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Augustyn Wos
Professor, Institute of Agricultural and Food Economics, Warsaw,
Poland
INTRODUCTION
A pre-harvest system may be defined as a system of existing technologies for agricultural raw materials production. Thus, the term describes the fundamental technical and economic relations within agriculture. The post-harvest system, on the other hand, is concerned with the post" agricultural agro-industries sphere and includes technologies of storage, transportation, and processing of agricultural raw materials into food products. The many kinds of technology employed at present throughout the world in agriculture and in the agro-industries cannot be presented in detail in this paper. It will concern only the links that exist between these systems and point to their implications for socio-economic development.
In the system of traditional agriculture that predominates in developing countries, pre- and post-harvest technologies are usually of different social and economic structure. The processes of soil cultivation, crop care, and harvesting as well as animal breeding are usually carried out by individual farmers, dispersed throughout these countries. This picture is not changed by the co-operatives appearing in some countries. The dispersion of private farmers is usually in contrast with well-organized and concentrated marketing firms and food-processing industries. These systems generate definite social conflicts, the solution of which is undertaken in various ways in different countries. Most frequently the farmers organize themselves to set against the powerful marketing and food industry forces their own organized force-most often a co-operative. Some countries have had considerable achievements in this field, but, considering the progressive concentration in the industries, such success will be increasingly difficult to attain. However, in countries still in the early stages of development, organization, particularly into co-operatives, remains promising.
During recent decades the new tendencies to create internally integrated food complexes, i.e. agribusinesses, have formed new kinds of links between the pre- and post-harvest spheres. Under agribusiness, these spheres are combined into one system with its own decision-making centre, and decisions are usually made by the integrator. The integrator joins into one entity those producing the inputs for agriculture-the farmers themselves-and food-processing industries. Contracts are the usual form of integration, but in fact all the links in food production are subordinated to the integrator. From a social point of view, this situation is completely different from that in various types of co-operatives where each member is a subject, not an object.
The concept of a food-economy complex, combining into one system all the links of the food production chain, embodies certain hopes for progress in the food supply system, especially in the developing countries. The idea is to join into one logical unit the industries producing inputs and providing services for agriculture; agricultural production itself; procurement, transportation, and storage of agricultural raw materials; and the agro-industries and food-processing industries. The principal problem is to obtain the appropriate balance between the respective parts of the food complex so as to eliminate bottlenecks in performance. Such development must be the subject of general social planning. The food-economy complex may seem at first glance to be an intellectual and planning construction; in fact, it is very real; the links between the respective economic units exist, although they are not always as they are intended.
The concept of the food-economy complex aims at the stimulation of integration processes, at shaping their rationalization according to criteria dependent on the general objective function. Thus, it is obvious that certain elements of planning are implicated, but not necessarily planning leading to the establishment of a centralized decision-making centre for administrative matters. A great deal may be achieved through a system of indicative planning, in which case the central economic planning organ reserves for itself only some of the decisions pertaining to the economic instruments employed, such as prices, credit, and taxes. Of course, centralization in planning the development of the food economy differs from one country to another; there is less centralization in countries with a market-economy system and respectively greater in countries with a centrally planned economy.
The food-economy complex can be said to exist in its ideal form only when there is a system of integrated, coherent economic instruments that integrate the complex process of food production into one logical unit. No effort should be spared in the formation of this complex regardless of possible difficulties that may be encountered on the way. Today it provides perhaps the greatest opportunity for integrating all the activities serving food production. Integration requires, however, in-depth studies of the structure of the country's economy, recognition of the existing proportions of the links in the food production chain, knowledge of intra-branch goods and services flows, as well as recognition of the productive capacities and potential for the respective links of the production system. Acquiring this understanding is difficult. The creation of the food complex is a long process. However, economists can aid in shortening the process and lessening the social costs.
INTRA-BRANCH PROPORTIONS
A fundamental question in the creation of the food complex is the establishment of the correct intra-branch proportions. In order for development to be truly complete and more or less harmonious, all the branches of the food complex from the industries producing inputs and providing services for agriculture and agricultural production itself to transportation and food-processing industries must be developed so that the flow of products from one branch to another can be efficiently handled. Proportional development by eliminating weak links decreases losses and permits the best possible use of the available resources.
Development while maintaining specified proportions between branches of the food complex is sometimes contrasted with a strategy of increased rate of growth of food production. This remains a highly complicated problem. The question is whether the dilemma really reflects some kind of antinomy between proportional development and dynamic development. Superficially, it seems so, because proportional development seems to imply a lower rate of production growth. From this point of view development means disrupting the existing equilibrium and achieving it on a higher level. Nevertheless, no process of development will be permanent and effective if it is permanently disproportional. Accelerating the rate of food-production growth destroys the existing proportions within the food economy and promotes difficulties for various national balances as well. A rapid rate of growth is a good strategy only where there are considerable reserve resources available. Otherwise the result will be the appearance of disproportions (weak links), and the planned high rate of growth will in reality become a slower one, in fact slower than the rate of growth possible following a path of moderate growth. From these assumptions stems the conclusion that, unless the economy has at its disposal significant reserves of production inputs, products, and capital, it is safer to plan a moderate rather than a high rate of food-production growth. The development is then indeed slower, but more stable and less sensitive to shocks. Over a longer time period a moderate rate of growth results in higher growth than that which would be achieved as a result of the strategy of an accelerated rate of growth, the latter inevitably leading to tensions and great losses. It is easy to cite examples of countries that have achieved relatively little as a result of planning too high a rate of growth
THE STRATEGY OF LOSS REDUCTION
All the developing countries face the problem of how to decrease food loss in the respective stages of production - harvesting, threshing, storage, transportation, processing, marketing-and during consumption in the household
There are two categories of losses. The first involves production potential that is not utilized. The country suffers losses if, as the result of incorrect production organization or flaws in the agricultural policy, the resources are not properly used. Errors, such as incorrect selection of seed material, mistakes in agro-technics and crop rotation, inappropriate application of fertilizers, faulty selection of breeding animals, and mistakes in animal feeding, may result in losses of agricultural raw materials. These problems could be called "losses of opportunities," and the costs paid for them, "opportunity costs," which include the physical volume of non-produced goods, loss of agricultural area, labour, and capital inputs. Evaluation of these items is very difficult, and only methods of comparative analysis can be used to make an assessment.
A second category is the ready-products losses that can be measured as a volume of big-mass and elementary nutritional factors that have been produced and not used. Research on losses most frequently is concentrated on this category, which is sufficiently large to be of interest to policy-makers. It is calculated that in countries of technically primitive agriculture these losses amount to half of what is produced from the land. In countries at the middle level of development, from 25 to 30 per cent of the biological yield is lost, while in the case of some crops, such as non-grain feeds (grasses, hay, and field-grown fodder crops), these losses may reach as much as 35 per cent of the biological yield. (The biological yield is the sum of elementary components borne by the land and estimated directly before harvest.) In highly developed countries these losses are lower, but they are observed everywhere. It is very difficult to estimate food losses with precision, partly because they are inherently economic factors. Therefore, no universally applicable advice can be given concerning how to reduce the losses and increase the food potentials.
