Food and Agricultural

Policy

Introduction
 Chapter One

Introduction to Food Security and

Agricultural Policy

Introduction
1.1 Foundation, Definition and dimensions food security

Concept of Policy
 Policy is a guiding principle
 It is a deliberate plan of action to guide decisions
and achieve rational outcome(s).
 The term may apply to government, private sector
organizations and groups, and individuals.
 Presidential executive orders, corporate privacy
policies, and parliamentary rules of order are all
 For the purpose of this course the scope of policy
limited to public (government) policy
 From Government point of view, policy is the course
of action chosen by government towards an aspect of
the economy.
 This includes the goals that the government seeks to
achieve, and the choice of methods to pursue those
goals
 1.2. Agricultural and food policy

 Principles that guide government programmes that influence

 production,
 the resources utilized in production,
 markets for commodities and food products,
 food consumption and the livelihoods of rural people

and famers’
 Need to consider, economic policy, foreign policy and

environmental policy
 1.3. Goals of Agricultural Policy

 Currently, agricultural policy is a critical element in

determining the rate and pattern of economic growth.
 One set of policies (investment in education,
health and sanitary facilities, and transportation
infrastructure) has a broad impact on agricultural
sector productivity.
 In general, economists, policymakers, and
development institutions have reached a consensus
 A second set of policies affects particular agricultural
commodities or techniques of production.
 These commodity-specific policies include taxes,
subsidies, and quantitative controls on particular outputs
and inputs, and policies that affect the macro prices
(interest rates, wage rates, and exchange rates).
 For this set of policies, little consensus has emerged on
appropriate levels of use
 Generally, Agricultural policy goals-specific includes:-
 Expanding farm production
 Supporting and stabilizing
 Farm prices and incomes.
 Expanding agricultural exports.
 Adjustment of farm production to market needs.
 Resource conservation and preservation
 Family farm survival and Multifunctionality.
 1.3. Rationale of Agricultural policy

Governments in developing countries use agricultural

policies to address a wide range of objectives, Among
which
 combating poverty,
 improving agricultural productivity,
 raising farm household incomes,
 reducing hunger, increasing food security,
 promoting sustainable resource use, and
 promoting gender equality are often paramount.
 While high income countries may have similar
objectives, the scale of the challenge may be of a
higher order in low income countries.
 In addition to this in those high income countries, the
relative priorities may differ.
 Faced with these diverse objectives, and with
differing structural circumstances and constraints,
governments seek to choose the most appropriate
instruments (policies).
 Therefore, rationales for Agricultural policy
intervention include:
 Accelerate the rate of income growth
 Correction of market failures
 Promotion of non efficiency objectives
 A. Accelerate the rate of income growth

 The first reason that governments impose policies on

their agricultural sector is the belief that intervention
can accelerate the rate of income growth
 Investment policies on the provision of public goods,
such as the research and development of new
technologies and infrastructural development (roads,
schools, and health facilities) are examples of public
sector interventions essential for increased economic
activity.
 Sometimes, these investments will not be made by
the private sector.
 Private investors may be unable to capture the full
benefit from investment in public goods because it is
impossible or too costly to exclude those who do not
pay for services created.
 In other instances, consumption by one consumer
does not reduce the availability of the good or service
 Consumers therefore avoid declaring their willingness
to pay for the good or service, and a market does not
form.
 Finally, capital requirements of the investment might
exceed the private sector's capacity to mobilize
necessary financial resources.
 For most of these investments, the public sector has
the potential to recover the costs of intervention
through user fees or through taxation of the
 B. Correction of market failures

 The correction of market failures represents a

second rationale for government intervention in the
agricultural sector.
 If market imperfections are present, the prices of
goods or services will not reflect their true scarcity
values.
 This is because the private sector is unable to
develop the institutions necessary for efficient market
functioning.
 Market power is an example of a market failure;
private sector suppliers (or consumers) are able to
influence prices because their numbers are small
and because buyers (or sellers) have no other
market outlets.
 These conditions are emphasized to prevail often in
factor markets (those for labor, credit, and land) and
sometimes in remote rural commodity markets.
 Another type of market failure arises because of

externalities-which is the costs or benefits from

production activities that are not fully reflected in

market incentives.

 Soil erosion, environmental pollution, and over

utilization of common property resources are common

externalities.

 Some form of government intervention-a tax, subsidy,

 The value of an externality is often difficult to
quantify, and in many cases subjective judgments
must be made as to whether externality effects are
significant.
 These measurement problems, combined with the
administrative costs of tax and subsidy policies,
cause quantitative or legislative regulations to be
widespread policy responses to externalities.
 C. Promotion of non efficiency objectives

 This is the most common rationale for intervention in

developing countries agriculture
 The establishment of an efficient economy and the
maximization of aggregate income or necessarily
the most important, goals of economic policy.
 When policy-makers are dissatisfied with the
implications of income maximization, policies will be
used to alter the economy
 In some cases, these interventions will reflect neutral
policymakers acting on a mandate from society.
 But more often, policies respond to the desires of
special interest groups within or outside agriculture.
 Income distribution concerns are often at the top
of the list of non-efficiency objectives.
 Government policies can benefit target groups
through direct regulation of prices-such as tariffs or
subsidies on imports or through policies that provide
market power to the target group.
 Such as the designation of monopoly suppliers of
particular agricultural products or the allocation of
import and export licenses.
 Price stabilization is a second common
justification for intervention in agriculture,
dependence on the whether causes agricultural
production to exhibit a relatively large degree of
random variation.
 When combined with inelastic demand, supply
variations can cause market prices to fluctuate
substantially from one production cycle to the next.
 The consequent potential income fluctuations for poor producers

and variations in expenditure for poor consumers are often

unacceptable to policy-makers.
 To avoid substantial fluctuations in domestic market prices, many

governments establish a set of policies, choosing among

international trade controls, storage schemes, price fixing, and

rationing.
 Elements of market failure are also partially responsible for

interventions of this type.

 In production, for example, crop insurance and
futures and options markets are institutions
that reduce the uncertainty of future prices and
income.
 However, these institutions are usually absent from
developing country markets.
 National concern over the appropriate role for
agriculture in the economy provides a third set of
non-efficiency rationales for government
intervention.
 Food security and self-reliance of staple food supplies
are commonly held objectives for agricultural policy.
 For food-importing countries, the attainment of these
objectives requires intervention to increase domestic
production.
Concept of Food Security
 The issue of food security really came to the fore in the 1970s and at
the 1974 World Food Conference in Rome
 The first explicit acknowledgement was made that this issue
concerned the whole of mankind:
 “Every man, woman and child has the inalienable right to be free
from hunger and malnutrition in order to develop fully and
maintain their physical and mental faculties. (…)
 Accordingly, the eradication of hunger is a common objective of all
the countries of the international community, especially of the
developed countries and others in a position to help.”
 Since the 1974 Rome conference the whole concept has

evolved, developed, multiplied and diversified.

 There are now thought to be almost two hundred

definitions of food security which is a clear indication of

differing views and approaches to the problem,

 However, the definition that has acquired the broadest

acceptance is that of the World Food Summit (WFS) in

November, 1996 was the following:

  The new accepted and popular definition

 “Food security exists when all people, at

 The new accepted and popular definition
all times, have physical, social and

economic access to sufficient, safe and

nutritious food which meets their dietary

needs and food preferences for an active

and healthy life.’’

 A focus on nutrition adds care giving practices,

health services and healthy environments to the

 How about definition for food insecurity?

 Food security is a difficult concept to measure

since it deals in very broad terms with the

production, distribution and consumption of food.

 Food insecurity on the other hand lends itself more

readily to measurement and analysis.

 It should be stressed that food security, famine

and hunger are not to be confused.

