Joyce Cacho Water for Food Presentation

Water for Food: Policy, Innovation,

Adoption

Joyce Cacho, Ph.D.

Challenges or Opportunities?◦ Climate Change◦ Agricultural Productivity◦ Enterprise Risk Management

Sustainability + Joint Product Economics

Policy, Innovation, Investment◦ Regional Markets

Adoption for Transformation + Resilience

Outline





Outline

Challenges or Opportunities:

CLIMATE CHANGE

http://www.climatechange.gov.au/community/~/media/publications/local-govt/risk-management.ashx

…and

R I S K

Challenges or Opportunities:CLIMATE CHANGE

SOURCE: http://www.cgdev.org/content/publications/detail/1424759/

PHYSICAL CLIMATE IMPACTS

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Dimension of climate impact: EXTREME WEATHER


PHYSICAL IMPACTS adjusted

for COPING ABILITY

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CLIMATE CHANGE


for COPING ABILITY

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CLIMATE CHANGE


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CLIMATE CHANGE


for COPING ABILITY

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Challenges or Opportunities: AGRICULTURAL PRODUCTIVITY

Source: SUSTAINABLE AGRICULTURAL PRODUCTIVITY GROWTH AND BRIDGING THE GAP FOR SMALL-FAMILY FARMS (Interagency Report to the Mexican G20 Presidency). With contributions by Bioversity, CGIAR Consortium, FAO, IFAD, IFPRI, IICA, OECD, UNCTAD, Coordination team of UN High Level Task Force on the Food Security Crisis, WFP, World Bank, and WTO; 12 June 2012

TRENDS Historically, productivity in agriculture has shown high growth rates. Together with the expansion of the resource base, this has enabled food production to

outpace population growth. The Green Revolution resulted in an increase in food production from 800 million tons to

more than 2.2 billion tons between 1961 and 2000 (FAO, 2011a). Estimates of past and current productivity trends vary widely Future productivity in the long run is difficult to project. Some recent estimates suggest that total factor productivity (TFP), the most

comprehensive measure of productivity reflecting the efficiency to turn all inputs into outputs, grew at an average rate of around 2% per year since 2000 across major world regions (Fuglie, 2012).

The picture is more complex when looking at individual countries or sub-regions.◦ Some large countries like Brazil, China, Indonesia, Russia and Ukraine have achieved much higher

TFP growth rates than the corresponding regional average.

◦ Sub-Saharan Africa is lagging, but some countries like Cameroon, Congo, Kenya, Mali, Benin and Sierra Leone have achieved above average TFP growth rates in the 2000s, mostly attributable to policy changes (Yu and Nin-Pratt, 2011).

TRENDS

Other studies, in particular those using partial factor productivity indicators such as land and labor productivity, give a more pessimistic global picture, in particular when China's performance is taken out of the calculation of the world average (Alston et al., 2010).

In Latin America, China and many developed countries, labor productivity increased faster than land productivity, as labor was shed out of the sector.

In contrast…in Asia land productivity dominated, and on the African continent land expansion was a main driver.

Differences in agricultural sectors…productivity in some livestock sectors, in particular non-ruminants, is increasing fast, there are concerns about trends in crop productivity growth.

The most popular indicator of land productivity is crop yield.



TRENDS The average global rates of growth in yield of most of the major cereals are

declining. Since the 1980s, growth in wheat and rice yields fell from 2.5-3% to around 1%.

Maize yields showed growth of slightly less than 2% over the last decade.



SUSTAINABILITY (Environmental, Economic, Social)…Efforts to increase food production will take place within an environment characterized by a scarcity of natural resources. ◦ In many regions, there is little room for expansion of arable land, with virtually no additional land

available in South Asia, the Near East and North Africa. ◦ Where land is available, in sub-Saharan Africa and Latin America, more than 70% suffers from soil

and terrain constraints (FAO, 2011a).4 ◦ Unsustainable land use practices, such as overuse, poor land management and nutrient mining,

result in global net losses of land productivity of an average 0.2% per year (Nelleman et al., 2009). ◦ Land degradation makes the top soil vulnerable to water and wind erosion and reduces the

productivity of inputs such as fertiliser and irrigation, which in turn leads to production and income losses.

