McKinsey: How to build food security & nourish growth

04 August 2015 Consultancy.uk

The world has 800 million people that lack food security and recent price shocks have created additional ripples of instability. In a recently released report from McKinsey & Company on the state of food security, the consultancy considers the current situation and practical steps governments and other stakeholders in the food value chain can do to create a stable and well regulated food net for everyone irrespective of income.

For many in the UK there is no concern about where the next meal will come from; it comes from the local market, the supermarket or food bank. Although there are numerous news stories about the food insecurity suffered by 800 million people, they continue to be far away. In a recently released article from McKinsey & Company, titled ‘From liability to opportunity: How to build food security and nourish growth’, the consulting firm considers the general conditions around food distribution and security, and the role that different stake holders, governments, business and farmers, in different regions around the world play.

Food environment
Current demographic projections will see the coming 35 years add a further 2 billion people to the world. In addition, the continued improvement in incomes for people in developing countries will lead to a growing ‘global middle class’. This in its turn will lead to an increase in demand for meat and other protein-rich foods. According to the UN ‘Global agriculture towards 2050’, the world will need to produce 70% more food to keep up with demand by 2050.

Prices of major food commodities

The increase in demand can already be seen as population demographics change. The past decades have experienced increased volatility in the prices of staple food on the global market and between 2010 and 2013, considerable spikes in food prices led to local instability. In their current state, 28 of the 109 countries surveyed do not have sufficient food stocks to withstand a crisis. In addition, despite advances in seeds, irrigation, crop protection, and other techniques in more than 20 countries, at least a quarter of the population is chronically undernourished.

Growing the future
To resolve the situation around food scarcity and supply stability, McKinsey considers the role of various stakeholders as well as tools and systems that may create improved long term outlooks for countries struggling to keep their populace fed.  One option for governments is to identify strength crops and encourage their production, while dis-incentivising cash crops that are poorly suited for the local environment.

According to the authors, “The most effective agricultural policies facilitate end-to-end value-chain development, from promoting the right inputs to encouraging creative business models to enabling low-interest financing and risk sharing.” Removing hurdles around the movement of food products and centralised distribution hubs for food are another way in which countries can improve their access to the food market – both in terms of removing bottlenecks from export and import opportunities.

4 different ways to improve food economies

The research highlights that to protect their citizens from disruptions to the food supply chain caused by unexpected events—for instance, civil wars, currency collapses, or extreme weather—many countries have buffers in place. These food strategic food-reserve systems can supply more than just emergency relief. They are also able to cope with supply and market disruptions and to keep inflation in check. McKinsey notes however that strategic reserves need to be carefully administered to prevent market disruptions as food nears its use by date and is released.

Building a stable future
Although there are a number of key moves that countries could make to create a stable food future for their populace, the consultancy notes that many countries are not yet investing in creating the conditions for long term food stability. Countries should develop a clear picture of their current situation, beginning with a quantitative, comprehensive assessment, and focus the issue of food supply needs to consider the wellbeing of residents of all income levels.

One approach to consider is to establish a leadership unit, whether by creating a new government agency or working within an existing one, to coordinate the transformation. According to the researchers, this may require sponsorship from the top of the government and partnerships between society, government, business and civil society. The joint input of governments, companies, donor agencies, and farmer organisations will provide the unit with technical assistance, financing, best practices, and monitoring and assessment.

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