail loss ratios at 922, 150 and 136, respectively, meaning that in the case of New Jersey, where a relatively few policies are sold, claims cost the industry in that state more than $922 for every $100 collected in premiums. The crop insurance business is subject to great variability in results, not only by state but across time. For example, the MPCI combined ratio was 75.3 in 2007 but 91.3 in 2005, the year that hurricanes Katrina and Rita struck the Gulf Coast, and 76.1 in 2004. In 2002, when the Midwest suffered a widespread drought, the MPCI combined ratio was 124.4 and in the following year it was 109.8. The combined ratio is a measure of profitability; it represents the percentage of the premium dollar spent on claims and expenses. Legislation: The 2007 farm bill was finally passed in 2008. Among the major provisions affecting crop insurers is a decrease of $5.6 billion in the federal crop insurance program, $800 million of which is related to the government’s reimbursement of crop insurers’ administrative and operating costs. Reimbursements represent a percentage of premiums which have risen substantially as crop prices have surged, somewhat offsetting the cuts. In addition, farmers will pay higher administrative fess for catastrophe coverage. The “Combo” Crop Insurance Policy: The Federal Crop Insurance Program is proposing a new combination crop insurance policy for major grain crops, which will provide both revenue and yield protection. The ”Combo” policy will replace crop revenue coverage, income protection and several other coverages, the goal being to reduce paperwork and simplify risk management decisions. Originally approved for the 2009 crop year, implementation was delayed by one year to 2010 because of the need to upgrade information technology. Fraud: In 2005 the U.S. Government Accountability Office (GAO) published a report on fraud waste and abuse in the crop insurance program. In 2007 the GAO found that the Department of Agriculture’s Risk Management Agency (RMA) was not using all the tools available and some farmers continued to abuse the program. In the past it has recommended reducing premium subsidies to those who repeatedly file questionable claims, improving the effectiveness of growing season inspections and strengthening oversight of insurance companies’ use of quality controls. Government investigators are increasingly using satellite images to match actual crop planting and growing practices in suspicious cases with information submitted in claims. New Programs: Livestock insurance is now available in all states where livestock are farmed. Livestock insurance, which just a few years ago was only a pilot project, allows the policyholder to lock in prices for animals to be sold for slaughter. If prices subsequently fall, the policy compensates for a portion of the loss. In a related move that will also help livestock producers, the RMA has developed programs for pasture, rangeland, forage and hay to provide a safety net for farmers who face drought conditions There are two programs: the Rainfall Index program and the Vegetation Index—both use indexes and grids that are smaller than counties to determine expected losses. The Rainfall program is based on accumulated rainfall and the Vegetation program relies on satellite images to measure departures from expected losses in a given grid area. Originally available on a limited basis, as of January 2009 the rainfall index is available in at least 10 states and the vegetation index in at least 13. So far they have been highly successful, with participation levels in excess of expectations. Together, these programs ultimately will be available in areas that represent about 25 percent of the nation’s grazing and hay land. The RMA’s long-range goals call for some kind of crop insurance product to be available to cover 98 percent of the value of U.S. commercial crops by crop year 2012. The development of a livestock program will help expand the program since more than half of all farms are livestock farms. In 2004, 15 states deemed historically underserved by the crop insurance program were targeted for $4.5 million in educational programs under the Agricultural Risk Protection Act of 2000. These states are mostly in the Northeast. The northeastern parts of the country have a disproportionate share of small farms. This program is continuing along with an outreach program to specialty crop producers, few of whom are insured, and ranchers. One answer to the problems of small farms may be what has become known as an adjusted gross revenue “lite” insurance program which covers the whole farm under one policy. The policy provides a maximum protection of $100,000 and can cover all crops and animal production including milk. Approved as a pilot program in some parts of Pennsylvania in 2003, it was expanded to cover five more states for the 2005 crop year. The program is now available in more than half the states. CROP-HAIL INSURANCE, 1998-2007($000) Year Direct premiums written (1) Annual percent change Loss ratio (2) Annual point change 1998 $576,464 -3.0% 83 26 pts. 1999 508,108 -11.9 76 -7 2000 468,405 -7.8 68 -8 2001 433,743 -7.4 69 1 2002 405,003 -6.6 70 1 2003 422,137 4.2 56 -14 2004 427,567 1.3 58 2 2005 434,711 1.7 44 -14 2006 405,254 -6.8 48 4 2007 489,673 20.8 50 2 (1) Before reinsurance transactions, total for all policyholders of crop-hail insurance.(2) The percentage of each premium dollar spent on claims and associated costs. A drop in the loss ratio represents an improvement; an increase represents a deterioration. Source: National Crop Insurance Services. MULTIPLE PERIL CROP INSURANCE, 1999-2007($000) Year Net premiums written (1) Annual percent change Combined ratio (2) Annual point change (3) 1999 $725,821 1.8% 98.2 NA 2000 938,840 29.3 90.4 -7.8 pts. 2001 1,321,820 40.8 96.0 5.6 2002 2,003,443 51.6 124.4 28.4 2003 1,702,862 -15.0 109.8 -14.6 2004 2,203,143 29.4 76.1 -33.8 2005 2,234,630 1.4 91.3 15.2 2006 2,824,769 26.4 77.9 -13.4 2007 3,736,658 32.3 75.3 -2.6 (1) After reinsurance transactions, excluding state funds.(2) After dividends to policyholders. A drop in the combined ratio represents an improvement; an increase represents a deterioration. (3) Calculated from unrounded data. NA=Data not available. Source: National Association of Insurance Commissioners (NAIC) Annual Statement Database, via Highline Data, LLC. Copyrighted information. No portion of this work may be copied or redistributed without the express written permission of Highline Data, LLC. BACKGROUND Insurance works best when everyone exposed to a certain kind of risk, such as fire, buys a policy, but only a limited number of policyholders suffer losses (and therefore file claims) in any given year. Where all policyholders in a geographical area are likely to file claims, as farmers would in the event of a drought, and where the people mostly likely to purchase insurance are those most vulnerable to loss, such as farmers in flood plains, insurers cannot spread the risk of loss broadly enough and over a sufficient length of time to make insurance affordable. This fundamental principle of insurance is critical to an understanding of the history of crop insurance. Agricultural production is subject to many uncertainties, including natural disasters. Adverse weather, insect infestations and plant diseases can severely reduce the yield or quality of a crop, wiping out a farmer's profits for the whole year in a bad season. The most important consideration, as far as insurers are concerned, is the potential for catastrophic losses resulting in widespread and severe damage claims. Many "perils," or causes of loss, to which farmers are exposed, such as heat and drought, freezing temperatures and excessive moisture, can affect whole regions. Droughts may also persist for extended periods so that farmers may suffer successive losses. But there is one common weather-related disaster that generally impacts a more limited area, and that is hail. Hail strikes randomly and erratically. Crops growing in one part of a field may be completely ruined while the remainder is unscathed. In addition, damage from hail can be easily identified and assessed separately from other adverse conditions that can lead to yield losses. The catastrophic nature of many crop-related perils led to the development of two types of crop insurance: crop-hail insurance, which is provided by the private marketplace, and the multiple peril crop insurance program, which is overseen and subsidized by the federal government and sold and serviced by private insurers. Multiple peril insurance covers most causes of loss, as its name suggests. The History of the Federal Crop Insurance Program: Hail insurance has been in existence in some form since the early part of the twentieth century and it has been a thriving segment of the insurance industry since the 1920s. Insurers also tried to develop a multirisk crop insurance business. But the attempt failed because they had insufficient data to set adequate rates to cover the kind of widespread catastrophic losses that long periods of drought, for example, produced. In 1933 at the height of the Great Depression, Congress passed major legislation aimed at protecting the family farm. By restricting domestic production, it hoped to raise prices for agricultural products and this, together with subsidies to keep acreage unplanted, would restore farmers' standard of living to pre-World War I levels. Five years later in 1938 after the U.S. Supreme Court declared the law unconstitutional, a new piece of legislation was enacted with similar goals, authorizing the Secretary of Agriculture to set acreage and marketing quotas for staple and export crops and to pay cash subsidies for planting soil conserving crops. (It was not until the 1990s that Congress began to seriously question the wisdom of protecting farmers from market forces, especially since the family farms that such programs were designed to protect now account for only a small portion of agricultural production.)In the same year that price support legislation was passed, Congress approved the Federal Crop Insurance Act, thereby creating the first federal crop insurance program. Backed by the resources of the U.S. Treasury Department, lawmakers expected the federal program to avoid the problems that had thwarted the formation of a private multirisk insurance industry. However, it was plagued by high costs, low participation on the part of farmers and an inability to accumulate sufficient reserves to pay for catastrophic losses. In an effort to make the program more financially viable, lawmakers limited coverage to crops and geographic areas that would be least likely to require government subsidies and to protect farmers who were not insured. Congress began to provide disaster assistance and emergency loans. As federal expenditures under these programs grew, not surprisingly, farmers had little incentive to purchase crop insurance and consequently the program remained limited in scope. In 1980, frustrated by the program's continuing deficiencies, Congress passed legislation designed to make crop insurance the preeminent vehicle for helping farmers survive major agricultural disasters. Its goals were to increase participation in the program to the point where government-funded disaster assistance programs could be abolished; raise the level of efficiency by joining with the private sector to sell, service and bear some of the risk of providing coverage (until then crop insurance was provided solely by the U.S. Department of Agriculture); and create an actuarially sound program that would reduce federal outlays while keeping coverage affordable through subsidies. The private sector would be involved in two ways: as master marketers and reinsured companies. Master marketers were insurers paid by the federal government to sell crop insurance policies but who did not assume liability on policies they serviced. (This arrangement was phased out by 1994, see below). Now private insurers bear the underwriting risk and the policies they write are reinsured by the federal government. Farmers’ premiums cover a portion of the risk of loss. Reinsured companies are reimbursed by the federal government for administrative and operating expenses and they share the risk of loss. A decade later the program was still experiencing problems. Because so many farmers lacked coverage, Congress found it difficult to resist political pressures to provide ad hoc disaster assistance and emergency loans, further undermining the crop insurance program. The devastating Midwest floods of 1993 further highlighted the costs and inefficiencies of the federal government supporting two separate and competing programs to deal with crop disasters. By 1994 the federal program was approaching a crisis. Despite the involvement of the private sector, the participation rate in any given year rarely exceeded 33 percent and the federal annual price tag for crop insurance was close to $900 million. Disaster relief expenditures, which were “off-budget”(not counted towards budget limits), were out of control, with payments over the six-year period 1988-1994 averaging $1.5 billion per year. Market-oriented Reforms: The Federal Crop Insurance Reform Act of 1994 was passed at a time when the costs of all agricultural programs were under intense scrutiny as part of efforts to balance the federal budget. With little hope of bringing expenditures under control unless it made sweeping changes in the program, Congress decided to mesh crop insurance and disaster assistance into one program, radically restructuring the agricultural community's safety net. Lawmakers took a multipronged approach. First, if disaster payments were to be severely curtailed or abolished, farmers would need some measure of economic security. A key element of the legislation, therefore, was the provision of basically free "CAT" coverage—insurance against catastrophic losses. All producers of insurable crops would be able to purchase CAT coverage for a nominal processing fee. Crops not covered by the federal crop insurance program would be eligible for a special disaster assistance program with payments triggered by area-wide losses. The level of payment would be similar to that of the CAT insurance plan. Second, as an added incentive for growers to invest in a comprehensive multiple peril crop insurance program, the federal government would subsidize the premium for additional insurance coverage, see below. Third, the "emergency" designation status for crop loss legislation, which allowed undisciplined off-budget borrowing to pay for disaster relief, would be repealed. Any future disaster assistance would be considered part of the budget and therefore could not be approved without an offsetting reduction in spending for other programs. Fourth, all farm programs, including crop insurance, would be handled by a single agency to improve service and program coordination. One key provision of the 1994 legislation, which was later modified as part of a massive reform of farm policy, was mandatory catastrophe coverage. To encourage farmers to buy insurance, and thus further minimize the potential need for disaster aid, crop insurance had been tied to agricultural price support and loan programs. Under the 1994 legislation, farmers would not be eligible for these farm program benefits unless they had obtained at least the basic catastrophic level of crop insurance protection. By encouraging farmers to obtain CAT insurance, the program widened the pool of policyholders beyond those most exposed to risk. But when Congress began to review the nation's farm programs, which were due for reauthorization in September 1995 (agricultural policy is reviewed by Congress every five years), lawmakers examined all aspects of farm policy, including insurance, and decided to make some changes. As part of the sweeping farm policy reform legislation that was passed early in 1996, farmers are no longer required to have a minimum level of insurance as long as they waive in writing eligibility for any future disaster payments. Farmers who fail to sign waivers must carry CAT coverage to maintain their eligibility for disaster aid. In addition, the sale and servicing of policies would be shifted to the private sector. The Federal Crop Insurance Corporation would manage crop insurance, establishing insurance policy terms and conditions, setting rates and generating the payment of claims through its Risk Management Agency (RMA). The exception to this is the noninsured crop disaster assistance program, which remains with the Farm Service Agency. Congressional deliberations about farm subsidy costs ultimately resulted in one of the biggest shifts in agricultural policy since the 1930s. Part of the impetus for change was the movement to reduce the federal deficit. But it was also an acknowledgement that farming had changed over the past six decades. Most of the subsidies were now going to large agricultural corporations that today grow most of the nation's food crops and to absentee owners of farmland living outside the agricultural community. In 1940, according to Congressional testimony, there were 6.1 million farms. In 1996 there were only 2.1 million. Many of these no longer rely on farming for the major portion of their income. Only 348,000 are considered “commercial” farms with annual sales in excess of $100,000. The New Deal price support program had allowed farmers to sell their crops to the federal government for a fixed price when market prices fell below a government-set target price. Now that the subsidy program was about to end, there was a need to fill this gap. Many farmers use the Chicago Board of Trade (CBOT) commodities futures market to protect against falling prices. Most use the futures market indirectly through cash-forward contracts with grain elevators, large farm product merchandisers who distribute agricultural products and who in turn hedge their exposure with the CBOT. But in either case, they have not been able to lock in prices for their entire crop because of uncertainties about the yield. Insurance programs reduce the risk of a poor yield but until recently did not respond to price declines. The 1996 Agricultural Market Transition Act addressed the need for "revenue" protection—the product of yield and price. Provisions in the bill set up various pilot programs that respond to fluctuating price levels as well as yield variability using the CBOT commodity prices. In addition, the CBOT itself has developed a new crop yield insurance product that allows grain elevators to offer farmers over-the-counter revenue insurance contracts in much the same way as they now offer cash-forward contracts. The major difference between CBOT and insurance products is in the underlying standard on which the contract is based. Insurance products are tailored to an individual farmer's historic yield, or in some cases to the yield of the county, see Revenue Insurance section, whereas the CBOT contracts are based on much broader aggregates, such as the state average yield. Congress approved another major piece of legislation, the Agricultural Risk Protection Act (ARPA) in May 2000. The Act made it easier for farmers to buy different types of multiple peril crop insurance, including revenue insurance, by increasing government subsidies. Over the five years following the passage of the bill, $8.2 billion is to be spent on the Federal Crop Insurance Program and 80 percent of these funds is to be set aside to reduce farmers' premium expenses. The measure also addressed the problem of farmers who face lower than average yields in their production history following multiple years of natural disasters. A succession of bad harvests lowers farmers’ insurance payments since compensation for low yields is based on actual production history. Under the law, farmers may include a yield equal to 60 percent of the long-term county average for any year in which their yield falls below that amount. In addition, the legislation focused on eliminating waste, fraud and abuses of the program; expanded pilot programs to include coverage for livestock; and extended risk management activities to underserved areas. Farmers with a good record may receive a performance-based discount on premiums. Crop-hail Insurance: Insurance coverage for hail damage is provided by both the private sector, with crop-hail insurance, and under federally subsidized multiple peril insurance policies. Farmers who purchase crop-hail coverage can choose to drop coverage for hail under the multiple peril policy, in exchange for a reduction in premium, or keep it for additional protection. A basic crop-hail policy covers losses due to hail and generally also fire, which is characterized by the same randomness as hail. The policy also covers damage caused by lightning and transit after harvest to storage. Coverage for additional causes of loss, such as vandalism, may be available as well as coverage for replanting costs when hailstorms early in the growing season damage a crop so severely that it has to be replanted. When the destroyed crop is replanted, the farmer also receives compensation for the reduction in expected yield due to the later planting date. Most insurers offer policies for the major grain and hay crops but the availability of coverage for specialty and vegetable crops is more limited. A policy can be purchased at any stage during the growing season from the time when 50 percent of the crop is clearly visible to the anticipated harvest date, as long as the crop has not already been damaged by hail. To prevent growers from closely tracking weather patterns and waiting until a storm with the potential for hail is imminent before buying insurance, the policy does not take effect until one minute after midnight on the second day after the signing of the application. Farmers can insure all crops in which they have a financial interest (where land is leased, the landowner as well as the farmer have financial interests in the crop yield) or just a portion of their acreage.The amount of coverage, which is purchased on a per-acre basis, is limited to the expected value of the crop, including anticipated profit. Coverage amount is the harvest price per bushel (or pound) forecast for the crop at the time the insurance policy is sold, times the number of bushels or pounds each acre is expected to produce. Premiums vary according to the susceptibility of the crop to hail damage and the location of the crop. Since hail losses have been tracked for more than 40 years, certain townships are known to be more prone to hail damage than others. After a report of loss, the adjuster estimates the percentage reduction in yield due to hail damage by taking samples and sometimes actually counting the plants damaged in a representative area. The loss calculation takes into account the fact that the expected value of the crop at the time the loss occurs may be higher than the value (yield times market price) forecast at the time the policy was written. However, the claim payment or "cash value" cannot exceed the original underwriting limit or the policyholder's financial interest in the crop. Where there is the possibility of a bumper crop, the farmer may increase coverage mid-season. Multiple Peril Crop Insurance: Multiple peril, or all risk crop insurance, protects against low yield and crop quality losses due to adverse weather (including hail) and unavoidable damage from insects and disease. While multiple peril insurance covers most economically significant agricultural crops grown in the United States—more than 100 crops—insurance for a specific crop may not be available in every state or in every county within a state. Most crops for which there is not yet coverage are eligible for the limited protection offered by the Noninsured Crop Disaster Assistance Program. A farmer purchasing multiple peril crop insurance has a number of coverage options. The first is a CAT (catastrophe) policy, the lowest amount of protection available. This coverage, which pays 55 percent of a crop's established price on crop losses in excess of 50 percent, provides a basic safety net. To encourage proper record keeping, reduce overpayments and deter fraud, payments may be reduced by up to 50 percent where farmers lack certified historical yield records, known as actual production history (APH). The federal government subsidizes the entire cost of the CAT coverage. Farmers pay only an administrative fee. In addition, farmers can buy additional insurance, known as "private supplemental," under a "buy up" program designed to encourage purchase of higher, more adequate levels of coverage.Under the buy-up program, the federal government subsidizes a portion of the premium. Currently, the subsidy decreases as the amount of coverage rises. However, while the government’s share of the premium shrinks with each step up in coverage, the total dollar amount that the farmer receives in subsidy increases. In addition, there are more complex supplemental coverages that protect farmers who, for example, commit their entire crop to food processing plants in advance of harvest or need it to feed livestock and therefore must be able to replace lost crops at market prices. There are also supplemental programs to increase the loss payment amount and to increase payments in catastrophic situations.Producers of some crops may be eligible for a multiple peril coverage known as "group risk" crop insurance, which may cost less than other options. It differs from the basic coverage in that yield guarantees are based on the county average yield rather than that of the individual farmer and is suitable for farmers whose yields tends to follow countywide yields. Policyholders automatically receive an insurance payment in any year that the county average yield falls below the yield guarantee. Group risk income protection adds a price protection feature to this coverage. Differences Between Crop-hail and Multiple Peril Insurance: There are several key differences between multiple peril and crop-hail insurance programs. First, farmers purchasing multiple peril insurance choose coverage levels by "unit" rather than by acre as with crop-hail. A unit is the entire acreage of the crop planted in the county by the farmer. Farmers can also break down coverage by "sections"—one square mile—or by irrigated and dryland practices. This difference is most evident when a loss occurs, because in the multiple peril program the amount of the loss—the reduced yield—is averaged out over all the fields in the unit rather than over the affected acre or acres insured. Second, a farmer cannot suddenly decide to buy a multiple peril policy. Unlike crop-hail, multiple peril coverage must be purchased prior to certain dates set by the federal government, which vary according to the county and the crop. These sign-up deadlines are set early in the planting season before long-range weather forecasts can influence purchase decisions. Coverage takes effect once the crop is planted, but the crop must be planted before the last government established planting date by crop and by county. Coverage may not be added during the growing season.In addition, crop-hail coverage generally provides coverage from the first dollar of loss, although deductibles are offered, whereas multiple peril coverage includes what amounts to a deductible, guaranteeing up to 100 percent of expected market price but never 100 percent of yield.Standard Reinsurance Agreement: From a private reinsured company financial perspective, the federal crop insurance program is unique in many ways. The first is the Standard Reinsurance Agreement. This sets out the relationship between private insurance companies and the federal government concerning the risk each will bear. There are three risk pools in each state—the commercial, developmental and assigned risk funds—and the amount of risk the insurer retains varies according to the pool and by state. Those policies covering acreage in counties known for low yields, for example, will be placed in the assigned risk fund, where the federal government bears most of the risk, and those where the risk of low yields is lowest in the commercial pool. Insurers may also reinsure a portion of their business in the private reinsurance market. Second, all administrative and operating costs are reimbursed by the federal government on a percentage-of-premium basis. This percentage is steadily being cut largely because farmers are purchasing higher amounts of insurance and administrative costs do not necessarily increase proportionately with each additional dollar of coverage. In addition, crop insurers have less investment income than insurers in other segments of the industry because they receive payment for coverage after it has been provided, rather than in advance as with other types of insurance. Premiums, for example, are not due until the end of the insurance period and are not paid on policies under which claims have been filed, the premium is deducted from amounts owed, and administrative expenses are not reimbursed until the actual acreage planted is reported, often as much as five months after the insurance sales closing date. Moreover, premiums fluctuate widely because they are tied to the market value of the crop and the acreage planted.Revenue Insurance: Farmers face three major risks: low crop prices, poor quality and low yields. Under the standard multiple peril policy, farmers are compensated for losses in crop yield. The market price paid for each bushel is fixed at a level set by the government in advance of the growing season, regardless of the actual price at harvest time, which could be lower or higher than the government forecast. The policy is triggered when the yield is less than the level of protection selected. Coverage can be between 50 and 75 percent of what their acreage typically produces and from 60 percent to 100 percent of the projected market price. The uninsured portion of the yield and anything below the full market price is essentially a deductible. Revenue insurance, which was first introduced in the mid-1990s, goes a step beyond standard multiple peril coverage. It guarantees farmers a certain income, allowing them to manage both yield and price risk. It recognizes that farmers’ income is the product of the price they receive for what they have grown, as well as the number of bushels or pounds their acreage yields. With a revenue insurance policy in hand, farmers can borrow against and market their crops in advance, knowing they will have set revenues regardless of market conditions at harvest time. Several broad types of revenue insurance programs have been developed.One program, Income Protection (IP), was created by the Federal Crop Insurance Corporation (FCIC) itself as a pilot program beginning with the 1996 crop year. Under an IP crop insurance policy, the farmer receives a payment when any combination of low harvest prices and low yield push gross income below the guaranteed income level selected. The income guarantee is based on early board of trade commodity prices for the insured crop. A second program, developed by the Iowa Farm Bureau and approved as a pilot program beginning in crop year 1997, is Revenue Assurance (RA). RA is similar to IP in most respects except that commodity prices are adjusted to reflect average prices in the county to make them more representative of local market conditions. Premiums for RA tend to be lower than for IP, which is based on prices across a broad geographical production area, because the likelihood of income loss in Iowa counties is lower than average. In Iowa, yields tend to be more uniform across counties and prices therefore tend to move in opposite directions to a greater extent than elsewhere. When yields are low, rising prices typically compensate for a reduction in production and vice versa. In other states, yields across counties tend to vary to a greater extent under similar growing conditions. Low production in one county may be offset by higher production in another, thus stabilizing market prices and increasing the likelihood that a farmer with low yields will have a reduced income. A third program, Crop Revenue Coverage (CRC), was developed by American Agrisurance, a private insurance company participating in the federal crop insurance program. The coverage was approved as a pilot program beginning in the 1996 crop year. CRC provides more comprehensive protection than the other two programs in that its revenue guarantee, which is based on the higher of two prices: the early market price and the harvest market price, covers fluctuations in market price both up and down. Although the upward movement in harvest price is capped above the historic maximum price increase, CRC allows the farmer to capture some of the benefit or rising prices when yields drop. Revenue coverage is also available based on the county average revenue rather than the historical average of the individual farmer. Another option, particularly for small farms, is adjusted gross revenue coverage which insures the revenue of the entire farm, including some livestock rather than a single crop. Insurance Information Institute

