THE ECONOMIC PAMPHLETEER: Cooperation: The Key to Sustainable Livelihoods in Food Systems
Keywords:Agricultural Economics, Sustainability
Profits are not sustainable in today's food systems, and most certainly not for farmers. The more efficient producers may be able to survive financially, but their potential to do more beyond survival is inherently limited. The economic livelihoods necessary to incentivize the needed transition to a sustainable food system will require fundamental change in today's food economy.
Historically, market economies have been characterized by competition. We typically think of horizontal competition within food retailing, processing, and farming sectors, but competition also occurs vertically throughout the different sectors of the food economy. Such markets are coordinated vertically, from consumers down to farmers, through vertical competition. For example, when consumers demand more of something, prices are raised by retailers to ration the available supplies. Higher retail prices provide profit incentives for retailers to offer higher prices to processors, who then offer higher prices to producers, providing incentives to produce more of the higher-priced products. This process is reversed by weaker consumer demand. Vertical competition reallocates productive resources to accommodate changing consumer demand.
These are basically the conditions under which markets for organic, local, and other sustainably produced foods have grown over the past few decades. For example, as consumers' preferences shifted away from industrially produced foods and toward organic foods, price premiums for organic foods provided both the economic incentives and financial means for organic farmers to expand production. However, market growth does not ensure profitability in market economies, as many organic farmers have discovered....
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Copyright (c) 2012 John Ikerd
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