At the global level, agriculture is the largest water user worldwide, representing about 70% of total withdrawal. ◦ In some countries, over 90% is withdrawn for agricultural purposes.

Cities and industries are competing intensely with agriculture for the use of water and an increasing number of countries, or regions within countries, are reaching alarming levels of water stress and pollution.

Global freshwater resources will be further strained in the future in many regions, with over 40% of the world‘s population projected to be living in river basins experiencing severe water stress by 2050 (OECD, 2012a).



LOOKING AHEAD

WATER MANAGEMENT…Agriculture is also a major source of water pollution, from nutrients, pesticides, soils and other contaminants, leading to significant social, economic and environmental costs.

Biodiversity underpins agriculture and food security through the provision of genetic material needed for crop and livestock breeding.

INNOVATION + WATER USE EFFICIENCY: Maintenance of biodiversity is crucial for sustainability and resilience of farming systems as it builds the capacity to absorb shocks and continue to function within a changing set of circumstances.

The challenge is to maximize agriculture‘s positive contributions to biodiversity while minimizing its negative impacts.

AG INNOVATION + BUNDLING + DIVISIBILITY: ◦ The productivity of farms can be improved through economies of scale and the adoption of

more technically-efficient production systems. However, long-run productivity growth for the sector as a whole requires continuous technological progress, as well as social innovations and new business models.

◦ For agriculture to respond to future challenges, innovation will not only need to improve the efficiency with which inputs are turned into outputs, but also conserve scarce natural resources and reduce waste (OECD, 2011a).



LOOKING AHEAD

TOTAL ROI from R&D: Estimates of the rates of return to agricultural R&D suggest a very high social value of agricultural R&D. ◦ Annual internal rates of return of investments on agricultural R&D estimated in the

literature range between 20% and 80% (Alston, 2010).◦ In developing countries, the dollar-for-dollar impact of R&D investments on the value

of agricultural production is generally within the range of 6% to 12% across countries (Fan et al., 2008, Fan and Zhang, 2008, FAO, 2012a).

◦ Countries which have heavily invested in R&D while simultaneously investing in extension have had the strongest productivity growth (Fuglie, 2012).

Driven by policy incentives, recent productivity improvements in developed countries have occurred with lower levels of variable input use, and thus more sustainably…reflecting the clearer channels of communication consumer demand, industry, and policy makers.

In contrast, in developing countries…Innovation systems for more sustainable use of resources, such as no-till farming, insect-resistant crops, more efficient irrigation, water management systems, sensors for nutrient status in crops, remote sensing and Geographic Information Systems (GIS) to improve and monitor land use and SMS messaging for enhancing advisory services to farmers, have been piloted….but scalable, widespread adoption is critical challenge.


LOOKING AHEAD


https://www.ceres.org/resources/reports/stormy-future/view

Key driver of the U.S. economy. Stimulate trillions of dollars in

private investment and influence business activity and building development patterns

Insurance is woven into virtually every economic activity for consumers, taxpayers and governments that are reliant on stable and sound private insurance markets.

Availability and stability are pivotal to consumer and government financial well-being.

Great need and opportunity for insurers to play an expanded role in managing climate risks and bolstering society’s resiliency to severe weather.

Challenges or Opportunities:ENTERPRISE RISK MANAGEMENT

http://www.ctnow.com/media/acrobat/2012-01/67158951.pdf

INSURANCE INDUSTRY




In coastal and non-coastal areas alike, U.S. insured losses triggered by volatile weather events are steeply rising.

Extreme weather events cost U.S. property/casualty insurers more than $32 billion in losses in 2011.

INSURANCE INDUSTRY




Given that weather peril losses have been trending upward for years, due to a combination of higher concentrations of property in vulnerable areas and increasingly more severe and frequent extreme weather events, there is strong reason to believe that 2011 and 2012 are not anomalies. Consider these trends:

◦ Losses from excessive precipitation during 2008-2011 were the highest on record.