15.01.2009

Swiss Re - Report on Agricultural Insurance in China

Agricultural insurance plays an important role in stimulating investment in agriculture and in stabilising farmers’ income. In a Focus Report titled: Setting up sustainable agricultural insurance: the example of China, released today, Swiss Re suggests that China’s experience with agricultural insurance subsidies could point the way for other emerging markets to drive growth and secure food supply. The report also recommends that all stakeholders in the agricultural insurance sector collaborate to ensure risk-adequate pricing and to develop viable risk assessment procedures and solutions for local markets. China is one of the fastest growing economies in the world and one of the major agricultural producers. As demand for food is rising to satisfy an increasingly affluent population, the country is also facing the growing challenge of securing the necessary food supply in the face of events such as floods, typhoons, droughts or epidemic livestock diseases. Subsidies spur significant growth in agricultural insurance Recognising the importance of the agricultural sector for its economy and social stability, China introduced subsidies for agricultural insurance in 2007, making insurance protection more affordable to large groups of farmers. The subsidies spurred an instant demand, generating premiums to a value of USD 800 million in 2007. In 2008, premiums are expected to reach an impressive USD 1.8 billion, which makes China the second biggest market for agricultural insurance after the United States. Further growth can be expected in the coming years. Roman Hohl, Co-Head Agriculture of Swiss Re, and one of the authors of this Focus Report said: “China’s use of agricultural insurance as an incentive for farmers to expand agricultural production, and its efforts to develop a robust agricultural insurance industry, is a good example for other emerging markets that currently lack such a framework.” Creating a robust agricultural insurance market While the introduction of subsidies has given agricultural insurance a broader base, the challenge remains to create a robust market able to cover a large variety of crops, different climatic regions as well as China’s predominantly small-scale farming operations. Access to the domestic and global reinsurance market is helping Chinese insurers to absorb peak risks. China is now also seeking to benefit more from the global experience and know-how of international reinsurers with dedicated agricultural specialists. Swiss Re is one of the companies that has been approached by Chinese insurers and local governments. Agostino Galvagni, Head of Insurance & Specialty at Swiss Re, said: “In view of the diverse agricultural conditions there can be no one-size-fits-all solution for the whole of China. However, Swiss Re has the experience and know how to help create the structures that could nurture a sustainable insurance system, and further, assist the country in addressing the priorities of their agricultural development programme in an efficient way.” “With its profound risk management expertise, Swiss Re can also assist in developing solutions to issues where conventional agricultural insurance is difficult to implement. Solutions can include index-based structures covering volume and price risks,” said Juerg Trueb, Swiss Re’s Head of Environmental and Commodity Markets. Call for closer cooperation with the Chinese government In conclusion, the Focus Report calls for all stakeholders in the agricultural insurance sector to collaborate to gather the necessary loss information that would allow for risk-adequate pricing of insurance products at the local level, and to develop viable loss assessment procedures. Both of these belong to the challenges that need to be addressed, to make the burgeoning agricultural insurance market in China truly robust. For copy of the report please go to www.swissre.com Source - Swiss Re

15.09.2008

World insurance in 2007: emerging markets leading the way

According to the latest Swiss Re sigma study, world insurance premium income grew 3.3% in real terms in 2007, reaching USD 4 061bn. This growth was primarily driven by the life business in industrialised and emerging markets and to a lesser extent by the non-life business in the emerging markets. Life insurance premiums increased 5.4%, which is above the previous ten year average. Non-life premium growth was robust in the emerging markets (+10%), but decreased in the industrialised countries (-0.3%). However, both the life and non-life industries are financially sound despite the challenging economic environment. Life insurance: pension and annuity products drive growth According to Daniel Staib, one of the study’s authors, “Despite a macroeconomic environment characterised by marginally slower economic growth and rising inflation, life insurance continued to expand in 2007 with world life insurance premiums increasing by 5.4% to USD 2 393 billion.” Sales of retirement and other wealth accumulation products spurred growth in the industrialised economies. Life insurance in the emerging markets was fuelled by strong economic performance and catch-up potential. Key drivers of growth in the life business: the trend towards single premium business and pension and annuities products continued to drive sales in countries where an aging population and reductions in state social security benefits were causing a shift from a traditional life insurance model to a pension-driven one; the growing economies of the emerging markets with a relatively young population and an expanding middle class are driving sales across all products; in 2007, the severe credit crisis and turbulent financial markets did not significantly affect life insurance sales.  Non-life insurance: profitable despite slow growth Global non-life premium growth slowed to 0.7% in real terms, totalling USD 1 668bn in 2007. Non-life premium growth continued to follow divergent trends in the industrialised and the emerging markets. While premium volume retreated in the industrialised markets, growth slowed marginally in the emerging markets. Though downward pressure on premium rates continued in some countries, overall technical results were favourable and profitability remained sound. Outlook: healthy growth in life, a stagnant non-life sector Growth in life insurance premiums in 2008 is expected to moderate as capital and stock market turmoil dampen demand.  Daniel Staib notes, “As the economic environment and capital markets stabilise, life insurance is projected to resume its strong performance in the medium term, both in terms of growth and profitability.” In regard to the non-life business, he adds, “Non-life insurance premiums are expected to fall in the industrialised economies. However, non-life premiums will continue to grow in the emerging economies, albeit at a slightly slower rate than in the recent past. ” The effects of the sub-prime crisis are expected to be limited, resulting in lower investment results. A further concern is rising global inflation, which will increase claims costs in liability insurance and other long-tail business lines as well as  hamper profitability. Note: Swiss Re’s sigma study "World insurance in 2007" examines the insurance markets of 147 countries, making explicit reference to 88 This publication can be downloaded in English, German, French, Italian, Spanish, Japanese and Chinese (simplified). Downloads  World insurance in 2007: emerging markets leading the way Assekuranz Global 2007: Schwellenländerauf dem Vormarsch L'assurance dans le monde en 2007: les marchés émergents ouvrent la voie Assicurazione mondiale nel 2007: mercati emergenti in espansione El seguro mundial en 2007: los mercados emergentes se sitúan a la cabeza 2007年の世界の保険:先頭を切る新興市場 2007 年度世界保险业:新兴市场带动增长 Swiss Re, Sigma publications

