Joyce Cacho Water for Food Presentation

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

 Sustainability + Joint Product Economics

 Policy, Innovation, Investment
◦ Regional Markets

 Adoption for Transformation + Resilience

…and
RISK

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

Dimension of climate impact: EXTREME WEATHER

PHYSICAL
✔
CLIMATE
IMPACTS

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


PHYSICAL
✔
IMPACTS
adjusted for
COPING
ABILITY



✔
PHYSICAL
CLIMATE
IMPACTS



PHYSICAL ✔
CLIMATE
IMPACTS



PHYSICAL
IMPACTS
✔
adjusted for
COPING
ABILITY


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).

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

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.

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,

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.


LOOKING AHEAD
 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.

INSURANCE INDUSTRY
 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.

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

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



BUSINESS STRATEGY + OPERATIONS
 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
Expansion
and
Organizational
Development

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

• 6 billion mobile/cell phone subscribers in the world
• Growth is led by China + India (30+ percent of
world subscriptions)

WORLD POPULATION
Android is now the top smartphone
operating system  with a user
base increasing by 700,000
subscribers daily

#1 HANDSET
MANUFACTURER Leading
smartphone
hardware
vendor
http://www.digitalbuzzblog.com/infographic-
2012-mobile-growth-statistics/

AFRICA
 has about 644 Mn subscribers (about 11%)
 LTE deployments are quickly gaining momentum (11 Cell / Mobile Phone Penetration
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
http://www.mikekujawski.ca/2012/05/30/finally-some-2012-statistics-for-the-african-
mobile-phone-market/

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

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

 Sustainability + Joint Product Economics

 Policy, Innovation, Investment
◦ Regional Markets

 Transformation + Resilience

 "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.

 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.

 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.

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

The 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.

THE TRUE SIZE OF AFRICA REC pillars
African Economic Community

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

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

Active REC pillars
African Economic Community

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

Africa‟s rivers and lake basins
cross many borders

http://new.uneca.org/Portals/15/CrossArticle/1/Doc
uments/Transboundary_dec2002.pdf
Information re AFRICA TRANSBOUNDARY WATER COMMISSIONS:
http://www.transboundarywaters.orst.edu/research/RBO/RBO_Afric

 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.

Paldies
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Joyce Cacho Water for Food Presentation

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