Connect with us

Emerging Markets

Agriculture and Sustainability in a World Hungry for Superfoods

 11 min read / 

Ever heard of quinoa, açaí or chia seeds? Few have not, as the superfoods hype has taken the world by storm. The interest in superfoods, defined in Oxford dictionary as a nutrient-rich food considered to be especially beneficial for health and well-being, was sparked in the 1990s by Michael van Straten and Barbara Griggs’ publication ‘Superfoods’. Since the 90s, the demand, production and price of superfoods has skyrocketed.

The tastes of consumers in developed economies changed over the past decade, becoming increasingly health and environmentally conscious while also looking for nutritious and organic food. Consequently, it had effects on local and global economies, superfoods trade and their farmers. Whilst the number of superfoods is vast, this article will provide a discussion of the hyper-trendy quinoa, niche açaí berries, and chia seeds whose price tends to be relatively unstable.

 

The Rise of Quinoa

Only a decade ago quinoa was mostly known only to the Andean population, but now it can be found in a variety of places, from cleansing diets to your trendy salad bars. The United Nations General Assembly declared 2013 as the ‘International Year of Quinoa’ in recognition of the indigenous people of the Andes who preserved this species. Quinoa was thought to be able to help alleviate undernourishment of the poor nations, hence allowing them to achieve the Millennium Goals.

Its popularity has accelerated rapidly over the past few years, but for someone who has been enjoying it for a while, the price difference from a few years ago should be striking. As the demand was rising, supply was unable to keep up; hence the price of Peruvian and Bolivian quinoa has more than tripled since 2004, as can be seen in Figure 1. The governments of the biggest exporters, Bolivia and Peru, have taken action to ensure that domestic demand of quinoa remains high despite the accelerating price. Quinoa can also play an important role in ensuring food security in those countries. For example, in Bolivia, its intake is stimulated through various school programmes and is incorporated into maternity subsidies.

Figure 1 – Source: Food and Agriculture Organisation

The expansion of quinoa world trade has been vast and undisturbed as there are few plant sanitary and protection requirements for quinoa and the tariffs, if any, remain low. For example, the USA implemented a tariff of 1.1% for WTO countries, the European Union has a specific tax of €37 per ton of quinoa and many other major markets, such as Canada, Australia and Japan have fully exempted the grain imports from taxes.  The combined quinoa sales of Bolivia, Ecuador and Peru have increased steadily over the past two decades, from $700,000 in 1992 to $111m in 2012, with an average annual increase of 29%, which is illustrated in Figure 2.

 

Figure 2 – Source: Food and Agriculture Organisation

However, the higher production volume of quinoa is mostly a result of increased cultivation areas, not productivity gains. The stagnation in yields can be attributed to several factors. First, many small farmers in Andean countries are credit-constrained and do not have an access to improved technology or fertilisers. Second, unless quinoa is kept in a dry, dark and cool place, where it can usually remain edible for 2 years, its shelf-life is limited. Due to the lack of suitable storage and efficient processing facilities post-harvest losses are substantial in South American countries, as around 10% of raw quinoa is lost annually in Peru. Using degraded soil and a lack of infrastructure and high-quality seeds for small farmers prevent gains in productivity.

The rising popularity of quinoa had some newspapers such as the Guardian citing concerns and spreading rumours that the poor South American inhabitants’ welfare suffers and they can no longer afford their traditional grains. And yet, the price of quinoa in 2012 was lowest in LAIA (Latin American Integration Association) member countries, as can be seen in Figure 3.

Figure 3 – Source: FAIA

Moreover, the guilt of eating quinoa can be reduced by analysing the study by Bellemare et al. (2016), which evaluates the effect of rising quinoa prices in Peru, both from the point of the consumers and farmers. Whilst Peru is the second largest exporter of quinoa, its shares of Andean exports have been increasing, from 6% in 1992 to over 23% in 2012, driven by access to international markets, and it is currently selling the grain in over 50 countries, as can be seen in Figure 4. In addition, Figure 5 shows some further changes in destination markets of quinoa exports. Peru reduced its regional quinoa imports from 18% in the 1990s to less than 2 % in late 2000s, which is a direct result of their increased domestic production. Now Peruvian quinoa production can satisfy both domestic and international demand.