09.08.2008

India’s Agrarian Suicides

The Indian peasantry, the largest surviving body of small farmers in the world, is currently facing an epidemic of suicide. For thousands of years farmers have depended on the Earth to sustain their families. Now, in the twenty-first century, their livelihood, prosperity, and the well-being of their families for generations to come are being threatened by globalisation and the shift in the linkage of agriculture from the Earth to a few profit-driven multinational corporations. Globalisation and the Extinction of FarmersIn 1997 India experienced its first bout of farmers suicides and since then over 25,000 farmers have taken their own lives. The crisis has stemmed from a number of hardships which have led to the irreversible indebtedness of small and marginal farmers from even the most historically productive regions of the country. India’s agriculture has turned into a negative economy due largely to three main factors: rising costs of cultivation, plummeting prices of farm commodities, and lack of credit availability for small farmers. Most of these factors can be attributed to corporate globalisation and unjust free trade policies implemented by the World Trade Organisation. In 1998, the World Bank’s structural adjustment policies forced India to open its seed sector to global agribusinesses such as Monsanto, Cargill, and Syngenta. As a result of this adjustment, traditional farm saved seeds have been replaced with genetically engineered seeds which are non-renewable, thus requiring repurchase for each growing season. What was once a self-renewing resource and gift from the Earth has now become a corporate commodity and a costly investment which farmers must make every season. In most cases this has lead to poverty and severe indebtedness. In futile attempts to relieve themselves of debt, some farmers have even sold their own organs. When these attempts fail to rectify their financial situations, many farmers find no way out but to take their own lives. Along with social maladies, the planting of GM seeds poses a significant threat to India’s biodiversity and will throw off the balance of its agro-ecosystems. While each farming region once grew a variety of seeds, many are now limited to the production of crop monocultures. This will lead to the extinction of millions of plant species which will, in turn, increase risks of crop failure. Combined with the pressure of high production costs, WTO free trade policies have created a drastic drop in global produce market prices. For some produce, prices have been cut in half in as little as six years. These price cuts cannot be attributed to increased productivity but, rather, are a function of increased subsidies and increased monopolisation of global seed markets by just a few multinational corporations. For example, when US farmers are given subsidies by the US government, commodity prices are lowered artificially. The South’s small farmers cannot compete with the rock bottom prices of imported produce. India’s farmers are losing an estimated $26 billion per year, a burden that their current state of poverty could never allow them to bear. Indebtedness and the Lack of Credit Availability Although India has been a frontline crusader in the global battle to protect the livelihoods of small farmers, its government’s response on a domestic level has unfortunately been a different story. The government of Karnataka, a southern state, has refused to recognise the link between economic causes (i.e. indebtedness) and farmers suicides. Thus, instead of changing agricultural policies, officials have made unhelpful recommendations suggesting that farmers boost their self-reliance and self-respect. What government officials have seemed to overlook is that self-reliance is an ideal that cannot be achieved under the Karnataka Land Reforms Act that limits farmers’ rights to landholding and leasing. Instead of addressing the root of the problem, the government attributes the cause of farmers suicides to peripheral problems such as adultery and alcoholism. Ignoring the facts will only result in failure to prevent a wave of suicides next growing season. In order for development to be sustainable, it will have to begin in rural areas and, more specifically, in agricultural communities. Compared to international standards, Indian agriculture has experienced slow annual growth. Additionally, non-farmers receive six times more the GDP increase than farmers do. In rural areas where almost a third of the working population is in the agriculture sector, farmers’ earnings are so low that they sometimes cannot even meet minimum needs for their families. Agricultural workers also face difficulty in acquiring bank loans due to high interest rates and the poor financial states of cooperative banks. Without help from state governments and cooperation from commercial and regional banks, farmers are facing a decrease in income share in their regions. In Andhra Pradesh where 18 per cent of bank loans were to go to farmers, their actual share of loans has never exceeded 11 percent. This dearth of credit forces farmers to take loans from rural lenders who charge interest at exorbitant rates (anywhere between 36 and 50%) that would cause the demise of even the largest of corporations. And, while banks complain about bad loans that had been given to farmers, they have yet to recover Rs 1 lakh crore from the corporate sector. Conversely, farmers only owe about Rs 15,000 crore. In Andhra Pradesh, six to 10 farmers commit suicide each day. Research presents a direct relationship between credit availability and agricultural productivity: the accessibility of credit is the most crucial factor in agricultural development. Similarly, agricultural development is an important factor relating to food security, and should be especially important in the country where a third of the world’s 800 million malnourished people go to bed hungry every night. Prosperity Perishing: Deaths in India’s Most Historically Productive Regions Farmers suicides are no longer limited to the drought and poverty stricken areas of the country, though this is the picture the media has managed paint. Now farmers in the most productive agricultural regions such as Karnataka, Punjab, and West Bengal are ending their lives because of their massive indebtedness. In Karnataka 49 suicidal deaths occurred between April and October 2003 in in the drought-prone region of Hassan. Over the same period of time, 22 suicides occurred in Mandya, the state’s ‘sugar bowl,’ 18 occurred in Shimoga, a heavy rainfall district, and 14 occurred in Heveri, a district that receives average rainfall. While comparing regional suicide statistics might seem callous, such comparisons reveal that suicide is not only occurring in areas where low production is caused by drought. Small farmers in all of these regions owe lakhs of rupees because institutional loans, which have fixed interest ceilings of no more than 14 percent, only provide for about 10 percent of their credit needs. The other 90 percent of small to marginal farmers loans comes from private moneylenders who are infamous for constantly harassing their ‘clients’ in order to enjoy heavy profits of the 24-60 percent interest that they charge on their loans. When their crops fail time after time regardless of the money the farmers have invested in fertilizers, pesticides, and bore wells, there is no profit to be seen and no conceivable way to repay their lenders. When the harassment persists many farmers become emotionally fatigued and end their lives in solemn hope that the meagre relief package provided by the government will give their family hope of a better future. In Punjab, the nutrients of the soil are being destroyed by the over-use of pesticides and chemical fertilisers needed to successfully grow the genetically modified seeds. The use of these chemicals gives farmers the false notion that costly inputs will ensure a higher output; when in actuality it only leads to further devastation of the land. This repeated degradation will result in the loss of land productivity thus putting future generations of farmers at even greater risks of poverty and famine. Over 500 farmers in the state have committed suicide by jumping in front of trains, setting themselves on fire, or poisoning themselves. Also, the disintegration of the joint family in Punjab has negatively affected landholding which will lead to decreased earnings and increases in indebtedness. While statistics may show Punjab to be India’s ‘breadbasket,’ claiming that its soils are rich and its five rivers supply abundant water throughout the state, the reality of this image of prosperity is revealed by the increasing number of suicidal deaths among Punjabi farmers. While Punjab was intended to be the paragon of the Green Revolution success story, farmers of the region face an estimated debt of Rs 10,000 crores. Additionally, it is the farmers who have croplands of less than an acre who are facing these inconceivably high debts which range from Rs 1 to 11 lakhs. Though the small farmers constitute the majority of Punjab’s farming community, they only receive 27.02 percent of total agricultural credit. Punjabi farmers accuse State Chief Minister Captain Amrinder Singh of going back on his poll promise to provide Rs. 30 per quintel on crops in three instalments. These payments, which usually amounted to only five to 10 rupees and only occurred in certain areas of the state, have done little to relieve the debts. Promising the peasants help in rectifying their debts had given them hope and backing out of that promise has left them feeling even more helpless than before. In Burdwan, the region of West Bengal commonly called the “rice bowl of the East,” 1,000 farmers ended their lives in 2003. The leading cause of these suicides was the inability of farmers to repay heavy debts while trying to compete with the cheap imports of Southeast Asia. Land reform acts instituted by the Communist Party of India in the late seventies had successfully brought Bengal’s poverty level down from 73 percent in 1973 to 31 percent in 1993. These rural reforms are now suffering because of trade liberalisation policies, putting the region right back in a state of economic distress. Whereas land reform policies served to confiscate surplus land from the rich class and distribute it among the poor, thus giving quasi-landholding rights to sharecroppers; peasants are now so desperate to relieve themselves of debt that they are selling and leasing their land to the rich class. Recently a new rich class of farmers known as the waterlords has emerged as a result of DVC water scarcity and the falling water table. Small farmers have no choice but to purchase overpriced water from the waterlords and, when they cannot afford the price, they are forced to lease them their land. Bengal’s agricultural sector is being slowly penetrated by a capitalist mode of production. Several transnational corporations engaged in food processing are already bidding to purchase vast plots of fecund cropland in the state and, with the state’s current policies, it will be difficult to keep these companies from entering the sector. In the future, small and marginal farmers will be pitted against these TNCs in price competitions that will finish the farmers off. The Suicides of Andhra Pradesh The tragedy of farmers suicides in Andhra Pradesh has been occurring regularly since 1998, hardly a sudden phenomenon. In the past few months, however, farmers of the region have been ending their lives at an alarming rate (six to 10 suicides per day), even after the inauguration of the new State Chief Minister, YSR Reddy, with promises of prosperity and free power for the agricultural sector. Many of the farmers who felt they had no choice but to shift to the intensive attractively marketed GM seeds now face debts caused by unaffordable, spurious inputs such as futile seeds, pesticides, and fertilisers, and dry borewells. Production costs of paddy, groundnut, and cotton in the state are much higher than those of other states, making its farmers uncompetitive in the national market. Although it is commonly agreed that the cost of the seed should never exceed 10 percent of total cost of cultivation, the average groundnut seed costs the farmer almost 40 percent of total cultivation. With little relief from provided government subsidies, this kind of high production cost leaves the average annual income of a farming family in AP at a mere Rs 10,000. Because farmers cannot procure seeds, social unrest has been on the rise. Reports of violence against agricultural officials surfaced this past June because of a poor groundnut seed supply in the region of Rayalseema. The farmers of Rayalseema have been dependant on groundnut crops since the 80s when the government had restricted edible oil imports and subsidised the seeds. Now that import restrictions have been lifted, groundnut prices have crashed and although the government has attempted to supply farmers with enough seeds, there remains a deficit. Also, the government only subsidises 38 percent of seed cost and most indebted farmers cannot even afford the remaining majority. Farmers are left with no choice but to buy the seeds from private traders and large farmers on credit, paying exorbitant interest rates. While subsidies may provide limited assistance to some farmers, growers of cotton and chilli do not enjoy any government subsidies. These farmers buy highly priced seeds and pesticides from private suppliers and, if the seeds fail to germinate, they rarely get compensation. Though YSR Reddy’s administration has attempted to reverse the damage caused by Chandrababu Naidu’s negligent and anti-poor economic reforms, the state’s suicide crisis will only worsen as long as government officials refuse to recognise the harm caused by the industrial farming models which have penetrated the state. These intensive agricultural methods and their focus on GM cash crops has played a severely detrimental role on the sustainable livelihoods of AP’s farmers. Andhra Pradesh’s Vision 2020 document has identified the state’s intention to reduce its number of farmers to 40 percent of the population with no plan of rehabilitating the remaining 30 percent. This decision to exterminate the state’s farmer population is highly lucrative for the government based on the finances that will be handed over by the profit-driven international agribusiness corporations. It is important that the state’s government provides more stable financial support to the farmers. Agriculture can be profitable and ensure food security but it takes scientific, political, and economic dedication. Last Resorts Farmers in all states have been under such extreme distress that they are finding anything they possibly can to sell and make some money. Kidney sales have been a common occurrence among indebted farmers. In Andhra Pradesh, 26 farmers sold their kidneys in 2000. Most of the cases occurred in the Palanadu region where cotton and chilli crops had failed due to heavy droughts and adulterated inputs (sand in the fertilizer, kerosene in the pesticide, and spurious seeds) that were sold to unknowing farmers. One farmer resorted to selling his kidney in 2000 when his chilli crop yield was low and the market price was unprofitable. He travelled to Delhi and, after some medical tests, sold his kidney for 50,000 rupees. Since he needed the money desperately to pay his debts and cover the marriage costs of his two daughters, he didn’t consider the health risks involved with the organ removal. Since he now endures chronic back pains and is unable to lift heavy objects, his wife has become the breadwinner of the family. The farmer can no longer lease land for farming and is paid 30 rupees per day as an agricultural worker when he can find employment. His debts remain at Rs 15,000, not including the 24-30 percent interest rate on his loans. This farmer’s case is common in the region, where the state government and banks have done little to assist those in need. In 2000, State Chief Minister YSR Reddy had stated that suicidal deaths and kidney sales by farmers “clearly show that there is no place left for farmers in the state.” Since YSR’s inauguration on May 14, 2004 over 300 farmers have committed suicide, proving his economic gimmicks to be futile. Suggestions to Stop the Suicides Globalisation, WTO trade policies, and domestic negligence have had a devastating effect on India’s farmers. While nature’s unpredictability has been additionally detrimental to the welfare of farmers in some regions, these are challenges that farmers have been able to use their prowess to overcome in the past. GM crops have converted a once innovative and knowledgeable community into a community that can no longer work with the earth which they know, but is dependent on costly, unnatural inputs with which they are unfamiliar. It is possible for the government to modify its policies in order to conserve the legacy of India’s farmers and put a stop to farmers suicides. Many states currently offer financial relief packages only to the families of deceased farmers who were unable to manage payments on their bank loans. However, it remains that loans taken from private moneylenders are the most difficult for farmers to pay. Since this is the case, over half of the victims’ families who need these relief packages do not qualify for receipt by government standards. The reality of the families’ situations must be examined more closely and compensation should be given accordingly. While some states have attempted to ban exorbitant interest rates implemented by private moneylenders, their effectiveness has been questionable. Usury will continue as long as farmers continue to depend on private loans where there are no written agreements regarding interest ceilings. Farmers must be provided with substantial institutional credit and given an alternative in order to extinguish their tendency to fall prey to the convenience of private moneylenders. In addition, a Crop Insurance Scheme must be carefully implemented so that farmers who are affected by crop failure will be relieved of the subsequent financial burden. Specific attention must be given to cover the lost profits of cash crops such as cotton, sugarcane, and edible oils. A very beneficial biproduct of efforts to aid farmers will be the renewal of the land’s biodiversity. This renewal is crucial because if ecosystems lack natural infrastructures we will soon find ourselves at a resource deficit. Methods of organic farming and integrated pest management should be introduced to eliminate dependency on commodities such as chemical fertilisers, pesticides, and GM seeds. Organic farming methods will also serve to eliminate emerging monocultures and promote strong, diverse agro-ecosystems.Most importantly, agriculture must return to a “farmers first” policy rather than its current bias towards corporations. It is only when this ideal is achieved that farmers will regain control of their own lives: financially and mentally. Denyse Baham

