“This kind of labor-intensive agriculture often has per-acre yields above those of modern, capital-intensive agriculture”

my instinctive reaction is to doubt that – but I don’t have data. Can you point me to any?

Lewis is who springs to mind when it comes to surplus labour – and he thought increasing agricultural efficiency was key to poverty reduction.

This is the thing that interests me though: “But in countries with a labor surplus, there may be no alternative employment for the displaced farmers.”

In what circumstances is there alternative employment for displaced workers, and how effective/realistic is the idea that increased efficiency reduces the real cost of food, and the income effect raises demand in other sectors? Do gains in agricultural efficiency require a (possibly state initiated) complimentary ‘pull’ from industrial development?

An interesting issue here is, “efficient” in terms of what?

Subsistence farmers typically over-supply labor, relative to its cost as measured in the local wage (yes, family members can and do leave the farm to engage in wage labor, but the various costs associated with this mean that the opportunity cost of additional labor input to the farm is very low, even if not strictly zero.) This kind of labor-intensive agriculture often has per-acre yields above those of modern, capital-intensive agriculture.

When subsistence farmers are replaced by larger commercial farmers, yields may well drop as land and capital are substituted for labor. basically, you end up with a new equilibrium, which is more efficient with inputs measured at cost but may be more or less efficient in terms of yield.

Historically, this process has been essential to development because it frees up labor for more productive uses. But in countries with a labor surplus, there may be no alternative employment for the displaced farmers. In this case, the greater efficiency of the commercial farm is a mirage—it really just represents a shifting of the subsistence cots to other sectors.

This is the situation in much of the third world—perfectly “rational” market processes may replace traditional agriculture with a stable equilibrium where overall output is lower.

How was a dependency on imports (I assume we’re talking about staple foods) created, if not by a reduction in domestic food output (or equivalently, a failure to expand in line with demand)? And how did that come about, other than a reduction in efficiency (which did happen in some places but was not the rule, I think) or a change of land usage?

Hybrid and GM seeds require far more fertilizer and pesticides than traditional crops. If one tries to grow them with the same lack of modern (read: expensive and imported) fertilizers, herbicides and pesticides, then one has even lower yields than traditional landraces. Traditional cultivation involves saving a portion of one’s crop to reseed the fields the following year. The phrase “eating one’s seed corn” represents the destruction of one’s future (one should also note that “corn” is a generic european term meaning “grain” and typically represents the predominant grain of the area).

Due to legal (genetic patents and other IP treaties) and technical reasons (hybrid seeds don’t “breed true” which is by design, and Monsanto has been adding “Terminator” genes which prevent the harvested seed from germinating at all), farmers then become locked into an expensive cycle of expensive seeds, expensive fertilizers and expensive pesticides. This is again by design as it increases corporate profit at the expense of everyone else.

Here is one local tale of the legal troubles that a farmer can get into when GM seed blows into his fields:
http://www.motherjones.com/news/feature/2000/12/schmeiser.html

If the latter, then there will be a pretty quick supply response to higher food prices, won’t there?

To afford the newer inputs requires borrowing capital for the seed, the fertilizers and so on. When we dump subsidized crops onto the world market, those farmers can’t always recover the input costs and end up bankrupt (which answers your 2nd question). In general, the folks then able to purchase the failed farmers’ assets aren’t other farmers as they’re cash strapped as well, but instead corporations.

Here’s one older story from BBC about debt leading to high rates of farm suicides in India:
http://news.bbc.co.uk/2/hi/business/5312600.stm
In the 80s in the US, suicide was the leading cause of death among rural men. This was during the reagan era’s “get big or get out” farm push. Smaller farmers found themselves cut out of subsidies and lending.

I’m also reminded of some news stories about large French corporations growing beans in one African country (I think this was late 80s, early 90s), and when the crop/market price collapsed, they let the crops rot in the field, while neighboring tribes (who had been pushed off the land these crops were growing on) were starving.

Metanote 1: it appears that 2 links is the max per post.
metanote 2: is it me, or is the preview pane broken?

“Now the land is owned by agribusiness producing export crops. In the end, it doesn’t even matter if those crops are actually staples – the peasant-turned-slum dweller won’t be able to afford it.”