Figure 4 – Source: FAIA

Figure 5 – Source: LAIA

 

Bellemare et al use the large-scale, nationally representative dataset ENAHO, an annual household survey in Peru which covers nearly a decade. They had two goals: trying to establishing the systematic relationships between the value of household consumption and household welfare with the price of quinoa for quinoa consuming households. The results are somewhat surprising and oppose the gloomy prediction of the Guardian – both groups have benefitted from the quinoa boom. The quinoa price elasticity of household welfare was found to be statistically significant such that a 1% increase in quinoa price is associated with 0.07% wealth increase in quinoa consuming Peruvian households.

Hence, an increase in the grain’s price curiously has positive macroeconomic effects, transmitted through indirect multiplier mechanisms such as increased employment in the agricultural sector, higher revenues from farming and investing into infrastructure. In addition to that, quinoa producers have undoubtedly benefited too, both directly and indirectly. The direct consequences of higher quinoa price allowed the quinoa producers to experience faster welfare growth in 2013 when its price was record-high. The indirect effect was found to be a reduction in the variability of wealth for the grain producers. Thus quinoa consumers from high-income countries can rest assured that by eating the beloved superfood, they are not depriving Peruvians of the nutritious grains and causing them distress.

The Berry Business

Açaí is another currently trending nutritious superfood that is delicious in smoothies, juices and granola bars. They are naturally found in the eastern Amazonia, for example, Venezuela, Brazil and French Guiana. However, despite their well-known anti-oxidant and anti-inflammatory effects, açaí berry production and consumption volumes are relatively small. They can be considered to be niche products, whose demand nonetheless has been rising since 2000s and peaked around 2009 in the USA.

In 2009, açaí sales in the USA jumped by 32% year-on-year. This can be mostly attributed to an episode of Oprah Winfrey’s show in 2009, where she endorsed açaí and praised its traits. The situation spiralled out of control as the lifestyle’s guru endorsement was used to advertise both real and faux açaí products. As a result, many Americans were introduced to açaí, and did not hesitate to try it. Unsurprisingly, the wholesale açaí price increased 60-fold from 2000 to 2009, afterwards, açaí demand and price stabilised to some extent. There were also a few changes in the process of açaí cultivation. Açaí berries used to be grown as an indigenous staple food by small owners and sharecroppers in the 70s, yet nowadays it is also a ‘fashion food’ and is cultivated by corporate farms for both local and international markets.

Eduardo Brondizio spent over 20 years researching the significance of açaí production in the Amazonian region. As his research started before açaí berries became trendy, Brondizio was able to observe how lives of rural farmers changed over the two decades. He emphasised that farmers who produce berries in forested areas rarely have legal claims to the land, as less than 10% of açaí is planted and the rest grows naturally in the Amazon, adding pressure to the sustainability of the rainforest.

Questionable Sustainability

Whilst the researcher admitted that Amazonian families are benefiting from extra income, he questioned the long-run economic and environmental sustainability of the prevailing açaí production system. It is argued that as global açaí market expands, the value of raw berries does not keep up with the value of the processed product. Therefore, the açaí juice producer who creates the drink earns more than the farmer who initially grew the superfood. It is vital to address some important issues, such as credit constrained farmers, lack of infrastructure in the Amazonian region as well as provide more employment opportunities for the local families.

Luckily, there have been some changes in the açaí berries production process. One of the biggest açaí producers is Sambazon, established in 2000, and now selling açaí juices and other products across the world.  The firm is known for its emphasis on sustainable production methods and social responsibility. In 2006 Sambazon was granted the Secretary of State’s Award for Corporate Excellence by US Secretary of State in recognition of its fair treatment of workers and sustainable berry harvesting.

Sambazon strives to improve Amazonian natives’ lives through various infrastructure projects, for instance, the construction of new schools. Unprocessed açaí berries can last only up to four days in shade without refrigeration, therefore if a market is far from a village, selling it is not an option for a small farmer. Hence, it is crucial to develop a ‘transformative economy’ where the value of the fruit can be aggregated locally. Not only this would allow farmers to have a higher economic return, it would also create more rural and urban jobs.