09.07.2008

The Soybean Crop in Uruguay: The Creation of a Power Block

In Uruguay, as in all other countries in the region, the expansion of single-crop agriculture (monoculture) combined with the powerful presence of agri-multinationals, has led to the creation of new power blocks. This in turn creates a policy environment where important decisions are made to facilitate these groups. When compared with its neighbors, Brazil and Argentina, Uruguay has demonstrated a record increase in the use of agricultural land for soybean monoculture. Since 2003, soy land-use has multiplied 15 fold. In this short period, soybeans have displaced traditional crops, such as sunflowers, wheat, and sorghum—accompanied by parallel changes in agricultural practices, soybean monoculture is becoming the rising star in its field. However in Uruguay this is by no means the only change in agriculture since the 2002 financial crisis. As Mexican tycoon Carlos Slim recently put it, "A crisis is an opportunity."1 Because of this crisis, since 2002 fully one-quarter of Uruguay's arable land has passed into foreign ownership. Argentine capital flows are responsible for the largest purchases, now controlling half of all Uruguayan soybean production. Soybeans are by no means the only sector experiencing such changes. Uruguay's most important agricultural sector, the meat industry, has come under the control of Brazilian capital; the same has happened with rice, the country's largest export crop. The Power of Soy In Uruguay's 2001-2002 season there were only 28,900 hectares planted with soybeans. In the current season there are now 450,000 hectares planted, and some think this number could reach a million. To understand how such extreme rapid growth is possible, one only needs to look at Argentina, whose investors in the sector control 54% of soybean cultivation in Uruguayan territory as well. The price of land in Uruguay is half that of Argentine land and in Uruguay there are no export taxes.2 Although the Uruguayan land has lower productivity, the higher taxation imposed recently by the government of President Cristina Fernandez, the excuse for the current conflict with the Argentine farming sector in Argentina, seems destined to increase the agro-industrial wave of investment coming to Uruguay from Argentina, which began in 2003. The River Plate coastal area is Uruguay's premium agricultural land. Soybean cultivation here has displaced cattle ranching for meat production and is now threatening dairy production. Of the 16 million hectares available for farming in Uruguay, 13 million are used for cattle ranching; one million for arable farming and another million are destined for forestry. Cattle ranching has been losing 350,000 hectares each year to expansion of soybean plantation and it is thought that it may fall to nine million hectares (as arable land use will rise to three or four million hectares). In the 1950s the number of hectares of arable land reached 1.6 million hectares, to fall to a minimum of 400,000 hectares in 2001.3 In the current harvest, "six companies, mostly foreign or related to foreign capital, sow approximately 25% of the arable land."4 The "Grobo group" alone (owned by Argentine Gustavo Grobocopatel) has 40,000 hectares planted with soybeans using the company name "Agronegocios del Plata." They're not alone: the "El Tejar" group cultivates 50,000 hectares, half with soybeans; "MSU" (Manuel Santos Uribelarrea) and the "Ceres Tolvas and Calyx Agro" (linked to multinational Dreyfus)—all Argentine capital—combine soybean production with cereals. The price of the land is one of the key factors. Good Argentine land for soybean cultivation costs approximately US$10,000 per hectare; in Uruguay it ranges from $2,000-5,000. However, back in the year 2000, that same land cost only $400 per hectare. For this reason many producers, eager for high gains, decided to rent their land to the soybean pools.5 Landowners leasing for dairy farming are happy to get $70 a hectare; for soybeans they can charge more than $200. Arable land production yields are between six and seven times that of cattle ranching, due to high international soybean prices. With the advent of the soybean, farming has become pure business, managed by "agricultural managers." These managers see no divide between agriculture and finance. In order to provide themselves cover against any possible risks, they take out insurance and fix prices based on the Chicago Board of Trade futures markets. They diversify their client base and the products sown and their plantations are spread geographically across nations and the region as a whole. This is done to ensure that "the [agricultural] business is no riskier than any other financial activity."6 Soybean occupies around 60% of Uruguay's arable farming land, but this percentage continues to grow every year. The sunflower crop, that once represented around 40% of the land sown, has been reduced to 8.5% in 2007 and maize went from 30% to only 11.6%. In 2001, only 7% of Uruguayan arable land was part of operations of more than 1,000 hectares. By 2006 these huge operations already controlled 15% and produced 57% of the total soybean crop, though they represent only 7% of all producers. Put another way, a concentration of only 54 producers represent more than half of the soybean production. Between 2000 and 2005, 47% of the family producers (each with an average of 216 hectares), quit the business. At the other end of the spectrum, the larger agricultural-cattle industrialists went from an average of 1,878 to 3,309 hectares per producer over the same period. Finally, soybean agriculture is not a major employer due to abundant use of herbicides and the complete mechanization of the process. For example, dairy farming employs about 22 workers every 1,000 hectares, cereal agriculture only 10, but soybean needs just 2-5 workers per 1,000 hectares. Only forestry creates fewer jobs than soybean. A Nation for Sale Although the data is not precise, estimates show that in 2000 about 10% of Uruguayan land was in the hands of foreigners.7 Over the last six years, four million hectares, 25% of Uruguay's arable land, came under foreign control.8 In neighboring Brazil for example, only five million hectares are in the hands of foreigners but Brazil has 50 times more arable land than Uruguay. Half a million hectares are occupied by multinational firms in use for forestry. The Finnish company "Botnia" has 160,000 hectares in forestry operating as "Forestal Oriental"; the Spanish group Ence owns 127,000 hectares in the name of "Eufores"; the American Group Weyerhaeuser9 exploits 150,000 and the Swedish Sora Enso bought 45,000 but will need 120,000 when it installs its plant. All together a half million hectares of pine and eucalyptus are in the hands of large foreign corporations. Brazilian firms bought the largest meat refrigeration systems of Uruguay. The "Marfrig" group bought the plants in Colon; "Tacuarembó" bought those at San Jose, resulting in the 40% Brazilian control of meat production. As for rice, we see the same pattern: in 2007, the "Camin" firm (based in the neighboring Brazilian state of Rio Grande do Sul), bought the largest Uruguayan rice firm. The whole chain of rice production (agriculture, storage, and export) is in the hands of Brazilian firms, and Brazil is the major destination of Uruguayan rice production.10 Now foreign investment is eyeing the dairy industry, with the arrival of large investments from both New Zealand and Brazil. The cattle sector is becoming highly concentrated in the hands of foreign capital: 72% of beef processing is in the hands of just 10 refrigeration plants; 88% of pig production is in four plants; and just two plants process 80% of milk products.11 The situation is so serious that the authorities in the Ministry of Livestock, Agriculture, and Fisheries are nervous to speak of the subject, and have done very little to deal with the issue. The parliament approved a law that obliges land-owning joint-stock companies to lose their anonymity. This was done so that in two years' time the landowners will be named and the Uruguayan state can determine the extent of foreign ownership. But, as happens in Brazil, the true owners can hide behind "Uruguayan partners." Even given this loophole, investors in forests and special pension funds, Uruguayan or foreigners, are not obliged to reveal their land assets. However, they will be obliged to prove that they invest in technology and create employment for Uruguayan nationals. Also envisioned are means to prevent foreign ownership in border areas and implement ceilings on foreign investment. Nevertheless, there are two camps in the Uruguayan government: those who believe all investment is positive and those who maintain that it is the state, and not large multinationals, that is responsible for determining how, and in what areas, the country should grow. Serious problems result from soybean agriculture practices. Seed-sowing practices have changed radically. Traditional farming practices, even for large industrial farms, practiced rotation of crops and cow pastures, for the sake of the land. By means of rotation fertility lost during use is naturally restored by animal waste. Unlike other crops, soybean agribusiness uses continuous agriculture practices. The lack of crop rotation means the land has no opportunity to recover. This in turn leads to increased fertilizer and agro-toxin use (insecticides, etc. ...). Continuous agriculture is possible due to the use of a system of no-till sowing, which replaces conventional deep plowing. Direct seeding sows the seeds without first plowing the earth, which has the benefit of reducing the erosion. However, this practice depends on the massive use of chemical herbicides for weed control. It is however, promoted for economic efficiency to avoid rotation with cattle pastures, thereby intensifying land use. According to experts, by not being worked in a conventional manner, and because leftover soybean green matter decomposes quicker than other crops, for six months, the land is bare. This lack of vegetation results in increased erosion from rainfall. For these and other reasons soybean agriculture is one of the crops that most negatively affects the fertility of the land. The Uruguayan minister responsible for cattle ranching, Ernesto Agazzi, has indicated that: "Farming development must be environmentally, economically, and socially viable." He noted that it is possible that: "The miserable hoarding currently in operation to maximize profits using hyper-intensive agriculture is an unsustainable use of national resources," and said "To create a centimeter of land takes a thousand years and to destroy it, merely a moment." He called on producers to take care of the fertility of the soil "as a public resource."12 New Power Block The countries of MERCOSUR have usurped the position of the United States as highest soybean producing region in the world. Argentina, Brazil, Paraguay, and Uruguay (to which Bolivia should be added, due to its high production levels in the department of Santa Cruz), have reached a level of 105 million metric tons annually of soybean production, compared with 87 million in the United States. This change is part of the process of refocusing the economies of the region on the production of primary commodities for export, implementing modern technological developments in agri-business. Put another way, the region is being placed in its position in an international division of labor, as provider of agricultural commodities as feed for factory fed animals in the northern hemisphere. For that reason, the soybean production area has increased by 120% in Latin America between 1990 and 2005. One of the decisive changes that soybean brought to Uruguay is the change in the way the corporate sector operates. There was a power shift in the chain of production from the growers to the grain buyers, who in turn became the main source of financing.13 To a large extent this explains the role of the large multinationals and the concentration of production, leading to the fact that agriculture has now become a speculative industry. Another relevant change is the degree of industrial processing of the region's soybean crop. Most countries export their soybean crop in the form of raw beans (unprocessed), with the notable exception of Argentina. For example in 2007, Brazil processed only 52%, but Argentina processed 71% of its production into soybean flours and oils. Uruguay lies on the other end of the spectrum: only processing 5%, and exporting 95% as raw soybeans.14 Obviously raw bean exports generate very few jobs. Argentina raised taxes on soybean and sunflower exports to foment grain production, creating subsidies. In some aspects the Argentine national policies favor the creation of jobs, although the Argentine policy lacks any policies for redistribution of wealth. Instead Argentine policy is limited to favoring large production and export groups and for soy flour and oil, with whom the government maintains a solid alliance. It is interesting to note that although the regional governments differ somewhat in their policies, the results are the same, always benefiting the same interests. In Brazilian grain/bean processing, 50% is undertaken by four companies; the first three are U.S.: Bunge, Archer Daniels Midland Group (ADM), and Cargill. In Argentina, just three companies control 50%; of them two are U.S.: Bunge and Cargill, and the third Argentine, Vicentín.15 The industrial production is in the same hands, and highly concentrated, as is commercialization of these products. Back in Uruguay, where, as we noted before, the soybean industry chose not to industrialize, we see that the concentration of the exporting groups is even greater than those of its neighbors. The five main corporations control 77% of the exports. First is ADM, with 21.5% of the soybean exports. In 1996, the Department of Justice of the United States applied the largest antitrust criminal fine in the history of the country, ($100 million dollars) on ADM for their part in the lysine and citric acid cartel. In second place is Cargill, with 18.6%. Next come three Argentine groups: "Agronegocios del Plata" of the Grobo group, controlling 15%; followed of "Peréz Companc16 with 11%; and in fifth place a subsidiary of Dreyfus, Uruagri, with 10.6%. All told: two American multinationals control 40% of the Uruguayan exports of soybean, and three Argentine corporations another 37%. In order to complete the panorama, it should be noted that Uruguay is an importer of flours, oils, and industrial derivatives of the soybean. It also imports all that is required for soybean cultivation, from seeds to agrochemicals such as fertilizer. Put simply, Uruguay exports raw grains and imports their industrial byproducts. These are the new factors of power in Uruguay and in the region. The progressive governments of Luiz Inácio Lula da Silva, Cristina Fernández, and Tabaré Vázquez, support this new power block formed by local elites tied into agri-business and the multinationals in the sector. Commenting on the recent resignation of the Lula administration's environment minister, Marina Silva, the MST (Brazilian Landless Peasants' Movement), indicated that her resignation should be chalked up as a victory for agri-business. "Agri-business is today the largest protagonist of the great destruction of the Amazon Basin," using "the state apparatus for their own private aims." By employing tactics such as large illegal land occupations by owners of large estates, the land is de-forested for wood, and cattle and soybean soon follow. "This process is lead by financial capital and the huge multinationals of agri-business like Cargill, Bunge, Monsanto, Syngenta, Stora Enso, and Aracruz," says the MST. The unholy alliance of Southern Cone governments with agri-business is, as they say in the River Plate region, "bread now, hunger for tomorrow." In the region this saying applies in both senses. In literal terms, as has been repeatedly stated, monocultures are anathema to food sovereignty. Secondly, because the new blocks of power that these governments help to support are now beginning to ask for more than those same governments can give them without losing their popular support. The "lock out" of the Argentine power groups is a small taste of things to come. End Notes El País (España), June 8, 2008. Argentina has measures in place to control and tax certain exports. The export rights ("derechos de exportación") have been in place for a long time; their taxation levels ("retenciones") have risen sharply since the financial crisis of 2002 and are now the reason for unrest in Argentina. "El País agropecuario", ob. Cit. Idem. A pool is a financial "pool" of people or organizations who provide capital to rent land for soybean production; they provide all services and the renter is simply paid a fee per sow-to-harvest period. "Soja transgénica y sus impactos en Uruguay," ob. cit. p. 45. Idem, p. 178. "Los dueños de Uruguay" (Uruguay's owners), ob. cit. http://maps.weyerhaeuser.com/maps/displayT2.asp?sectorID=null&mapID=24&businessID=null&locID= Idem. "Soja transgénica y sus impactos en Uruguay" (Transgenic soybeans and their impact in Uruguay), p. 142. Raúl Zibechi, ob. cit. "Soja transgénica y sus impactos en Uruguay," p. 25. Idem, p. 159. Idem, p. 163. http://es.wikipedia.org/wiki/Gregorio_P%C3%A9rez_Companc. Raúl Zibechi is international analyst for Brecha of Montevideo, Uruguay, lecturer and investigator on social movements at the Multiversidad, and adviser to several social groups. He is a monthly collaborator with the Americas Policy Program (http:///). Raúl Zibechi