 Food security refers to the availability of food whereas

famine and hunger are the consequence of the non-

availability of food, in other words the results of food

insecurity.
The
“A FAO definition
situation of foodwhen
that exists insecurity is: lack secure
people
access to sufficient amounts of safe and
nutritious food for normal growth and
development and an active and healthy life.”
 Factor that affect food security

 Food security is affected by both physical and temporal

factors.
 The physical factors relate to food flow in terms of

availability, accessibility and utilization.

 Availability of food is achieved through production, domestic

food stocks, commercial food imports or food aid.

 While food accessibility is achieved through purchasing

power, financial outlays or access to the necessary resources.

 Food utilization is associated with the socio-economic dimension

of household food security.

 For example, if sufficient and nutritious food is both available and

accessible, the household can make decisions regarding what food

is purchased, prepared and consumed and how it is allocated within

the household.
 In households where distribution is unequal, even if the measured

aggregate access is sufficient, some individuals may suffer from

food deficiency.
 Therefore, utilization requires not only an adequate
diet, but also a healthy physical environment,
including safe drinking water, adequate sanitary
facilities and an understanding of proper health care,
food preparation, and storage processes.
 The temporal aspect of food security involves
stability, the time frame over which food security is
being considered.
 Further, transitory food insecurity can either be

cyclical or temporary.
 In cyclical, where there is a regular pattern of

food insecurity, e.g., the ‘lean season’ or ‘hungry

season’ occurs in the period just before harvest

 The temporary one occurs as a result of short-term,

exogenous shocks such as droughts or floods

Agricultural Policy Problem in Developing Country
The current agricultural
situation of
the developing countries
 For a large number of developing countries, the
agricultural sector remains largely underdeveloped, in
respect of production
 both for the domestic market and for export.

 At the same time, in most of these countries, the

agricultural sector lies at the center of their
economies. It accounts for
 A large share of GDP,

 Employs a large proportion of the labour force,

 Represents a major source of foreign exchange

earnings,
 Thus, significant progress in promoting economic
growth, reducing poverty and enhancing food security
cannot be achieved in most of these countries
 without realizing the productive potential of
the agricultural sector and its contribution to
overall economic development.
 Several factors have contributed, in varying
degrees in different countries, to this
underdevelopment of the agricultural sector.
 However, two key factors stand out:
1. The past policy bias against agriculture in
these countries and
 1. The past policy bias against
agriculture in these countries
 The traditional policy bias in most developing
countries against agriculture, reflected in direct and
indirect taxation of agricultural production and
exports, was due to a variety of reasons.
A. Revenue considerations were one major factor,
 As agriculture was the only economic activity that
could be relatively easily taxed in many countries
in immediate post-independence years.
This indirect taxation of agricultural exports occurred
principally through overvalued exchange rates.
These factors, taken together, had the unintended
B. The socio-political imperative
 The second important factor was the socio-political
imperative of maintaining low food prices, most
often through state-controlled marketing
boards.
 This has created for the following adverse impacts

 Marketing boards can be inefficient and wasteful,

using resources that could be better used elsewhere
 Marketing boards can monopolize domestic markets,
which can reduce marketing efficiency,
competitiveness and innovation
 Since the late 1980s and early 1990s, many
developing countries have implemented domestic
policy reforms which have reduced the policy bias
against agriculture
 Further agricultural reform remains high on the
agenda of many developing countries.
 The common objectives of these reforms are to:
I. Enhance productivity;
II. Increase domestic production of basic foods;
III. Improve the quality and standards of products;
and
IV. Diversify production and exports by promoting the
development of new crops and the processing of
 Therefore, achieving these objectives requires

 Building farming capacity,

 Attracting new investment,

 Promoting innovation and

 Ensuring the provision of infrastructure, farm

inputs and credit.

