5.1 Conclusion

This report set out to explore the changing political economic dynamics of food security by investigating how the political economic dynamics of both international and domestics food markets affect food security in fragile states. Despite a concerted effort to improve the supply of food aid, the commercial supply of wheat through international trade and supply through domestic production likely outstrips the impact that can be achieved through food aid or development aid aimed at improving farm yields in many FCAS by a wide margin. Therefore, this report explored the functioning of international food markets and their (historical effects) in FCAS and discussed the political economy of domestic production in FCAS.

The analysis commenced with an exploration of international food trade regimes, the impact of the financialisation of the commodity trade and the position of fragile states vis-à-vis international markets. As many states came to rely on internationally traded wheat given their reliably low prices on international markets, these prices have become increasingly volatile. International markets shifted from a market geared towards reliable and affordable food supplies to market dynamics focussing on maximising earnings for market participants. This coincided with a power shift in the grain markets from national institutions (e.g., wheat boards) to commodity traders and financial institutions. The accompanying increasing financialisation further displaced power from productive actors towards investors. These shifting dynamics affect the position of fragile states, which are increasingly struggling to cope with high price fluctuations and have few means to mitigate the resulting uncertain food security outcomes.

As a result of these international dynamics, the organisation of domestic grain value chains may thus very well be one of the most impactful levers when it comes to promoting food security in FCAS. Yet, in fragile states it is often difficult to achieve food security through domestic production and distribution mechanisms, as fragility and conflict disrupt economic activities along the whole value chain. Moreover, the development of domestic value chains is hampered by political constraints, as powerful elites block changes to the status quo in order to preserve their position of power at the expense of reliable food security outcomes for the wider population. Yet, even when such resistance is overcome, developing stronger agricultural value chains does not automatically lead to improved food security. Existing powerbrokers within the value chain often reap most of the profits arising from the increased economic activity, leaving little benefits for their competitors or end consumers. Moreover, increased economic activity may inadvertently fuel conflict – not only when profits are directly used to fund armed actors, but also when the distribution of profits plays into existing tensions among communities involved in the chain. As such, technical approaches aimed at improving yields and other production factors may not translate into improved food security. Rather, food security interventions should move beyond technical approaches and work politically.

These findings were subsequently illustrated through the case of Ethiopia, a fragile state that features high agricultural production potential but struggles with persistent food insecurity. Ethiopia’s multiple and persistent conflicts disrupt activities across all stages of the value chain. The country’s state-led approach struggles to deliver its intended benefits to smallholder farmers and at times plays into adverse impacts for them, including shrinking land plots, input shortages and a lack of finance. Policy at times prioritises political imperatives over market realities. This creates blockages in implementation at best or market distortions at worst. Given the current poor economic context, banks are reluctant to provide finance for agricultural activities, while the government struggles to import fertilisers. Moreover, the wheat value chain is rendered highly resistant to change, as a limited number of actors leverage their political connections and/or their market position in order to capture the benefits of interventions or to resist their implementation. This demonstrates that interventions focused on boosting production are not sufficient to improve food security outcomes, as increases in production risk being channelled abroad by businesses or smugglers while other gains are captured by entrenched actors with no meaningful increase in the incomes of farmers or decrease in the price for consumers.

In order to overcome the constraints identified in this report, policy makers and implementing agencies should consider the following recommendations.

5.2 Recommendation 1: International food market regulation should refocus on reliable and affordable food provision

As highlighted in chapter 2, international food markets have shifted away from a structure geared towards the reliable provision of affordable food for consumers around the world towards a market system focused around competition over revenues between market actors. As such, food prices have risen and become increasingly volatile, a trend which is likely to aggravate in the future as climate change impacts become increasingly felt. Therefore, it is worth reconsidering to what extent the international food markets should contribute to economic development through free trade and competition and to what extent they should facilitate people’s right to adequate food stimulated through regulatory intervention. Currently, the international and national regulatory framework in most Western countries is skewing substantially towards the deregulation of trade, whether that be the trade of physical goods or financial derivatives. While some measures have been introduced in the past to curb certain trade patterns in favour of increasing food affordability and/or price stability, many such measures have been weakened or repealed in the years since. In Europe, notable examples can be found in gradual erosion of position limits in food-relevant commodity trade.[259]

Measures required to shift market dynamics in favour of consumers are known (see for instance publications by EU organs, UN Trade and Development [UNCTAD] and FAO on this topic), but currently lack sufficient political backing for their sustainable implementation.[260] In effect, trade in food related commodities in the major financial markets in the EU and US could be refocussed through regulation focussed on the following areas:

5.3 Recommendation 2: Food security interventions should address not only production, but also broader political and economic bottlenecks in the value chain

Chapters 3 and 4 have shown that food (in)security in fragile settings stems not only from supply shortages, but also from the broader political economy structures in which relevant value chains develop. To be sure, conflict and fragility do often reduce the supply of food in the market. Yet, increasing supply does not automatically translate into improved food security outcomes. If farmers are forced to sell below cost price or at fixed prices artificially set below the market price, increases in supply may not be sustainable in the long term. Similarly, if agricultural produce is diverted and exported abroad, increasing supplies risks generating profits for traders, rather than increasing the availability of food in the country. More generally, when activities along an agricultural value chain are scaled up, actors that enjoy a dominant position in the chain tend to exploit their power to pocket the profits. They are also likely to resist any potential change that may threaten their dominant position, for instance by restricting competition or lobbying for favourable regulation.

As a result, food security interventions that focus solely on boosting agricultural productivity and total supply are unlikely to achieve their desired effect. Rather, to address the bottlenecks that prevent value chains from improving food security outcomes, interventions may need to work more politically – that is, they should actively engage with the power dynamics that ultimately determine who benefits from changes to the status quo. While specific measures will vary greatly from context to context, key broad steps in this regard include the following:

5.4 Recommendation 3: Programming in Ethiopia should rebalance power dynamics within the grain value chain

The analysis of Ethiopia’s wheat value chain in chapter 4 showed that the main issues preventing Ethiopia from achieving food security are largely political and economic, rather than simply technical. Political tensions around the country and the ensuing conflicts damage value chain’s activities, while the state’s heavy-handed approach in the agriculture sector (including a centralised system of fertilisers supply and the government’s current wheat push) often results in more challenges than benefits for many actors along the value chain. While recent economic reforms are likely to reduce incentives for the smuggling of wheat abroad, they may create other challenges, such as increasing the price of imported agricultural inputs (e.g., fertilisers). In order to be effective, food security interventions should be coupled with efforts to address these broader challenges – most notably ongoing conflicts and the country’s economic crisis.

In addition, a restricted number of actors currently enjoy a particularly powerful position in the value chain, be it because they enjoy political connections, or because they occupy a favourable position in the chain. In the current circumstances, these actors are likely to capture most of the benefits generated by changes to the status quo. This limits the possibility to raise production at farm level, as the benefits of raising production accrue elsewhere in the chain. To ensure a broad distribution of benefits and improved food security outcomes, interventions should be geared towards addressing some of the existing power imbalances. This includes: