Agricultural risks

The agricultural sector is exposed to an extremely high degree of risk arising out of natural factors, principally weather conditions. The importance of this class of risks stems from the relatively large number of events that may cause agricultural output to drop (floods, drought, frost, hail, pests, diseases, etc), and also from the frequency with which these events actually occur and the magnitude of the crop losses they may cause. Moreover, most of these events resulting in losses are beyond the control or prevention of individuals or of societies as a whole.

Assuming no movement of surplus potential food production and labour among individual-country length of growing period zones, 2,480 million hectares - 38% of the total land area - are unable to produce sufficient food for their 1975 populations with low inputs. In these zones, no less than 1,156 million people - 58% of the total - were living on land resources able to sustain only 597 million people.

Preliminary land degradation assessments indicate that, unless conservation measures are introduced on all cultivable land, 544 million hectares of potentially productive rainfed cropland - more than one-sixth of the total - could be lost.

On the basis of movement of surplus potential food production within countries, 55 countries (out of a total of 117 studied) have insufficient land resources to meet the food needs of their 1975 population with low level of inputs. The number of critical countries would rise to 65 by the year 2000. Of these critical countries, for the year 2000, 29 would need to raise their inputs to at least intermediate level, on all their potentially cultivable land, if they are to meet food requirements from their own land resources. A further 17 would need to raise inputs to the high level to attain food self-sufficiency. 19 countries will be unable to meet their food needs, from national land resources, even with high level of inputs.

In evaluating output increases or decreases accompanying land reform, the influence of farm price levels on investments and output cannot be disputed: the level of product prices influences the amount produced. Farmers may shift from one crop to another, or may decrease the use of inputs given lower farm product prices (or anticipated lower prices). Land tenure arrangements influence farmer response to changing prices. An FAO (1963) study concludes that price response was usually greater among owner-operators than among tenants. Tenants paying a fixed rent were likely to benefit more from price incentives and therefore to show a greater response to price changes than sharecroppers. Producer price policies were therefore generally more successful where they had been preceded by land reform measures. Therefore perhaps more important than prices per se, under most circumstances of agricultural development in the world today, is the incentive structure provided by the tenure system.