 While many challenges remain for these countries in

achieving the full productive potential of their
agricultural sectors, the main domestic policy
2. The major distortions on world agricultural
markets due to the protection and subsidization
of this sector in many developed countries.
 The second key factor constraining agriculture in
developing countries, is the high levels of subsidies and
protection provided to agriculture in the developed
world, continue to pose serious problems in several
respects.
 Domestic support to agriculture in developed countries
encourages over-production, which increases supplies
on world markets (by reducing import demand or
increasing export supply) and depresses world prices.
 Low prices make it harder for producers in developing
Issues relating to developing domestic capacities
in agriculture

 The followings are some of the issues at stake regarding

domestic policy flexibility to develop the agricultural
potential of developing countries.
 Domestic support
 Border protection
 Export subsidy
 Adoption of agricultural technologies
 Enhancing rural financial sectors
 Etc….
 Major challenges of
Agricultural and Food
Problems in Developing
Country
Some of the major challenges facing farmers in
developing countries:

1. Agriculture inputs management

 From mechanized feedlots to automatic irrigation

systems to agricultural machinery, agriculture has
become increasingly industrialized,
 Developing countries face many challenges in
managing agricultural inputs, including
 Limited capital of smallholder farmers and limited
access to credit
 Poor infrastructure that can lead to high
transportation costs for agricultural inputs
 Poor quality and limited types inputs
 Monopolization of imported inputs: A few large
companies may monopolize imported inputs

2. Inflation
 Farmers working in developing countries are far more
susceptible to inflation comparing to their peers in
developed countries considering that developing
countries depend more on agriculture as a share of
their GDP
 High inflation rates can contribute to food insecurity
 This is due to Domestic food prices and domestic
food supply shocks
 In 2023, more than 90% of lower-middle-income
countries and around four-fifths of low-income
countries saw food price increases of more than 5%
3. Climate Change
 Climate change contributes substantially to food
insecurity, by increasing food prices, and reducing
food production.
 Food may become more expensive as climate change
mitigation efforts increase energy prices.
 Water required for food production may become
scarce due to increased crop water use and drought.
 Competition for land may increase as certain areas
become climatically unsuitable for production.
 In addition, extreme weather events, associated with
climate change may cause sudden reductions in
4. Population Growth
5. Inadequate rural infrastructure
6. Low household incomes
7. Currency exchange rates

Are also among the major challenges of agricultural

and food problems in developing country
 Role of Agriculture in poverty and
food insecurity reduction
 Agriculture plays a central role in reducing poverty and
food insecurity, especially in developing countries
 Economic importance
 Agriculture is a larger share of the economy in countries
with the highest percentage of poor and undernourished
people.
 In some of the world's poorest countries, agriculture
accounts for more than 30% of economic activity
 Source of Livelihood
 Many smallholders and rural people depend on
 Engine for Industrial and Service Sectors

 Agriculture has been a constant source of inputs for

major industries in most of the developing countries

 Role in Foreign Trade and Drive to exports

 The items like tea, coffee, spices, cotton, fruits and

vegetables are the traditional items of exports and
they are produced in farms and not in the factories.
 Agricultural technology
New agricultural technology can raise incomes of farm
households, raise employment, and lower the price of food
staples
 Agricultural and rural development interventions
These interventions can reduce poverty by providing access
to finance, training, and markets
 Reducing hunger and malnutrition
Agricultural growth is particularly effective in reducing
hunger and malnutrition
 Role of agriculture in economic
development in developing country
Agriculture plays a key role in the economic
development of developing countries, as it can help to
 Reduce poverty:
Agriculture can help to reduce poverty and improve
food security for those who live in rural areas and work
in farming.
 Create jobs:
Agriculture can help to create jobs and raise incomes.
 Improve nutrition:
Adequate nutrition is a prerequisite for healthy mental
 Sustain livelihoods:
Agriculture can provide subsistence livelihoods for
millions of people
 Promote sustainable development:
Agriculture is a key component of sustainable economic
and social development
 CHAPTER TWO

Chapter: Two

Overview of Agricultural and Food Policy in Ethiopia