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Agricultural Development

Dr Risti Permani ([email protected]) Senior Lecturer in Agribusiness Department of Economics Faculty of Business & Law

UNS, 7‐8 October 2019

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Deakin University CRIICOS Provider Code:: 00113B

Our plan over these two days

Agricultural development: • Session 1: The roles of food and

agriculture sector in the economy and trends in agricultural sector

• Session 2: Agricultural resource management: managing risks and achieving sustainability

• Session 3: Governing agricultural

• development

• Session 4: Global agricultural competition: trade dynamics

• Session 5: Innovations in agriculture

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Deakin University CRICOS Provider Code: 00113B

Understanding Resources trends management

Risk management Sustainability

Governance Global context

Innovations

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Some values that I encourage you to develop in this unit (and during our class discussions): Sharing of local knowledge Global perspectives Innovation Sustainability Balanced views ‐‐‐ i.e. always see opportunities

as well as risks and challenges

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Session 1: The roles of food and agriculture sector in the economy and trends in the agriculture sector

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Session 1: The roles of food and agriculture sector in the economy and trends in agricultural sector

Overview of agricultural contribution to the economy

Trends in agricultural sector

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Global Agriculture

• Economy – agriculture ‐ One‐third of global GDP; employ 65%

poor working adults

• To meet demand of a growing population – 9.8 billion people

by 2050; persistent concern of malnutrition (number of hungry and undernourished people increased from 804 million in 2016 to 821 million in 2017); obesity (one in eight adults –or 627 million people‐ is obese)

• Resource use – agriculture 70% water use; agriculture,

forestry and land use change ‐ responsible for a quarter of greenhouse gas emissions

Source: World Bank

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Global food and agriculture statistics

• Population doubled since early 1960s, approaching 7.5 billion people with 55% being urban dwellers

• In 2016, agriculture used over one‐third of total land area i.e. >50% in Asia, but <25% in Europe.

Arable land area, top 20 countries (2016) (million ha)

Source: FAO (2018) – World Food and Agriculture Statistical Pocketbook 2018

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Value added in agriculture, forestry and fishing, industry and services (% GDP) (2017)

Inflation rate in prices (%)

Indonesia Agriculture, forestry, and fishing value‐added (2018)

• Constant 2010 US$= US$ 143,780.35

• % GDP=12.8%

Employment in agriculture (% total employment)=31%

Australia Agriculture, forestry, and fishing value‐added (2018)

• Constant 2010 US$= US$ 25,683.32

• % GDP=2.6%

Employment in agriculture (% total employment)=3%

Source: World Bank https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS https://data.worldbank.org/indicator/NV.AGR.TOTL.KD 8https://data.worldbank.org/indicator/SL.AGR.EMPL.ZS Deakin University CRICOS Provider Code: 00113B

Contribution of agriculture to the economy

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Indonesia (in 1000 ha)

• Country area= 191,358

• Land area=187,751.9

• Agricultural area=60,200

• Forest area=90,325.6

Australia (in 1000 ha)

• Country area= 774,122

• Land area=769,202

• Agricultural area=342,602

• Forest area=125,059

Source: FAO (2016) http://www.fao.org/countryprofiles/en/

Land use

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What does the tale of the two countries (and the rest of the world) tell us about the structural transformation?

The shifting away from an agricultural economy

Source: World Bank (2016) http://documents.worldbank.org/curated/en/561951467993197265/pdf/104231‐BRI‐Policy‐2.pdf

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http://www.fao.org/countryprofiles/en/


















http://documents.worldbank.org/curated/en/561951467993197265/pdf/104231



































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Agricultural structural transformation

The agricultural structural transformation

has been characterised by:

• The relative decline of basic

agriculture

• The rising importance of

agribusiness, which includes the

value added for agro‐related

industries and for agricultural trade

and distribution services

• The growing share of high‐value

agricultural products in

international trade with respect to

traditional exports

Source: World Bank (2016) http://documents.worldbank.org/curated/en/561951 467993197265/pdf/104231‐BRI‐Policy‐2.pdf