The problems related to food production must be studied and solved in every country, or even every region, by taking into consideration the local habits, existing production techniques, patterns of community organization, consumption patterns, and even religious restrictions. Looking for one recommendation for all developing countries is a waste of time for development planners. The prevention of food losses necessarily involves more than technical issues. Cultural, economic, and social factors strongly affect the nature and magnitude of food losses and attitudes of farm families and governments toward food conservation. As has been strongly underscored by the experts, past experiences with agrarian reforms have demonstrated that programmes must be sensitive to the cultural, socio-economic, and political characteristics of a society and that the technical and scientific components of change cannot be divorced from the social context within which they are applied. Throughout the world different techniques have been elaborated for pre- and post-harvest operations and loss reduction activities. In the specific conditions for which they were intended, they have been very successful. However, techniques of agricultural production and food conservation are frequently dictated more by traditional beliefs than by immediate utility. The roles of men and women or relationships among individuals and families may be reflected in the particular way food is produced, handled, or stored after harvest. Thus, national efforts to improve food production and reduce losses cannot rely solely on technology or empirical data. Techniques and information must be culturally and socially acceptable if they are to be useful (see Postharvest Food Losses in Developing Countries, Board of Science and Technology for International Development, National Academy of Sciences, Washington, D.C., 1978).
With modern technology and sufficient resources, it is theoretically possible to conserve most food commodities almost indefinitely without loss. This effort requires a large investment in all parts of the food economy, including better organization and extension. To eliminate all the losses is not rational from an economic point of view.
The marginal cost of loss elimination is relatively very high, and after a certain point, obtaining a unit of a product through loss reduction is more expensive than producing an additional unit of the product. While there are relatively few research results on this subject, those that have been obtained have documented this hypothesis sufficiently.
A subject of interest for agricultural policy should, however, be the considerable area before the critical point (OP in fig. 1) in which elimination of losses is profitable and may be a source of great economic benefit. In fact, the decision-maker, at the level both of the farm and of the whole economy, has a choice. He can choose a strategy of maintaining the required rate of growth of agricultural production (strategy A) or of depending on loss minimization (strategy B). In fact, the choice is between a technology of extensive production growth and a technology aimed at saving and permitting better utilization of the existing products.
Losses in agriculture and in food economy are of a different nature, and even their partial elimination always requires some inputs. Agriculture usually needs the necessary technical inputs for harvesting the yields more effectively and for their transportation and storage. The food industry requires modern facilities to produce as much food as possible from the agricultural raw materials. On the way from the farm to the consumer, easily perishable products must be stored and transported in a frozen or cooled state, which is inefficient and requires considerable investment. It is obvious that the rich countries solve these problems more easily than the poor ones. The dilemma of social and economic development is that the developing countries, suffering the greatest deficit of food, also experience the biggest losses since they lack the means to reduce the losses. In a situation in which one-fourth of the agricultural product is lost, additional new inputs must be earmarked for increasing production to make up the deficit arising as a result of the losses. This creates a vicious circle which, nevertheless, must be broken.
Some say that the developing countries are too poor to undertake a programme of food-loss elimination. This thesis, however, does not withstand critique. Quite the contrary, the strategy of eliminating losses represents the cheapest road to development and to alleviating hunger and poverty in these countries. Research has shown that the elimination of losses is cheaper than the extensive growth of agricultural production because in all links of the food economy there are such losses, which may be eliminated without great material inputs. What is required most of all is improved knowledge of how to reduce loss as well as better organization and more efficient management. Better care for animals may significantly reduce losses, and more rational feeding may improve the feed-conversion ratios and animal productivity. There is considerable evidence that the effectiveness of mineral fertilizer and the application of chemicals for plant protection depend in a decisive degree on the skills and ability to use these inputs. Thus, they are influenced by the available knowledge and organization of production.
Also, there are benefits from cutting and harvesting grasses and other fodder crops for silaging at the correct times in terms of agrotechnics. Timing is especially important in relation to the period of protein maturity. Delaying the harvest for even a few days results in great losses of plant protein as well as losses of other nutritive elements of significant value to animals.
