Despite a growing world abundance of food, famines and other food-related crises continue to occur. Indeed, the numbers of people who cannot obtain an adequate diet seems to have increased dramatically in the last decade, notably in South Asia and Sub-Saharan Africa. Food insecurity is most prevalent in rural areas where households with few accumulated assets rely largely on agriculture for subsistence. Loss of income, due to crop failure or steep price declines, makes such households dependent on hand-outs or borrowing, often on very unfavourable terms. The result is increasing reliance on more developed countries for food aid and loans, and cumulative indebtedness.

World price instability is a major contributor to this cumulative food insecurity. In Discussion Paper No. 301, Alexander Sarris develops a model in which the risk that in a given year a country will be unable to satisfy some minimum domestic food requirement is explained in terms of domestic production, net imports and changes in stocks of food. A country's food security is determined by the extent to which it can adjust, by trade or changes in stocks, to unforeseen shocks to domestic production and to world prices. Sarris uses the model to illustrate how developed countries' agricultural policies can have an indirect impact on the food security of LDCs. The model suggests that the major determinants of world price instability are production fluctuations and, perhaps even more significantly, the trade and stock adjustment policies of the trading countries. Developed country agricultural protection insulates their markets from international fluctuations, increasing the variability of world prices and hence the instability of LDC import prices.
Estimates of the model also reveal that, in order to ensure that the security risk for food-importing LDCs is less than 5% in a given year, substantially larger food stocks should be held than were held in the period 1974-83. The initial level of world cereal reserves should be 6% of trend demand, if reserves are held only by exporting countries, or 3% if reserves are held by food-importing developing countries too.

Food security considerations carry implications for LDCs' desired production structure. Sarris presents a model which shows that, the larger the ratio of a country's minimum food requirements to its total income, the lower the share of income available for investment; economic growth can only be maintained by borrowing. Rather than produce the mix of products which would maximize their income, most LDCs would prefer to avoid extreme fluctuations in income. The model shows that the greater a country's risk-aversion, the greater weight it should give to food production. This explains why many poor developing countries have made food self-sufficiency a prominent development goal, despite apparent comparative advantage in more lucrative but also riskier products.
Many developing countries with debt service problems have had to implement IMF or World Bank adjustment programmes. These aim to create the conditions for greater sustained growth and typically emphasize agricultural production for export, rather than domestic consumption. Such policies may be unwelcome to many such countries, Sarris argues, since their preference may well be to stabilize import volumes rather than to maximize export earnings.

Food Security and International Security
Alexander H Sarris

Discussion Paper No. 301, March 1989 (IT)