The Success of Chia Seeds

Chia seeds are yet another category of superfoods. Neither a berry nor a grain, they are consumed in smoothies, cereals and puddings, and are famous for its nutrients such as vitamin B and iron. Until a few years ago, chia production and consumption was concentrated in few areas, yet now it is more widely spread. Mexico, Bolivia, Paraguay, Australia and Argentina are some of the countries that have adapted their agriculture to accommodate chia seeds boom in the developed economies. The leading producer of chia is Argentina which cultivated 40,000 tons in 2014, and it is competing fiercely with Bolivia and Paraguay who produced 30,000 tons each in 2014.

Despite Argentina being relatively skilled in growing chia, it experienced almost a complete loss of harvest in 2013 after a long drought. The total loss of the drought in 2013 was estimated to be 3.2bn pesos ($608m). As a result, some workers in the agricultural sector were laid-off, food prices rose and farmers’ revenues from agriculture fell. Chia is also prone to diseases and insects, which makes the harvest difficult to predict. On the other hand, Paraguayan farmers have less experience and a lack of knowledge about the cultivation of chia and their soil and weather are less suitable.

International Demand

Thus even though the international demand for chia has been rising, its price tends to be vulnerable. Its trading price (FOB) fluctuated from $8,000 to $12,000 per ton in 2013, yet fell as low as $3,000 in 2014 Q3. The prices have mostly been under pressure due to earlier mentioned competition between the three main rivals and other international producers stepping into the chia business, such as Australia. In addition, chia price is vulnerable due to changes in its quality, demand and supply; it is considered to be unreliable, which makes it a highly speculative crop, hence troubling its producers.

According to a CBI Ministry of Foreign Affairs Report, the future of chia seems relatively bright. After a period of overproduction and highly speculative behaviour in the markets, its production should stabilise, but remain rising together with exports from 2017 onwards, as can be seen in Figure 6. This gives an opportunity for these countries to diversify their agricultural sector, but it is unlikely that chia’s proportion in total agricultural output will increase sharply over the next years.

Figure 6 – Source: CBI

The report also states that acreage in Bolivia and others have a potential to expand in the near future, but the farmers should be cautious of any changes in chia demand, despite the predictions that it will remain increasing in the years to come, especially with some savvy advertising.

A Promising Future for All

The ongoing superfoods boom was mostly caused by changes in consumer tastes and preferences and their hunger for healthy meals. It allowed the poor farmers of the developing countries to have a relatively stable and increasing income and governments to invest into infrastructure and education. It is crucial for the governments to remember that their lands are precious, and they should not be abused by international profit seeking corporations: rather sustainability and social responsibility should be encouraged, as in Sambazon’s case. Then, not only superfoods but also their producers’ and consumers’ future can be bright.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Americas

Venezuelan Digital Currency Backed by Oil

 2 min read / 

Venezuelan Digital Currency

The Story

Venezuela has announced plans to launch a digital currency, “the petro”, backed by the country’s oil and mineral reserves. The petro aims to help ease the country’s monetary crisis but sceptics claim the proposal has no credibility and will not help those in extreme need.

Why It’s Important


source: tradingeconomics.com

Hyperinflation has eroded the Venezuelan bolivia’s value by 97% this year, making imports incredibly expensive and causing many to abandon trust in the currency. The country’s oil reserves made up 95% of its exports in 2016, while oil and gas extraction accounted for 25% of GDP. Rich supplies of resources provide some initial credibility to the proposal, but President Maduro’s questionable track record when it comes to monetary policy is making many sceptical about the proposal. His currency controls and money printing have only added to the monetary crisis. Maduro has not announced when the digital currency would come into use or any details regarding how the country would create such a system.

Opposition leaders argue the country’s shortages of food and medication are far more pressing and that the digital currency will not address this. The digital currency may provide a more trusted medium of exchange, but it is unlikely to help those in excessive poverty.

Keep reading |  2 min read

Americas

Venezuela’s Inflation Is at 4000%. Here’s Why

 2 min read / 

Venezuelan Digital Currency

Venezuela’s currency, the bolivar, has lost 96% of its value this year. As the currency becomes near worthless, imported food and medicine are in short supply. A humanitarian crisis is unfolding.

The government and state-owned oil company, PDVSA, owe bondholders $60bn alone and have recently defaulted on debt repayments. More defaults could mean investors seizing their stake in Venezuela’s oil.