But the peasant-turned-slum dweller has to buy food somewhere, the problem being now that the prices have shot up. If those agribusinesses switch back to staples, it will matter, in so far as it bring prices down.

I’m not sure what land reforms you have in mind, but if it’s giving land back to small subsistence farmers, I’m not sure that’s the way to go. Paul Collier makes an argument for more agribusiness, not less, here .

Yeah, I think I read something similar about the oil prices starting going up after a futures market for crude oil was created. But what’s the cause and what’s the effect here? Do prices go up because of the speculations or does the amount of speculations increase as the commodity becomes scarce? The latter seems like a better explanation, though, I suppose, futures markets don’t help either, creating, in effect, a middle-man (a monopoly, perhaps) between the producers and consumers.

The conventional explanations for the flare in prices are population growth, (misconceived) diversion of corn and soybeans to bio-fuel production, rising Asian and Middle Eastern demand for high-value foods, higher transport costs, and crop failures. Oddly little has been said about the role of speculation in the rise in commodity prices generally and specifically in food.

On the Chicago CME Group market, which deals in some 25 agricultural commodities – it is a merger of the former Chicago Mercantile Exchange and Chicago Board of Trade – the volume of contracts has increased by 20% since the start of the year and now has reached the level of a million contracts a day. This will soon exceed the rate of growth reached in all of 2007.

The hedge funds are now active in commodities and are playing the futures contracts, where upwards of 30 million tons of soybeans for future delivery are contracted for every day. They are also buying the companies that stock grains.

The argument sometimes is made that this speculation is unimportant because the futures speculators will never take delivery; but this is precisely the problem. It is why this speculation is highly destructive of the true market.

Futures purchases of agricultural commodities classically have been the means by which a limited number of traders stabilized future commodity prices and enabled farmers to finance themselves through future sales.

Speculative purchases have no other purpose than to make money for the speculators, who hold their contracts to drive up current prices with the intention not of selling the commodities on the real future market, but of unloading their holdings onto an artificially inflated market, at the expense of the ultimate consumer. Even the general public can now play the speculative game; most banks offer investment funds specializing in metals, oil, and more recently, food products.

Forgive me if I am actually about to ask a really stoopid question, but how is that actually possible? We digging into reserves or something? Can you even have 8 year old wheat reserves?

We are digging into reserves. Or rather, we’re consuming the left overs of surpluses from the past. Properly stored, year old wheat is fine. If one were to remove oxygen from the storage containers, it will last 30-50+ years.

The column labeled “World ending stocks” is what one should be looking at:
http://www.ers.usda.gov/Data/Wheat/YBtable04.asp

Now the land is owned by agribusiness producing export crops. In the end, it doesn’t even matter if those crops are actually staples – the peasant-turned-slum dweller won’t be able to afford it.

The obvious solution would be land reform, but as the agribusiness investments are protected and the third world government can’t afford to piss of Western governments by simply nationalizing farmland, that won’t be easy.

The point being that international trade, while it may be make production more efficient, also creates distribution problems. (This isn’t new, read Mike Davis’ Late Victorian Holocausts which studies the way imperialism and market fetishism turned droughts into devastating famines in the late 19th century.)

As long as your total consumption exceeds the amount of reserves, you need never eat wheat more than a year old (i.e. you eat the reserves first, then dip into production). Any year that reserves shrink year-on-year, consumption exceeds production, but depending on how quickly reserves shrink, this state of affairs can last quite a while without actually requiring that any wheat be left over from the first year.

If consumption is less than reserves, the situation is more complicated, but presumably (hopefully?), wheat that is too-old-to-eat disappears from the reserve quantity.

I took a look at the post you linked to. Your approach is very different from that of Stern, but just as speculative. Your cost assessment relies on your guess for the price elasticity of fossil fuels. Your figure of 1-2 seems very optimistic. In the U.S. we have experienced over a five-fold increase in the price of oil and about four-fold increase in the price of gasoline in the last 10 years, and yet per-capita consumption of oil and gas have not changed much. Can you give your reasoning for your estimate?