30.06.2008

Small Farmers And The Doha Round: Lessons From Mexico's NAFTA Experience

The paper is divided into three parts: Section I briefly introduces how developing countries have sought to protect the interests of small and marginal farmers in the on-going Doha round and the current state of play in those negotiations. Section II discuses the integration of Mexican agriculture in global markets under NAFTA and why the brunt of the adjustment was borne by small and marginal farmers. And finally, Section III proposes an alternate model of agricultural modernization centered on small-farmers and why for developing countries the stakes are much higher than for Mexico. I: Introduction - Special Products and the Special Safeguard Mechanism At the heart of addressing livelihood concerns of small farmers in developing countries in the on-going Doha round of WTO negotiations is the designation of Special Products (SPs) and Special Safeguard Mechanisms (SSM) in the Agreement on Agriculture. Developing countries have argued that SPs - products linked to food security and livelihood security - should either be subject to no tariffs or small reductions. An SSM would allow a temporary increase of relevant tariffs in response to a pre-specified increase in import volumes or decline in price levels. In designing the use of both these instruments the G33 and other developing country groupings in the WTO have sought to amplify the policy space available to developing countries in dealing with livelihood concerns while continuing to integrate into the global economy. The reason for framing livelihood issues in this manner is the understanding that small and marginal farmers, at least in most developing countries including India, lead an exceedingly precarious economic existence and are not positioned to compete effectively in relatively open agricultural markets, particularly given the levels of subsidies enjoyed by agricultural producers in developed countries. Therefore, first, in a situation where reasonable opportunities of migrating out of agriculture are limited even in rapidly growing economies, forcing farmers off their land through import competition is both economically and politically unsustainable. Second, given the above, the flexibilities sought in the use of instruments have to be put in the context of the seriously limited policy space available to developing countries in helping small and marginal farmers cope with import competition, given that direct production subsidies of various sorts are WTO-illegal. In this light, Crawford Falconer's new negotiating text for the Agreement on Agriculture makes disappointing reading. By offering that the SSM be activated if prices decline by 30% or more and far fewer SPs than the G33 have asked for[1], the text makes a mockery of livelihood concerns of small farmers that is at the heart of the developing country and Indian position. Little wonder then that India has said that the new text is "totally unacceptable"[2]. More specifically, the G33 statement 26th May 2008 commenting on the draft text says "that specific fundamental elements of SPs & SSM have not been incorporated."[3] Equally pointedly, the statement of the Small Vulnerable Economies Group on the draft text notes, among other things, that as far as the SSM is concerned, "lamentably the text is very far from reflecting a possible agreement, because the dispositions contained therein turn it into a mechanism without utility for the developing countries."[4] II: Mexico - NAFTA and agricultural modernisation For anybody who doubts that, without safeguards, the brunt of adjustment costs of integrating relatively low-productivity agriculture into international markets is borne by small and marginal farmers, a close look at Mexico's post-NAFTA experience would be salutary. Even Felipe Calderon, Mexico's President and an acolyte of neoliberal economics, has had to acknowledge that Mexico, at least in part as a result of agriculture's integration into global markets, is faced with an unprecedented agrarian crisis. At a recent press conference in May when the German Chancellor Angela Merkel was visiting Mexico, he said that high levels of subsidies available to European and US farmers had a debilitating effect on the competitiveness of Mexican farmers, resulting in a large number of his compatriots migrating to the US "abandoning land, because it was simply impossible to compete with subsidies in other countries"[5]. To be sure all of Mexican agriculture's current problems cannot be ascribed to NAFTA. They go back at least to the early 1980s, when the "sowing petroleum" strategy – using oil revenues and public investment to subsidise agricultural growth and achievement of food-security - collapsed on the back of sharply declining oil prices and the subsequent debt crisis of 1982[6]. In the macroeconomic retrenchment that followed agriculture suffered sharp cuts in public investment and subsidy levels. But it was Mexico's accession into GATT in 1986 that made possible a new strategy based on global economic integration. As a result in 1989, during Carlos Salinas's presidency, a strategy of agricultural 'modernization', centered around global integration, private investment and markets, was put in place. Salinas amended the Mexican Constitution to make it easier to buy and sell communally owned land, substantially reduced the role of the state in rural economic activity including the privatization of state-owned enterprises in distribution and storage and moved relative prices in favour of agricultural exports. This of course has to situated within the overall swing in Mexican economic policy making that took place in the late 1980s towards market fundamentalism. The hope was that secure property rights and a market-led economy would ensure a private investment driven revival of agricultural growth in line with comparative advantage[7]. NAFTA, which entered into force in 1994, essentially built on all of the above institutional changes and sought to lock-in agricultural trade among NAFTA partners in terms of comparative advantage. Vis-à-vis the USA (and Canada), Mexico was at a comparative dis-advantage in grains (corn, wheat, rice), oilseeds, cattle rearing and forestry. It has a comparative advantage in fruits, vegetables sugar cane and coffee[8]. It was also felt that as a result of relatively backward and low-productivity agriculture, the share of agriculture and allied sectors in its workforce - in 1991 it accounted for 27% - was much larger than was warranted given its level of development. Comparative advantage driven modernization of agriculture therefore, it was hoped, would also help shift labour towards higher productivity non-agrarian occupations[9]. The hold of market fundamentalism was so strong among Mexico's business and economic policy making elites that market driven comparative advantage was an article of faith. There was very little discussion of the fact that what is important for growth is not static but dynamic comparative advantage. That markets left to themselves, do not automatically deliver dynamic comparative advantage, which depends upon the evolution of institutions and technological and learning capabilities[10]. That successful development experience is also the successful shaping of the evolution of dynamic comparative advantage through purposive public policy[11]. Be that as it may, as a result of NAFTA therefore, in agriculture and related trade, Mexico imports basic foodstuffs – corn, wheat, rice, soya, beef, pork, chicken meat, milk – and exports tomatoes, peppers, fruits, vegetables and beef cattle. Among agro-based products beer, tequila and canned fruits and vegetables are important. Some of the outcomes that designers of NAFTA had hoped for have come about. Agricultural exports have grown three-fold since the agreement and Mexico's agricultural exports are today much more diversified towards higher value products. And before the current spike in the price of foodgrains, agricultural exports had finally begun growing faster than imports, narrowing the agricultural trade deficit. Equally importantly, there has been improvements in agricultural productivity. As a result, some economists have argued that NAFTA has been good for Mexican agriculture[12]. Despite these improvements, agriculture overall has not performed very well. Not only has it, in the post-NAFTA period, grown slower then GDP, but equally importantly, growth has decelerated as compared with the decade earlier[13]. Whatever be the gains that have been achieved, and as we have seen, there have been some, the very nature of these gains has adversely affected small farmers. And the reasons are fairly straightforward[14]. 12% of Mexico's arable land is devoted to agriculture and 54% to cattle ranching. Of the cultivated land, 71% is devoted to grains and oilseeds and only 9% to fruits and vegetables. Therefore the bulk of cultivated area is adversely affected by import competition. 85% of Mexico's farmers are small and marginal and grow largely grains and oilseeds. About 16% of farmers grow fruits and vegetables and most of these are medium and large farmers, largely because the investment required for growing fruits and vegetables is beyond the reach of most small-farmers. Therefore it is small farmers that have borne the brunt of import competition. The vacuum created by retreat of the Mexican state from agriculture was filled by large US and Mexican agribusiness. In the post-NAFTA period the bulk of FDI in agricultural sector has been in the agri-business and agro-processing rather than agriculture[15]. As a result a few large trans-national agribusiness firms, mostly US and Mexican, dominate storage, flour milling, grain trading[16] and meat processing. Put differently they dominate the intermediation chain that takes crop or cattle and makes it a marketable commodity. Transnational agribusiness has used this dominant position and a process of vertical and horizontal integration to establish an overwhelming presence in the market for wheat, rice, corn, soya, poultry, meat, pork and eggs. Transnational agri-business tends to have much closer links with larger farmers and producers, who have better access to land, irrigation and credit, all of which are scarce commodities for small farmers[17], particularly after the withdrawal of the state. And the little state assistance that remains tends to inordinately favour larger farmers. Little wonder then that it is the larger farmers that have taken advantage of global integration and changing cropping patterns and now account for a larger proportion of domestic markets. Alongside this, as hoped for by designers of NAFTA, has been 'modernisation' - a sharp decline in the share of agriculture and allied sectors in the workforce. From nearly 27% in 1991 it declined to slightly less than 15% in 2006, losing more than 2 million jobs[18]. Again small and marginal farmers and agricultural labour bore the brunt, as evidenced by very sharp decline in the number of rural households. According to a study by Jose Romero and Alicia Puyana carried out for the federal government of Mexico, between 1992 and 2002, the number of agricultural households fell an astounding 75% - from 2.3 million to 575, 000[19]. There has been a significant increase in migration out of rural areas as livelihoods are lost and farms have been abandoned. The hope was that this migration out of low-productivity agriculture would be absorbed into higher-productivity non-agrarian urban employment. But anemic employment growth in the post-NAFTA period, particularly in manufacturing[20], put paid to that. And what little employment there has been has largely been in the informal sector. As a result there has been a change in the pattern of rural out-migration. In the 1980s the likelihood of migrating to urban Mexico was higher than that of migrating to the USA. Today, as a result of anemic employment growth, the likelihood of migrating to the USA is significantly higher[21]. The World Bank estimates that between 2000-05, 400,000 Mexicans migrated to the USA annually[22]. According to other estimates this number is closer to 500,000[23]. 300,000 of these are from rural Mexico and again mostly small, marginal farmers and agricultural labour[24]. To put this in context between 1994 and 2004, Mexico's labour force grew by approximately 1 million annually[25]. So effectively today Mexico imports food from the USA and exports farmers and agricultural labour. Again to lay all the problems of Mexican agriculture at NAFTA's door would be incorrect[26], though few would disagree that it has been a contributing factor. The problems facing Mexican agriculture are the result of systematic underinvestment in agriculture from the early 1980s, way before NAFTA was signed[27]. But the reason why NAFTA complicates matters is because it is a multilateral agreement that essentially protected rights of big capital (investor protection) and enhanced its mobility (within North America)[28] to the detriment of other factors. In agriculture, it essentially protected the interests of large Mexican and US agri-business and adversely affected the ability of small and marginal farmers in Mexico to cope with import competition[29]. And this because their interests were not represented at the negotiating table[30]. It had been hoped that NAFTA would lead to an increase in investment in Mexican agriculture, but that did not materialize. A sector that accounts for more than 5% of GDP accounts for less than 1% of its investment and the underinvestment noted earlier has continued in the post-NAFTA period. And what investment there has been, as we have seen, marginalized small farmers even further by reducing their access to the intermediation chain and therefore their ability to compete in the market. It is not just the fact that Mexico's small and marginal farmers have borne the brunt of the adjustment of Mexican agriculture's integration into global markets. The spike in food prices in the last couple of years has put enormous pressure on its BOP and the agricultural trade deficit that had begun narrowing has widened sharply, putting in sharp focus issues of food security. According to the Mexico's Inter-Institutional Working Group on Foreign Trade the import bill for cereals more than doubled in the first trimester of 2008 as compared with the same period last year[31]. Even though no where as sharp as the increase in the cereal import bill, price increases has meant that import costs of oilseeds, milk, eggs, meat and meat products has increased significantly. At the same time prices for most of Mexico's agricultural exports such as fruits and vegetables have either stagnated or declined. In many ways therefore, despite the strides in agricultural exports, Mexico's NAFTA based transnational agri-business driven agricultural strategy must be deemed a failure. Food production has stagnated, cultivated area under food production has declined and the underinvestment that has characterized Mexican agriculture in the 1980s has not been reversed. The problem of food security has reappeared and because of large migration of farmers and farm labour to USA, depleting the rural countryside of the human resources it requires for an agrarian revival, even if public policy chose to focus on it. III: An alternate modernisation model If the declining share of agriculture in the workforce alongside increasing per capita incomes is one of the most robust stylizations in development economics, it does not follow, as the experience of Japan, South Korea and Taiwan tells us, that the brunt of this adjustment necessarily has to be borne by small farmers. At issue is the nature of the agricultural modernization model – should it be based on land alienation driven by large farmer and transnational agri-business interests, where both these dominate the rural landscape; or will it be a model based on mixed income households where small farmers are competitive because of achieving economies of scale and scope in the purchase of inputs and in processing, storing, marketing and distributing their crops and with a significant proportion of household labour involved in non-farm activity as well. The key therefore lies in intermediating between the small farmer and the market in a way that enhances both his/her profitability and market opportunities. As Alicia Puyana commenting on the stagnation in Mexico's grain production and the widening gap between USA and Mexico notes "To make domestic products competitive, it is not sufficient to open markets to foreign competition."[32] What development experience does teach us, and Mexico is a good example, is that the market left to itself will not invest in intermediation infrastructure for small farmers – credit, storage, marketing, input purchase and extension. Wherever such investment has happened it has been through co-operative mechanisms or public sector involvement or a mix of both. India's dairy industry and the Amul brand are very good examples. Therefore both these – large farmer and trans-national agri-business centered and small farmer and co-operative agri-business centered - are feasible and extant models, even though most people (and most economists) associate modernization with the former. As Dr. M.S. Swaminathan, architect of India's green-revolution and former Chair of the National Commission of Farmers, has repeatedly argued, India and other developing countries need a second green revolution but this time centered not around land alienation and large farmers but land conservation and small-farmers. He argues that the energy intensive agronomic practices of the first green revolution should be eschewed in favour of a small-farmer based green revolution where traditional methods of soil health enhancement and pest management should be refined and blended with modern technology[33]. A small-farmer centered green revolution alongside a co-operative and/or public sector driven investment in market intermediation infrastructure – credit, extension, input-purchase, storage, trading, marketing, and insurance – would ensure that small farmers are both profitable and productive. This strategy would, as he argues, address concerns about food-security, livelihood security, environmental conservation and sustainable growth. Therefore one part of the solution to the problem of food-security and sustainable growth is in the hands of 450 million small and marginal farmers (globally) that neoliberal economic policy has tried so hard to alienate from their land. And in addition if we are able to put in place a strategy of maximising non-agrarian employment growth, then rural-to-urban migration, which is necessary concomitant of per capita income growth, would be a matter of choice and not compulsion. It is useful to remember that in 1991 – prior to the advent of NAFTA - agriculture and allied activities only accounted for 27% of Mexico's labour force. In other words, the occupational structure transition that is characteristic of increasing per capita incomes was already underway. For most developing countries including India however, even today agriculture and allied activities account for more than 50% of their workforce. Therefore an agricultural modernization programme that does not take into account the needs of small and marginal farmers and agricultural labour would not only economically but equally importantly, politically, unsustainable. Equally, it is important to remember that 95 percent of the world small and marginal farmers live in poor, developing countries and that 75% of the world's poor survive on agriculture. For developing countries therefore the key to both food security and livelihood security is the ability to protect small and marginal farmers from unfair competition and the policy space within which develop an agricultural policy centered around small-farmers and the maximization of employment growth. Therefore whether or not Mexico's current agrarian crisis can be blamed entirely in NAFTA is beside the point. What it does suggest however is that when economies asymmetrically situated in terms of productivity integrate, then left to the market, the burden of adjustment is borne by agents with the lowest productivity – in this instance small farmers and agricultural labour in Mexico. This effect gets compounded when agents in the higher productivity economies are subsidized to maintain income levels (in this instance farmers in USA and Canada). But as we have seen integration and modernization does not have to be like this. Economies should be allowed to choose the pace and pattern of integration and modernisation, defined as sustained and sustainable increase in per capita incomes, depending upon their institutional structures and historical trajectories. Clearly one size does not fit all. Therefore if developing countries are not given the policy space within which to protect small and marginal farmers and modernize their agriculture, they should walk away from Doha. Most in any case do not even have Mexico's option of exporting farmers and farm labour to USA. (Mritiunjoy Mohanty is an Assistant Professor of Economics at the Indian Institute of Management Calcutta (IIM Calcutta) in Kolkata. He is currently on leave and a Visiting Researcher with Institut d'études internationales de Montréal (IEIM) of the Université du Québec à Montréal (UQAM), Montreal, Canada. He is grateful to Maurice Dufour for comments on earlier versions. He can reached at mritiunjoy@gmail.com) [1] See 'No trade deal without livelihood concerns: India', Hindu News Update Service, 20th May 2008. Available at http://www.hinduonnet.com/thehindu/holnus/001200805202023.htm [2] See 'No trade deal without livelihood concerns: India', Hindu News Update Service, 20th May 2008. [3] See page 3 of the G-33 Statement: COA-SS Open Ended, 26th May 2008. Available athttp://www.tradeobservatory.org/library.cfm?refID=102829 [4] See 'Intervención de República Dominicana en nombre Del Grupo de las Economías Pequeñas, Vulnerables', Reunión Informal del Comité de Agricultura en Sesión Especial, 26th May 2008. Translation mine. Available at http://www.tradeobservatory.org/library.cfm?refID=102830 [5] See 'El país paga un "costo muy alto" para evitar aumentos de precios', Angélica Enciso, La Jornada, 20th May 2008. Translation mine. Available at http://www.jornada.unam.mx/2008/05/20/index.php?section=economia&article=021n1eco [6] See for example Mohanty, M., (1990) 'Structural Characteristics of the Mexican Economy, 1942-82', Social Scientist, Vol. 18, No. 5, May, pp 42-64 [7] See the discussion in section III of Yúnez-Naude, A., (2002) "Lessons from NAFTA: The Case of Mexico's Agricultural Sector." Background paper for D. Lederman, W.F. Maloney and L.Serven, (2004), Lessons from NAFTA for Latin America and the Caribbean, The World Bank, April [8] See for example Appendini, K., (1994) 'Agriculture and Farmers within NAFTA: A Mexican Perspective' in V. Bulmer-Thomas, N. Craske, and M. Serrano (eds.), Mexico and the North American Free Trade Agreement: Who Will Benefit?, St. Martins Press, New York. [9] See de Ita, A., (2008), 'Fourteen Years of NAFTA and the Tortilla Crisis', Americas Program Special Report, Center for International Policy. Available at http://americas.irc-online.org/am/4879 [10] On the importance of dynamic comparative advantage and the role of policy in shaping it see Chapter 6 in Krugman, P. and M. Obstfeld, (2006), International Economics : Theory and Policy, 7th Edition, Addison-Wesley [11] See for example Chang, Ha-Joon, (2002), Kicking Away the Ladder: Development Strategy in Historical Perspective, Anthem Press, London and New York [12] See for example Yúnez-Naude (2002). Also see Rosenzweig, A., (2005), El debate sobre el sector agropecuario mexicano en el Tratado de Libre Comercio de América del Norte, Serie Estudios y Perspectivas #30, Unidad Agricola, Cepal, Mexico; and Hufbauer, G.C. and J. J. Schott, (2005) NAFTA Revisited: Achievements and Challenges, Institute for International Economics, Washington, DC. [13] See de Ita (2008), 'Fourteen Years of NAFTA and the Tortilla Crisis'. [14] This paragraph is based on de Ita (2008), 'Fourteen Years of NAFTA and the Tortilla Crisis'. [15] Carpentier, C.L., (2001), 'Trade Liberalization Impacts of Agriculture: Predicted vs. realized' Working Paper, North American Commission for Environmental Cooperation [16] On the concentration of agri-business in Mexico see pp 71-72 in Rosenzweig (2005). [17] On the problems facing small and marginal farmers see Romero, J. and A. Puyana, (2004), Diez años con el TLCAN, las experiencias del sector agropecuario mexicano, El Colegio de México, Mexico. See also the discussion on access to credit on pp 63-65 in Rosenzweig (2005). [18] See de Ita (2008). Also see Polaski, S., (2006), The Employment Consequences of NAFTA, Testimony submitted to the Senate subcommittee on International Trade of the Committee on Finance [19] See Romero and Puyana, (2004), Diez años con el TLCAN, las experiencias del sector agropecuario mexicano. [20] See Polaski (2006), The Employment Consequences of NAFTA [21] See Yúnez-Naude, A., and J.E. Taylor (n.d.) Los impactos del TLCAN en la emigración rural, Folletín informativo No. 2, PRECESAM, El Colegio de Mexico. Available at http://precesam.colmex.mx/Folletines/Folletin%20No.%202.htm [22] 'México, el mayor expulsor de migrantes del planeta, dice el BM' Roberto Gonzalez Amador, La Jornada, 16th April 2007. Available at http://www.jornada.unam.mx/2007/04/16/index.php?section=politica&article=003n1pol [23] See Spieldoch, A., (2008) 'NAFTA Takes the Political Spotlight: It's about time', 17th March, Commentary, IATP Observatory. Available at http://www.iatp.org/iatp/commentaries.cfm?refID=102007 [24] See 'Desempleo, migración y escasez' 26th December 2007, La Jornada. Available at http://www.jornada.unam.mx/2007/12/26/index.php?section=politica&article=003n2pol [25] See Polaski (2006), The Employment Consequences of NAFTA [26] See Romero and Puyana, (2004), Diez años con el TLCAN, las experiencias del sector agropecuario mexicano [27] See Romero and Puyana, (2004), Diez años con el TLCAN, las experiencias del sector agropecuario mexicano [28] See for example McDonald, M., (1996) Yankee Doodle Dandy: Brian Mulroney & the American Agenda, Stoddart Publishing, Toronto; and MacArthur, J.R., (2001), The Selling of "Free Trade" - NAFTA, Washington, and the Subversion of American Democracy, University of California Press, Berkeley, California. [29] See Appendini (1994), 'Agriculture and Farmers within NAFTA: A Mexican Perspective' [30] See de Ita (2008). [31] See 'Subieron 102% importaciones de cereales entre enero y marzo' Juan Antonio Zúñiga, La Jornada, 20th May 2008. Available at http://www.jornada.unam.mx/2008/05/20/index.php?section=economia&article=020n1eco [32] Quoted in 'El agro mexicano llega polarizado y mermado al último tramo del TLCAN' Miriam Posadas y Matilde Pérez , La Jornada, 29th December 2007. Translation mine. Available at http://www.jornada.unam.mx/2007/12/29/index.php?section=politica&article=005n1pol [33] See 'Global Food Crisis and Indian Response', M.S. Swaminathan, The Hindu, 2nd June 2008. Available at http://www.hindu.com/2008/06/02/stories/2008060255061000.htm Mritiunjoy Mohanty

27.06.2008

Will the spike in food prices lead countries to change the way they handle food and agricultural policy?

Will the spike in food prices lead countries to change the way they handle food and agricultural policy? In terms of providing food aid and development assistance for Africa and a few other poor places, yes. In terms of domestic agriculture, biofuels, and trade policy for richer countries, no. Anti-hunger activists and government officials in some countries had been hoping that the three-day confab here with the long-winded name—the United Nations High-Level Conference on World Food Security and the Challenges of Climate Change and Bioenergy—would result in at least three outcomes: massive commitments of money for food aid and development assistance; a U.N. position opposing corn-based ethanol; and a strong statement on the export bans that some developing nations have put on rice and other staples to keep prices low in their own countries. But the conference had been planned a year ago by the U.N. Food and Agriculture Organization as an event to discuss climate change and biofuels issues long-term. When food prices soared, the meeting became a de facto crisis summit that attracted leaders ranging from French President Nicolas Sarkozy and U.S. Agriculture Secretary Ed Schafer to Iranian President Mahmoud Ahmadinejad and more than 900 journalists. Perhaps expectations rose too high. Over the three days, the attendees—they were not delegates, there were no votes, and there were no calls for pledges of money—promised to provide food or cash for hungry people hit hard by the high food prices and to help bring African farmers into the 21st century. But the matter of greatest discussion was a “comprehensive framework for action” paper that is to serve as a guide “to address the food crisis, to meet immediate needs, and [to] contribute to sustainable food security.” The framework was written by a task force composed of the heads of the U.N. food agencies, the World Bank, the International Monetary Fund, and the World Trade Organization. For some countries, including the United States, keeping certain language out of that paper became as important as what would go into it. The result was a document that did not take a tough stance on either biofuels or the export bans. The world leaders here also didn’t always agree on the nature of the crisis. In his opening statement, U.N. Secretary-General Ban Ki-moon said, “Food production needs to rise by 50 percent by the year 2030 to meet the rising demand.” But it seemed clear from most of the discussions that the current crisis is more about food prices, not availability. Josette Sheeran, a former Bush administration official who is executive director of the U.N. World Food Program, said several times that she had been in marketplaces where there was food but people had no money to buy it. In some countries, Sheeran said, the WFP has begun providing vouchers that are much like U.S. food stamps. As the conference opened, the Saudi Arabians gave Sheeran the last of the $775 million she needs to operate WFP programs this year in the face of vastly higher food prices. Sheeran also praised the Canadians for giving her cash, which will allow her to issue more food vouchers. But she noted that when she does need food, she still has to go to the United States, the European Union, Canada, and Australia to buy it. Those countries are the big producers and, unlike some developing nations, have not imposed export bans. That position takes some of the heat off the United States, which is continuing its practice of requiring that its WFP donations be used almost exclusively to buy U.S.-grown food. Food and Agriculture Organization Director General Jacques Diouf said that the developing world needs $30 billion annually to eradicate hunger and that it was “incomprehensible” that $11 billion to $12 billion in U.S. ethanol subsidies were diverting 100 million tons of cereals from human consumption “mostly to satisfy a thirst for fuels for vehicles.” But Schafer, E.U. officials, and Brazilian President Luiz Inacio Lula da Silva all defended biofuels vigorously, if for different reasons. Schafer emphasized that biofuels can produce energy in rural areas and bring prosperity. Lula, having decided that “the sugarcane Brazil uses to produce ethanol is not food,” declared, “I am not in favor of producing ethanol from corn or other food crops. I doubt that anyone would go hungry to fill up their car’s fuel tank.” National Journal

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