Third Copenhagen Consensus: Hunger and Malnutrition Assessment, Hoddinott Rosegrant Torero
An Assessment Paper by John Hoddinott, Mark Rosegrant, and Maximo Torero and released by the Copenhagen Consensus Center. The working paper used by the Expert Panel is available for download here, the finalized paper has been published in Global Problems, Smart Solutions - Costs and Benefits by Cambridge University Press.
The problem of hunger can be solved. The planet creates more than enough food to meet everyone’s needs. But there are still about 925 million hungry people in the world, and nearly 180 million pre-school children do not get vital nutrients.
In 2008, the last global Copenhagen Consensus project focused attention on the problem of hidden hunger. A team of Nobel laureate economists found that micronutrient interventions – fortification and supplements designed to increase nutrient intake – were the most effective investment that could be made, with massive benefits for a tiny price-tag. In research for Copenhagen Consensus 2012, researchers John Hoddinott, Mark Rosegrant, and Maximo Torero again propose that decision-makers prioritize micronutrient interventions, and update the analysis of the costs and benefits of doing so. For less than $700 million annually, it would be possible to eliminate vitamin A deficiencies in pre-school children, eliminate iodine deficiency globally and dramatically reduce maternal anemia during pregnancy. But they also offer new solutions including bundling nutrition interventions; increasing global food production; and improving market functioning through better communications and increased competition in fertilizer markets.
Hoddinott, Rosegrant and Torero note that for about $100 per child, a bundle of interventions including micronutrients , improvements in diet quality and better care behaviours, chronic undernutrition could be reduced by 36 percent in developing countries. Chronic undernutrition has significant neurological consequences, adversely affecting the hippocampus, damaging chemical processes associated with spatial navigation, memory formation and reducing myelination of axon fibers. This damage leads to loss of cognitive abilities and hence lower incomes. Even in very poor countries such as Ethiopia and using very conservative assumptions, each dollar spent reducing chronic undernutrition has a $30 payoff.
Increasing global food production might seem a strange proposal given that globally, food production exceeds food needs. But they argue that lower prices are necessary to make food more affordable, and to provide a buffer against some of the negative consequences of climate change. Hoddinott’s team look at ways to speed up improvements in agricultural production. This most importantly means increasing research and development to insure higher yields through extensive breeding, but crucially they also look at ways to increase tolerance to drought, heat and salt, identifying and disseminating the best varieties of crops, addressing problems like wheat rust, developing resistance to cattle diseases like East Coast Fever, and focusing on soil diagnostics to ensure that optimal combinations of organic and inorganic fertilizers are used.
They propose increasing annual global public investment in agricultural research and development by $8 billion to $13 billion. The team uses economic modeling to calculate the results on yields, incomes, GDP growth, and prices. This investment would mean that in 2050, rapeseed oil would be 68 percent cheaper while rice would be nearly a quarter cheaper than it would otherwise be. The global number of hungry would be reduced by over 200 million. Taking global population growth into account, the prevalence of hunger would be 63 percent less in 2050 than it was in 2010. The reduction is most pronounced in the two parts of the world where hunger remains most virulent: South Asia and Sub-Saharan Africa. Spending an additional $8 billion per year would, by 2050, reduce the number of hungry people in the world by 210 million and the number of underweight children by ten million. The internal rate of return to increased investments is 61 percent with a benefit-cost ratio of 16.1 indicating the high returns to expanded investment in agricultural R&D.
Roughly 80 percent of the global hungry live in rural areas and half are smallholders. The researchers therefore also propose a dual approach to improving the economic conditions of the rural poor, by providing market information through cellular phones and reducing barriers to fertilizer access.
In India, the Reuters Market Light program sends text messages to smallholders with crop advice. The monthly cost is $1.50, and recipients get configurable, location-specific weather forecasts, local price information, and local and international commodity information. Hoddinott looks at African and south-Asian studies into the impact of improved market information, and concludes that with the most pessimistic assumptions this investment can only be justified in a few countries. But under any other set of assumptions, benefits will exceed costs and in some cases do so by a considerable factor, up to 8.35 in return for every dollar spent.
There have been mixed results from policies designed to stimulate sustainable fertilizer use, but Hoddinott’s team note that not much has been said about the high and increasing dependence of developing regions on imported fertilizer. A small number of countries control most of the production capacity for the main nitrogen, phosphate, and potash fertilizers. The top five countries control more than half of the world’s production capacity for all major fertilizer products. In most cases, the top four firms control more than half of each country’s production capacity. Policy-makers could consider the forcible break-up of this concentrated industry. But apart from the disruption this would cause, this could lead to a loss of economies of scale. Regulation is another possibility, but imposing price restrictions could lead to unproductive rent-seeking. Instead, the researchers propose investment in the construction of new production capacity. Private companies are deterred from entering the market by high fixed costs and strategic pricing behavior by incumbents, so the researchers outline a case for public investment in production capacity with the understanding that the operation of the facility would be turned over to the private sector. Hoddinott estimates that building fertilizer plants with annual production capacity high enough to be a ‘top-4’ firm would cost US$1.2 billion in South Asia and US$700 million in Africa. The net present value of doing so is $12.5 billion.