Why Is Venezuela in Debt?

Acting upon the country endowment of natural resources made it an economic success in the mid-2000s.

Yet, while the price of oil skyrocketed during the late-2000s, former President Hugo Chávez matched this with Venezuelan public debt.

Once the price of oil dived in June 2008, lenders stopped extending credit to the country.

Oil – price per barrel; Source: Macrotrends.net

Venezuela’s Inflation

The recent defaults have caused Venezuela’s inflation to rise astronomically.

Defaults on government bonds are largely to blame for this inflation.

In 2016, OPEC found that oil reserves accounted for 95% of the country’s exports, while the oil and gas extraction combined made up 25% of its GDP.

Venezuela’s overdependence on oil and lack of saving during its heyday are the leading causes of the current crisis.

Keep reading |  2 min read

Emerging Markets

The Psychology Behind Saving

 4 min read / 

saving

The idea that the poor do not save enough money just because they are simply “too poor to save” is wrong.

Gambian farmers have in the past saved in cash (wooden lockboxes with savings were smashed open in an emergency or once the savings goal was reached), stored crops, and consumer durables. Saving in livestock and jewellery enabled other farmers to convert cash into less liquid assets to prevent unwarranted and frivolous spending. A detailed household survey conducted in 13 countries found that for many people in the developing world saving may be counter-intuitive. The poor and the extremely poor, those living on less than $2 a day and on less than $1 a day, respectively, do have a significant amount of choice in regards how to spend their money.

The Developing World

The poor do not use all of their income to buy calories, but only allocate between 56% to 78% to food. Spending on tobacco and alcohol (considered non-essential and nonfood items), and festivals (weddings, funerals or religious events) plays a significant role in household budgeting. For example, the poor in rural areas of Mexico spent slightly less than half the budget on food, and 8.1% on alcohol and cigarettes. The poor and the extremely poor spend about the same on food, which suggests that the extremely poor feel no extra compulsion to purchase more calories. Instead, the remaining income is often saved across a variety of informal saving groups, including peer-to-peer banking and peer-to-peer lending.

It is often the poor, women and the rural communities who are the least banked (those without an access to formal banking services). Not surprisingly, without an access to savings accounts or other formal financial services, it is difficult for families to manage unexpected risks, like illnesses, or plan children’s education. But the desire to save and engage with financial services is still there, as shown by a large uptake in the savings plans in Kenya despite high-interest costs, high withdrawal fees, and close to negative interest rates.

Yet, inchoate financial infrastructure in the developing world cannot on its own explain undersaving. Behavioural economists argue that the poor are no different to the rich in their saving habits: both groups are subject to cognitive biases and inherent human irrationalities and face self-control problems. When it comes to saving, “present bias” (or procrastination, proverbially) occurs when people give stronger weight/preference to an earlier option or purchase that provides instant gratification, rather than setting some funds aside for emergency use. Due to income uncertainties, however, the consequences of this “live for today” behaviour are far more detrimental to the poor than on the rich.

The Developed World

Undersaving is not exclusive to the developing world. Household saving rates, the difference between disposable income and consumption, vary greatly across the world. In 2017, Switzerland and Luxembourg, closely followed by Sweden, are the three countries with the highest savings rates. However, a higher GDP per capita does not necessarily equate to a higher savings rate.

In other words, people with higher income in the developed world countries do not always save more. Consider the US with GDP per capita $57,466 and savings rate of 5.3% and the Czech Republic, GDP per capita $35,127 and a savings rate of 6.7%. Similarly, with GDP per capita of over $43,000, the UK’s household savings rate was 3.3% in 2016, the lowest level since 1963, while in Hungary ($27,008 GDP per capita) the savings rate has been on average 4.5% in the past three years.

Final Thoughts

Is it possible to fully comprehend the monetary hurdles of low-income families? Undoubtedly, consuming today might be a rational choice and a necessity to survive. But, biases deserve context. For many in the developing world saving at home still remains hard. Technological innovation in finance and growth of electronic wallets have already alleviated some of the hurdles of saving money, but technology is not the silver bullet that will address undersaving. An active and conscious commitment to saving and awareness of biases could have a strong beneficial impact on the lives of the poor.

Keep reading |  4 min read

Trending

Send this to a friend