◦ Average annual winter storm losses have nearly doubled since the 1980s.

◦ Since 1980, wildfires burned the highest amount of acreage in 2005, 2006 and 2007; and in 2010, wildfires caused over $1 billion in damage (and in 2012 record setting wildfires occurred in Colorado and other parts of the West.); and

◦ Losses from low precipitation (drought) during 2012 will be the highest since 1988.12

INSURANCE INDUSTRY

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In the past…multinationals’ global operations consistently underperform their domestic operations. Why? These companies’ strategies focus mostly on similarities across their markets: whenever possible, global companies standardize their business models to achieve economies of scale. They view regional difference as obstacles to be overcome – not opportunities to be leveraged.

This perspective blinds firms to a contrasting strategy: ◦ arbitrage, the exploitation of difference (in culture, administrative practices, geographic distance,

and labor or capital costs) across markets. ◦ Top notch companies seize advantage of such differences while also leveraging similarities that

create scale


Source: “The Forgotten Strategy” by Pankaj Ghemawat; HBR – Nov2003.

BUSINESS STRATEGY + OPERATIONS


“The Forgotten Strategy” by Pankaj Ghemawat; HBR – Nov2003

Business Expansion

and Organization

al Development

Challenges or Opportunities:ENTERPRISE RISK MANAGEMENT• 6 billion mobile/cell phone subscribers in

the world• Growth is led by China + India (30+ percent

of world subscriptions)

WORLD POPULATIONAndroid is now the top smartphone

operating system with a user base increasing by 700,000

subscribers daily

Number of text

messages (SMS)

sent in 2011#1 HANDSET

MANUFACTURER Leading smartphone hardware

vendor

http://www.digitalbuzzblog.com/infographic-2012-mobile-growth-statistics/

http://www.mikekujawski.ca/2012/05/30/finally-some-2012-statistics-for-the-african-mobile-phone-market/


has about 644 Mn subscribers (about 11%) LTE deployments are quickly gaining momentum (11

million customers predicted by 2015) Smartphone penetration rates are now at a

whopping 17 to 19 percent (that’s almost 1 in 5!) The rest are split between either “feature” phones

or basic “dumb” phones (albeit with SMS capability) Commerce in Africa is dependant on mobile. Micro-

entrepreneurship covers some 90 percent of the employment base and about 65 percent of the continental GDP

There are currently 5 major international cables in place providing bandwidth to the African continent

Despite the global recession and one of the lowest per-capita income levels in the world, BRICS counties and others are investing in Africa ahead of other markets

AFRICA

Cell / Mobile Phone Penetration

Source: Industry sources; Blycroft estimates; c. Blycroft 2012.




Transformation + Resilience

Outline

"People, planet and profit" succinctly describes the triple bottom lines and the intention of sustainability.

Joint products are two or more products manufactured simultaneously through the same process. ◦ Joint costs = common/shared manufacturing costs◦ Each product has a significant market value.


Managers of joint products processes must manage risk in two output markets.

The challenge is to structure the firm to maximize profits in both markets.

Policy tools that have been employed to support agriculture-based growth include:◦ Marketing policy◦ Trade policy◦ Fixed Capital Investment policy◦ R&D investment policy


Managers of joint products processes must manage risk in two output markets.

The challenge is to structure the firm to maximize profits in both markets.

Policy tools that have been employed to support agriculture-based growth include:◦ Marketing policy

◦ Trade policy

◦ Fixed Capital Investment policy

◦ R&D investment policy


Growth in Brazil’s Soybean Processing Industry and Government Policies, 1970-93; page 80; J. Cacho dissertation.

A key policy tool in the transformation of Brazil’s soybean industry was:◦ Fiscal policy

Tiered tax policy indicated a preference for poultry exports, over soybean grain exports.


Joint product economics, combined with uncertainty and investment theory, may point to policy directions that support internalizing the environment cost and productivity increasing value of technology innovations.

