Explaining the Malthusian Trap
Dugie Young explores the idea of the Malthusian population trap. Is the prediction of Malthusian misery coming back into focus?
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Mud Sweat and Tractors
A programme due for screening on BBC 4 this coming Wednesday could be a really useful teaching resource on the economics of farming.
This is a new documentary series looking at the history of 20th century farming in Britain opens by focusing on milk. In the early years of the century, 150,000 dairy farmers milked by hand and sold milk door to door. By the end of the century the 15,000 that were left were breeding cows that increased yields by 400 per cent and milk was sold through supermarkets.
Our Daily Bread
In a similar vein to Manufactured Landscapes, Our Daily Bread is a no holds barred documentary on industrial farming and food processing. It is available for purchase in DVD format through Amazon UK.
Costs of Supply - Organic Farmers Divided
As the recession bites, so sales of organic food have started to slump and with it the premium prices that truly organic farmers can command in the market-place. The tough economic climate seems to be causing a deep divide within the organic farming community about whether the rules on the use of organic feed should be relaxed as a cost saving measure for producers facing an uncertain future.
The article in the Times today entitled “Let us bend the rules, say organic farmers” is a great example of how organic farmers face differences in the conditions of supply compared to producers who rely on conventional mass production methods. According to the article, average organic feed prices are £320 a tonne compared with £160 a tonne for conventional feed.
With hundreds of farmers converting some or all of their production to organic methods in response to the rise in organic products sales over recent years, the Soil Association and the Organic Farmers and Growers are trying to persuade the government to relax the regulations imposed on organic suppliers that allow them to trade under the organic quality mark. But hard core organic producers argue that to do so would dilute the brand reputation and cause confusion (information failure) among consumers.
It is interesting how in a recession there are increased pressures on so many different stakeholders. The depth of the downturn in 2009 will create much suffering among producers - but the very best, the most flexible and the most robust should be able to survive without sacrificing their principles or their standards. Organic produce will always be more expensive than conventional farm output - are we about to see yet another industry lobbying for government support to tide them through difficult times?
Consumers stung by slump in bee population
If there is any honey left for tea, the chances are that it will be much more expensive in the days and weeks to come.
There are many causes including the impact of pesticides used in industrial farming, the longer-term impact of climate change, fungal infections, parasites and a shift genetically modified crops. But there is no denying a potentially calamitous decline in the size of the UK and European bee population.
This BBC report claims that the British bee-keeping fraternity are warning that there could be no domestically-produced honey left on supermarket shelves by Christmas. A mite infestation that has killed off a quarter of the UK’s honey bees this year and bee-keepers have been lobbying government for financial help to prevent the problems becoming a rout of the bee population. As market supply falls, the price of honey increases. But the effects are much broader than this. Bees pollinate many of the plants and vegetation which we then go on to consume so we can expect higher prices for our morning coffee or orange juice and also milk. Here we have a graphic example of inter-related markets.
A blog on the Guardian web site makes this point forcibly:
“Some 250,000 species of flowering plants depend on bees for pollination. Many of these are crucial to world agriculture. Bees increase the yields of around 90 crops, such as apples, blueberries and cucumbers by up to 30%, so many fruits and vegetables would become scarce and prohibitively expensive.”
One immediate response has come from the European Union which has agreed to set up recovery zones for bee hives - namely patches of farmland planted with pollen and nectar-rich plants. The fear is that this is too little too late, and the wider externalities from the demise of the bee population will prove to be very expensive for all of us.
Markets in Action: Economics of Opium Production
Ed Maris writes on the incentives to supply opium in the turbulent country of Afghanistan
The Opium trade has existed for hundreds of years; it was the cause of the Anglo-Chinese wars of the nineteenth century and has been a resilient market despite increasing pressure from law enforcement agencies and governments worldwide. It is a part of most country’s shadow economy - it is an illegal good and a factor of the world narcotic trade. Opium is an example of a good exhibiting derived demand; whilst it may be consumed in its raw state, it is usually processed into Heroin, a powerful and damaging drug. Afghanistan’s opium production is estimated to account for 52% of the country’s legal GDP and 87% of the world’s total supply.
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Cross-Elasticity: Fertilisers and Bio-solids!
Countryfile is one of my favourite television programmes - a rich source of background on the ever-evolving rural scene and the challenges and opportunities facing the UK farming industry. Last Sunday featured a programme on the growing demand for and use of bio-solids in food production in the UK. It provides a good example of cross-price elasticity of demand!
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Milking it?
This BBC news article asks whether the recent surge in food prices has brought benefits to the UK farming industry - a sector that has been in relative decline for many years and which now accounts for less than 1% of our Gross Domestic Product. Farmgate prices for milk have risen but the profit margins remain wafe thin because of rising input costs. New EU environmental standards also threaten to create higher costs for farmers. Total farm incomes have risen by more than 10% this year and the price of agricultural land has also headed higher - but the article reinforces the fragile nature of the industry and a widening gap in the fortunes of cereal producers and those in livestock farming. There is some excellent microeconomics here.
Protecting the Natural Health Service
“Under siege from climate change, development, pollution and aggressive new farming methods, the country’s biodiversity is already significantly less rich than it was 50 years ago.” The Independent continues to promote it’s environmental agenda today with a striking front cover and leading article on the threats to the UK’s natural habitat and heritage. There is a strong economic and social case for a holistic approach to protecting and improving our natural resource base including paying farmers an income for their environmental husbandry and stewardship.
Inter-related markets: Farmland prices
There is an excellent example of the inter-relationships between markets in today’s Independent.
“The price of farmland is rising at its fastest rate for more than 30 years ....Arable land, in particular, has become so profitable that its average price has soared from £4,000 an acre in January last year to £5,500 an acre today.....The increases are being fuelled by the astonishing demand for agricultural holdings at a time when food prices are at an all-time high and when very little farmland is coming up for sale ....The price of wheat and other cereals has more than doubled in 12 months. While that means the cost of food is going up, it has also improved the profitability of arable farming and made it an attractive investment. At the same time, Britain’s agricultural land is attracting interest from abroad.” The rest of the article can be found here
Plenty of microeconomics here - the inelastic supply of farmland coming onto the market; the relationship between returns from financial markets and the demand for other assets including farmland; the impact of rising food prices on the profitability of owning and farming arable land. Will this help to stop the flight from farming in the UK? Or are there dangers in amateur landowners looking to buy up land as a lifestyle choice?
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