The losses during storage of agricultural products are great. Potatoes stored for fodder provide a good example. The losses during winter in storing potatoes in Poland constitute from 15 to 30 per cent of the crop, depending on the year. If Poland annually produces 45 million metric tons of potatoes, then, rather optimistically assuming losses of 20 per cent, that means a loss of 9 million metric tons. To produce this amount of potatoes we need 560,000 hectares of land. In turn, from this area we could produce about 1.5 million metric tons of grain, which represents about 30 per cent of the present total imports of grain and fodder. These figures give a good indication of the scale of the problem. Of course, it is not possible to eliminate the losses in potato storage completely, and the calculation presented here is of a hypothetical nature. If, however, the losses were decreased by only 0.5 per cent, which is certainly possible and would not require very great additional inputs, we would obtain a sizeable increase in production. Referring only to potato consumption, the increase would be enough to feed two cities the size of Warsaw, i.e. with a population of 1.6 million. There are many similar examples of possible loss reductions in almost every country. Of course, each example must be analysed separately and in the context of its specific conditions.
To generalize, there are numerous economic and social reasons
for giving preference in economic policy to strategies of
increasing food supply through loss elimination rather than
through expansion of food production. I believe this is a very
realistic alternative in many developing countries. The following
points all argue for the loss elimination strategy:
- The strategy of decreasing losses is economically cheaper
because it requires smaller inputs per unit of the final product
than a strategy of increasing production extensively, especially
in the short term.
- The inputs that would be used to decide on a strategy of loss
elimination are usually accessible and in most cases do not
require expensive imports.
- Numerous benefits may result from the respective organizational
changes and improvements in production management because the
strategy of loss elimination demands the least capital for
production growth.
- By limiting losses, we free some resources, especially land,
which may then be used for other purposes.
- A strategy of decreasing losses has important moral and
educational value. It teaches the results of human work and the
rational use of the goods that have been produced.
A limitation of this strategy is that, while securing benefits in the short term, it does not solve problems of food security over a longer period of time. This problem must be solved by a proper investment policy. There is simply no development strategy that can finally and definitively solve the question of how to combine and harmonize short-term and long-term interests.
The strategy of loss elimination has a holistic, universal character. Losses are experienced in all links of the food economy, and especially in consumers' households. In each link the required activities should be undertaken. However, a universal educational system, which would make the population conscious of the mistakes made and point to the possibilities of improvement, is always required. The implementation of this strategy requires organic work at the grass-roots level and because of this is much less spectacular than a strategy of extensive production growth. Such a strategy is usually accompanied by great inputs, modern techniques, and usually large-scale production, but great losses as well. It is, perhaps, this lack of spectacular achieve meets which explains why activities that would contribute to a strategy of loss elimination have been neglected.
There are some who believe that in the developing countries, which face such great problems in the field of nutrition and food security, a call for the strategy of loss elimination may result in a dangerous tendency of directing attention only to agriculture, neglecting other sectors of the national economy that are also instrumental in food production growth. This thinking is logically off base. Especially in the developing countries, which experience a large deficit in production inputs for agriculture, everything should be done to favour increasing their availability and use. These countries cannot waste deficit resources without hampering their development. Agriculture requires a great flow of inputs for its development, but since this flow is sharply limited, materials-saving production technologies and technical and organizational systems minimizing the losses should be preferred
The expenditures on food conservation and reduction of losses must be justified by particular needs and circumstances. Before programmes can be undertaken to reduce losses on a national scale, more data are needed on probable costs and personnel and organizational needs. The loss reduction efforts must begin with political commitments by individual countries to carry through the actions required at the national level. When new production and conservation techniques are introduced, traditional practices should not be abandoned unless it can be demonstrated both that the new technologies and methods will be effective improvements and that they will not result in intolerable strains on social structure, income levels, and distribution.
There is no universal method for analysing and estimating food losses. A social costs-benefits analysis must be part of the strategy used to assess the problem. Both direct and indirect costs and benefits need to be quantitatively estimated.
Among the direct costs to be estimated are
- investment in pre- and post-harvest loss reduction,
including
(i) technical infrastructure on the farms,
(ii) technical infrastructure at the community and regional
levels;
- costs of extension staff to advise on how to reduce losses;
- costs of co-ordinating staff on the regional and country
levels.
