March 26th, 2014

What is Food Security? Part III: Putting It into Practice and a Look to the Future

Posted at 1:00 AM ET

peter_book_-smaller-hsPeter Book, Head of Agriculture, Asia Pacific

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Putting it into practice

In several Asian countries there are already examples of attempts to alleviate the physical, social and economic factors that hamper food security.

China in particular is rapidly developing a sophisticated agriculture insurance system with evidence of a number of different risk transfer instruments:

• Individual farmers have access to individual farm indemnity and area yield index insurance that is changing the make-up of farming. Farmers are turning to crops that suit their geographic areas and their climates and are rapidly adopting improved production techniques as they embrace insurance as a means to limit the risks of crop failure.

• Pig production is being encouraged and promoted by transferring off farm the risk of large swings in feed prices versus pig prices through the use of a gross margin style insurance product based on published corn and pig prices.

• Manufacturers are offering forward contracts to farmers to promote planting of certain crops and arranging insurance on farmers’ behalves against crop failure.

• Both central and provincial governments are offering targeted subsidies that differ based on the specific type of farming or crop types. The stated goal being to increase production and alleviate rural poverty.

Given its relative economic health it is not surprising that China has to date not deemed it necessary to look at central or provincial government level supply shock or post-loss risk financing solutions. However, other countries in the region have, and are expected to continue to do so.

To the future

The rapidly changing faces of Asia and other developing regions and their increasingly affluent populations will place increasing demands on agriculture. They will likely struggle with competing demands for land from mining, urban sprawl and conservation and with other industries for inputs such as water and chemicals. These demands, coupled with the demand for feed stocks for production of alternative fuels puts increasing pressure on the agricultural industry to produce a sufficient food supply.

It is essential that every effort be made to allow agriculture to achieve the optimum level of production of the optimum mix of food types with the optimum resilience to shocks.

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