Such as:◦ Tax incentive for firms with drip irrigation AND pivot

irrigation products AND who invest in cell phone based agronomic advice (extension)

◦ Tax incentive for firms with actuarial models that address increased flood and/or drought events

Macroeconomic stability is a critical assumption.






Outline

Fiscal policy: a tool to…

◦ Communicate market priorities to R&D and Marketing departments in the private and public sectors

◦ Target smallholder farmers / farmer associations

◦ Strengthen investment in businesses locally and internationally

◦ Encourage investment in value-chain building enterprises

◦ Catalyze demand for innovations that bundle responses to environment, social and productivity risks in a single market; and

◦ Rationalize the scarce resource of personnel in government investment bureaus.

Policy, Innovation, Investment

Economic integration is the unification of economic policies between different states through the partial or full abolition of tariff and non-tariff restrictions on trade taking place among them prior to their integration.

The increase of trade between member states of economic unions is meant to lead to higher productivity global scale development of economic integration, a phenomenon now realized in continental economic blocks such as ASEAN, NAFTA, SACN, the European Union.

The Regional Economic Communities (RECs) in Africa group together individual countries in subregions for the purposes of achieving greater economic integration.

Policy, Innovation, Investment:REGIONAL MARKETS


http://en.wikipedia.org/wiki/File:Economic_integration_stages_(World).png; Updated 12 January 2012.

Policy, Innovation, Investment:REGIONAL MARKETSThe Ogallala Aquifer, part of the High Plains Aquifer System, is a vast yet shallow underground water table aquifer located beneath the Great Plains in the United States

The Mekong River (known in Tibet as Dza-chu, China as Lancang Jiang and Thailand as Mae Nam Khong), is a major river in southeastern Asia.


http://flowingdata.com/2010/10/18/true-size-of-africa/

http://en.wikipedia.org/wiki/African_Economic_Community

REC pillarsAfrican Economic

Community

THE TRUE SIZE OF AFRICA


http://en.wikipedia.org/wiki/African_Economic_Community

Active REC pillarsAfrican Economic

Community


http://new.uneca.org/Portals/15/CrossArticle/1/Documents/Transboundary_dec2002.pdf

Africa’s rivers and lake basins

cross many borders

Information re AFRICA TRANSBOUNDARY WATER COMMISSIONS: http://www.transboundarywaters.orst.edu/research/RBO/RBO_Afric

a.html





Outline

Systematic, broad-based, adoption of bundled technologies will be pivotal to agricultural productivity growth at a pace to satisfy demand by consumers and minimum nutrition needs of an increasing world population.

Several factors, including the weight of water, are driving the focus on increasing food production closer to consumers.

Focus on SUSTAINABILE WATER UTILIZATION FOR FOOD can slow down the drive to convert forest into agricultural land, which has implications for conserving wildlife habitat.


Fiscal policy – an innovative policy tool for adoption of technologies that respond to the multi-faceted demands of our future world.

Additional research opportunities:

WATER MANAGEMENT + INDUSTRIALIZATION

WATER MANAGEMENT + FARMER ASSOCIATIONS

ORGANIZATIONAL DEVELOPMENT◦ The finance function in a multinational company presents new

opportunities, and challenges, for Chief Financial Officers.◦ Historically the finance function has focused on cost control,

operating budgets and internal auditing.


INSURANCE PRODUCT DESIGN◦ What is required to make the insurance industry reflect the

acknowledged impacts from Climate Change?

TELECOMMUNICATIONS APPS + KNOWLEDGE◦ How can the mobile/cell phone platform be harnessed for improved

water management?◦ What are the implications of telecoms policy for stabilizing rural

communities?

Partnership with other research organizations, such as IFPRI, ACET, FARA; operational companies; farmer associations; and, financing enterprises is critical.

Water accessibility/availability is one of the priority concerns for the future of our planet increasing demand for policy research.


Multi-disciplinary approach, presents the increased likelihood of:◦ Bringing ‘inclusiveness’ to defining water rights

(group and individual); and,◦ Stimulating demand for Science, Technology,

Engineering, and Mathematics (STEM) education.


Thank You!

Obrigado

Merci

Gracias

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