The indirect costs include
- investments in the industries that produce items for the
technical infrastructure;
- costs of inspection staff.
The direct benefits include
- additional food potential for feeding people or for export
(estimated either on the basis of the market value of the food
products or on the basis of the value of the food that would
otherwise have to be imported, calculated at world market
prices);
- surplus food for marketing, which may pay for an increased flow
of foods and services to rural areas.
Indirect benefits include
- greater security for farm families against lean years;
- generation of employment in such areas as transportation,
storage, processing, and marketing;
- better health of the population and higher productivity
resulting from nutritionally superior food;
- arable land and capital inputs saved by loss reduction and thus
made available for other uses.
The costs-benefits analysis is only one factor that policy makers and programme-planners must consider. Other elements that must be included in the decision-making process are the socio-cultural acceptability of possible programmes, overall national development priorities, and the impact of possible programmes on social and economic matters beyond food losses.
CHOOSING A STRATEGY TO ELIMINATE LOSSES
The choice of the proper strategy for development makes the issue of correct input allocation urgent. Having recognized the size of outlays required, especially investment, for agriculture and the food economy, we must make decisions concerning their best allocation, deciding whether to expand the production facilities aimed at increasing production or to stimulate inputs that favour loss reduction. Losses are experienced because the respective technological lines suffer from bottlenecks caused by weak links, which limit the efficiency of the whole system. The productivity of the whole system is equal to the capacity of the weakest links. The strategy of loss minimization must in the first place assume the elimination of these weak links and the creation of complex and complete technologies in agriculture. Most developing countries cannot afford such complex development simply because they lack the resouces to spend for the complete technological lines. The policy decision maker is faced with a dilemma: should the available resources be dispersed, thus achieving only a little progress in all the areas engaged, or should they be concentrated in selected areas, leaving others to be developed later? The answer to these questions is fundamentally important.
The so-called normal market mechanisms favour the dispersion of outlays; i.e., the investments are allocated where they have been created. On the other hand, for reasons of economic rationality, a concentration of inputs in selected lines of production would be more advisable. The experience of many countries, notably of Hungary, shows that it is effective and economically justified to set aside a number of technological lines (so-called verticals) for complete mechanization, which can be managed according to the modern rules of production organization. Such a vertical system may be used, for instance, for corn production, fodder management, or dairy production and processing. The vertical system is an excellent example of combining preand post-harvest technologies into one system. It is important that these technologies have the required capacity throughout the whole production cycle, starting from seed, through soil cultivation, sowing, fertilizer application, water economy management, crop care and protection, harvesting, threshing, transportation, storage, and processing. They must be technologies of the same generation; it must be possible to use them alternatively; and, most of all, throughout the entire process of production and processing there should be no weak links that would constrict the potential of the production capacities of more advanced domains. From this point of view, it is not necessary in the least that the technologies discussed be the most modern; it is more important that they be complementary and represent the capacity needed.
The concept of selective development presented here has some limitations. If the volume of production inputs is not adequate, then a considerable number of farmers will not receive the accrued benefits that ought to stem from the accepted system of preferences. This situation may serve to deepen and aggravate the inequalities within rural society and to generate social tensions. Therefore, solving these issues requires careful consideration and great experience, taking into account the tensions in social relations. If the decisions discussed were to be made only on economic grounds, then there is sufficient support for the concept of selective growth. It does guarantee success in the areas included in the preferences system, while profits and other economic benefits may be allocated, for instance, through the state budget, and in this way the development of the remaining branches of agriculture may be financed. Thus, the effects may radiate, including new areas of agricultural production and new groups of the rural population. The concept of selective development includes certain mechanisms for the stimulation of economic growth in agriculture, the growth of food production, and the improvement of the standard of living of the rural population. These effects are poorly provided for by the policies of a dispersed allocation of outlays: this has been confirmed by the practical experience of numerous countries over many years.