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This agricultural structural transformation has been shaped by three interrelated process:

• Improvements in productivity

• Change in composition of

production

• Change in mode of commercialisation

Agricultural structural transformation

Thanks to: ‐ Technological progress ‐ Public goods (e.g.

regulatory systems, infrastructure, irrigation, property rights, transportation)

‐ Market access (e.g. trade and finance)

Source: World Bank (2016) http://documents.worldbank.org/curated/en/561951 467993197265/pdf/104231‐BRI‐Policy‐2.pdf

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Deakin University CRICOS Provider Cd: 00113B

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http://documents.worldbank.org/curated/en/561951






























































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Australia’s Food and Agriculture

Production value of

$58 billion in 2015‐16

(up from $3.7 billion in 2014‐15)

77% exported ($44.8 billion in 2015‐16, 15% of Australia’s total exports

Figure 1. Australia’s agricultural export commodities (2015‐16)

Over 300,000 People employed in the Australian farm sector, or 3% of the national workforce

1.6 million jobs Across the supply chain agriculture

Source: NFF (2017) 13


Australia’s top agriculture export commodities

Source: ABARES ‐ http://data.daff.gov.au/data/warehouse/9aal/2017/aaim17_20171121/AusAgIndMap2017_v.1.1.0.pdf

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http://data.daff.gov.au/data/warehouse/9aal/2017/aaim17_20171121/AusAgIndMap2017_v.1.1.0.pdf






















































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Australia’s agriculture export destinations

Source: ABARES ‐ http://data.daff.gov.au/data/warehouse/9aal/2017/aaim17_20171121/AusAgIndMap2017_v.1.1.0.pdf

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Overview of the Indonesian agriculture policies

• According to the Strategic Plan of the Ministry of Agriculture

2015‐2019, the primary focus of agricultural development is to achieve food sovereignty and farmers’ welfare.

• The corresponding strategic goals: o To achieve self‐sufficiency in rice, corn, soybeans and

increase the production of beef and sugar; o To increase food diversification

o To increase value‐added and competitiveness of certain commodities for export promotion and import substitution

o To increase the availability of raw material for bioindustry and bioenergy

o To increase farmers’ welfare


Source: Sudaryanto (2018) http://ap.fftc.agnet.org/ap_db.php?id=903 16

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Indonesia’s top agriculture export commodities

Main export commodities in 2017 included palm oil (US$21b), natural rubber (US$5b), cocoa beans (US$1b), coffee (US$1b), etc.

Source: MoA ‘Statistik Pertanian 2018’ http://epublikasi.setjen.pertanian.go.id/arsip‐perstatistikan/160‐ statistik/statistik‐pertanian/586‐statistik‐pertanian‐2020

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Indonesia’s agrifood imports

Source: http://www.agr.gc.ca/eng/industry‐markets‐and‐trade/international‐agri‐

food‐market‐intelligence/reports/market‐overview‐indonesia/?id=1475075685743

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Two minutes discussion: Any elements that you would add to the priority goals if you were the policy maker?

1. … 2. … 3. …

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Overview of the Indonesian agriculture policies (cont.)

• ‘Special efforts’ to increase the production of rice, corn and

soybeans (UPSUS PAJALE) • Involvement of military to supervise and monitor farming

practices; farmers required to sell their rice to BULOG • Fertiliser subsidy

• Poverty alleviations programs e.g. support for machineries, seeds, animals, etc.

• Special efforts of accelerated increase in pregnant beef cattle and buffalo population (UPSUS SIWAB)


Source: Sudaryanto (2018) http://ap.fftc.agnet.org/ap_db.php?id=903 20

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Two minutes discussion: Noting the various programs to improve Indonesian agriculture, do you have any concerns about these programs?

