Experts are repeatedly pointing out that the future potential for world agriculture lies in emerging Asia. Here is where 80% of the world’s aquaculture production takes place, per capita meat consumption levels are rising 17% on average per year and eating habits are evolving at a faster pace than the rest of the world.
With gross domestic product levels forecast to grow 3% in 2009 and 6% the next in emerging East Asia (Asian Development Bank report), compared to negative rates for Japan and western developed economies this year and fewer than 2% next year, business and investment prospects look rosy.
But these positive statistics hide another story — that of an Asia where poverty levels are still high, and where intensive food production, scaled up in recent years to cater to a growing population, has resulted in depleted natural resources and declining yields. Climate change is also having a negative impact on the region’s natural resources. Yet these resources will be required to produce even more food in the coming years.
By 2030, demand for cereals is expected to grow 30% and meat by 40% according to the Food and Agriculture Organization of the United Nations (FAO), with the bulk of this increase coming from Asia.
Higher investments are needed
At the first Agriculture Outlook conference for Asia, held in Singapore last fall, experts unanimously pointed out that higher investments are the way forward for agriculture in Asia.
Returns on investments in agriculture are highest in the region, too. For example, $1 of investments in agri-research and development in India were seen to yield $6 in agriculture income, says the FAO’s policy officer Sumiter Singh Broca. Yet, in spite of this, public investments in agriculture as a percentage to total investments have declined over the years, resulting in real prices for crops rising 10% from the period of 1997 to 2006. Investments in basic resources and infrastructure are critical to reversing this trend and setting food production and prices on a sustainable path.
Climate change presents real limits to growth in the sector as weather patterns affect agriculture production to a large extent. Likewise, agriculture also affects the climate in a significant way. About 15% of greenhouses gases emitted are generated by agriculture related activities. The sector needs an overhaul from a ‘climate crisis’ mindset to one that is ‘climate friendly’ says Sununtar Setboonsarng.
Rather than looking at climate change issues defensively, the Asian Development Bank’s (ADB’s) senior agricultural economist contends that the climate challenge could pave the way for innovation, new avenues for profit and more effective market-based strategies where externalities are accounted for in price systems.
As both consumers and producers move towards higher ethical and production values, sustainable systems would become the default method of operation, rather than a standard imposed on by either party.
Farmers, lifeblood of sector
As the key suppliers of agricultural produce, farmers are the lifeblood of the sector. Unfortunately, many farmers in developing Asia continue to be marginalized, operating without professional partners and inadequate access to finances and information. The best technology is also priced beyond the reach of the average small-holder farmer, and when applied without proper know-how, produce disappointing results and even losses.
Rajbeer Singh of the Asian Food and Information Centre in India proposes that new R&D technologies could move towards applications that are more small-farmer friendly. Making technologies and facilities such as cold chain storage and processing available to Asia’s many small holder farmers raises farm efficiencies and output exponentially and creates sustainable rural livelihoods.
Other end of supply chain
At the other end of the supply chain, the distribution network is the final baton in the farm-to-market relay. Critical infrastructure is often lacking or inadequate in many parts of Asia, resulting in rejects by consumers and wastage levels as high as 40%. Siebe van Wijk of Fresh Studio Innovations in Vietnam, an international consulting and R&D company, points out that all players in the value chain, from the delivery driver to the storage and distribution house, play equally important roles.
State-of-the-art distribution centres are pointless if ill-equipped packers create the weakest link that destroys the quality and value of meat and other produce. The crux of the matter: Investments in modern distribution facilities are a waste if other parts of the sourcing and marketing systems are shoddy or inadequate.
While standards for exports are high in Asia, not enough attention has been paid to catering to the home market, experts say. In Vietnam for instance, minimal effort and investments have gone into upgrading the systems for supplying catfish to local consumers. As one of the largest catfish exporters in the world, Vietnam has over 150 certified processing facilities for export, yet little of this is utilized for the local market. “Just for the Vietnamese domestic market alone, we believe that there are ample opportunities for investments in modern distribution centres for fresh meat, fish and numerous other products, as long as they are integrated into a value chain approach,” says Van Wijk.
Consumers want quality
Contrary to misperceptions, consumers in developing Asia are ready for high-quality products. Converting mere agriculture supply chains to high value requires, beside the requisite quality assurances and standards, better linkages between the producer and retail outlet through screening suppliers, training and monitoring programs for farmers and a culture that promotes the use of viable technology and encourages innovation among farmers.
Scaling up standards also allows businesses to introduce new concepts of freshness and quality and through this, establish the brand image among a new generation of well-heeled and increasingly label conscious consumers in Asia.
Last year’s phenomenally high food prices have made governments aware of the dearth in public investments in the much neglected agriculture sector, notes Fabrizio Bresciani of the World Bank during a roundtable session on the Chinese agricultural economy and domestic market.
Investments have lagged far behind the growth in high value agri-markets in countries such as China and many emerging Asian economies, where urbanization and incomes are increasing the most rapidly.
Supply chain overhaul
Yet as livestock and crop farming intensifies, a more coordinated supply chain is required, one with traceability and transparency in place, says Michael Boddington of Asian Agribusiness Consulting in China.
This may even require coordinating standards between governments and producers themselves. While doing so will bump up initial costs, improvements in standards and efficiencies in the long-term facilitate global trade, strengthen the domestic sector, build up the local food and agriculture sector and ensure sustainability in the long term.