1.Goal: 2. Design: 3.Sustainability: 4. …

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Recent trends and challenges in agriculture

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Trends in the global food market

• Middle‐income countries (typically with no distorted agricultural trade regimes)

e.g. Argentina, Brazil, Thailand are becoming major food exporters; meanwhile, upper‐middle income manufacturing exporters in Asia e.g. Japan, South Korea, Taiwan, Hong Kong, Singapore are becoming major agricultural importers

• China and India representing one‐third of the world’s population are becoming both major global exporters and importers

• Developing country tropical products e.g. coffee, cocoa, tea, nutrs, spices, cotton, sugar and confectionary products have steadily decreasing since 1980

• Highly protected temperate zone products of industrial countries e.g. meats, milk and milk products, grains, animal feed and edible oil and oilseeds have generally remained constant though developed country grain exports have been cut at least in half

• Dynamic non‐traditional products e.g seafood, fruits, vegetables and cut flowers increased by 50% since 1980

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How has globalisation influenced the food system?

Through changes in: o Governance

o Capital availability o Employment o Incomes o Relative prices facing

producers and consumers o Access to dietary diversity oAdvertisement o Labour mobility o Women’s status o Lifestyle o Energy expenditure

Source: Pinstrup‐Andersen and Watson II (2011) – Chapter 10

In turn impact: o Diet diversity and

composition o Food safety standards o Food quality o Human health and nutrition o Poverty o Food production o The environment o Child care and time allocation o Access to knowledge and

technology

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Trends#1: Innovation, innovation, innovation

Source: Deakin University(https://blogs.deakin.edu.au/deakinlife/2018/07/05/enrol‐now‐in‐our‐warrnambool‐intensive‐on‐drones/)

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Trends#2: Not just technologies but also innovative business models

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Trends#3: Ethical and environmental matters

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Trends#4: The unusuals

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Trends#5: Connecting with consumers

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Trends#6 – Inclusiveness

‐ The Indonesian government specifically targets poor farmers.

‐ Efforts to shorten the agrifood chains e.g. through e‐ commerce platforms both B2B and B2C

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Trends#6 – Inclusiveness (cont.) From information app to P2P lending platform

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How do these trends and challenges require changes in agriculture?

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Increased demand for skills to manage complex systems from resource management, social license to regulatory compliance

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Big push for innovations – to introduce and assess

35them Deakin University CRIICOS Provider Code:: 00113B

Product development and marketing to better address consumer needs

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The role of education institutions

Agricultural industry is in need of professionals.

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Consumer behaviours

Agribusiness Technology (IoT,

drone, biotechnology)

y development ade Communit

hains Ethics

Sustainable resource management

Food security

Global challenges: food, water and climate

International tr

Supply chains and logistics

Food and agricultural policy

Market risks

Financial management

Credit analysis

Farm management

Market volatility

Global value c

Interdisciplinary with economics as the

integrating and core discipline

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Food and Agribusiness major as part of Deakin’s internationally recognised Bachelor of Commerce

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Various roles in agriculture

• Agribusiness Finance Manager

• Agribusiness Accountant

• Agribusiness Banking Officer

• Agribusiness Quality Assurance Officer

• Corporate Farm Manager

• Farm and Land Appraiser

• Agricultural Policy Analyst

• Food Distribution Officer

• Feed Sales Officer

• Livestock Insurance Representative

• And many more!!

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• The agriculture sector is a thriving discipline and is in need of professionals.

• Important to review existing theories and see how these relate to data and information.

• Important to look beyond farming and adopt a “whole‐of‐chain” paradigm while recognising that on‐farm activities remain key. Therefore we will further discuss resource management in Session 2, and supply chain governance in Session 3.

• Further consideration is required to understand the policy impacts (to be further discussed in Session 3).

Recap

Understanding Resources trends management

Risk management Sustainability

Governance Global context

Innovations

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• Explain at least THREE important factors for the successful development of the agriculture sector.

• Many define that agribusiness is the business of farming.

Comment on this opinion, and explain how would the appropriate definition of the field could impact the society’s perception of its contribution to the economy, and the role of agricultural youth.

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Practice questions

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Documents