Get your assumptions out in the open

Oxfam has just released a new report calling for a moratorium on land deals in developing countries. Well worth a look – this should be subject to a robust debate. Lacking the time for more substantive analysis* (see end), let me turn to comparative advantage and look a little closer at one their killer facts:

Indeed Oxfam’s calculations suggest that the land acquired between 2000 and 2010 has the potential to feed a billion people, equivalent to the number of people who currently go to bed hungry each night.

Sounds like a lot of people. The defence of this calculation is tucked away in the footnotes:

The country and area of individual land deals for the purposes of agriculture, forestry, and livestock, covering a total of 40.3 million ha, were obtained from http://landportal.info/landmatrix/get-the-detail/database.csv (downloaded 25/07/12). The potential annual cereal production on acquired land was then calculated for each country by summing the product of the area of each deal and the average national cereal yield (data source: http://faostat3.fao.org (downloaded 25/07/12)). The food energy available from the potential cereal harvest on acquired land in each country was calculated by multiplying the potential production volume by the kcal available from one tonne of cereal in the given country (obtained by dividing the annual food energy supply by the annual food supply quantity, in both cases for cereals excluding beer (data source: Ibid.)). The number of people that could potentially be fed from acquired land in each country was then calculated by dividing the potential annual supply of food energy by the product of 365 days and 1,800 kcal (the FAO’s global minimum daily energy requirement per capita). National totals were then summed to arrive at a global total. On the assumption that the vast majority of the land acquired in the past ten years could be used to grow food, whether or not investors intend to use it in that way, and that the publicly available data is a reasonably representative sample of the total database, a conservative estimation was made that if about 40 million ha could feed about 240 million people, then 203 million ha is likely to have the potential to feed more than 1 billion people

So there’s an assumption here that the land being sold could, if left alone, supply food with the same yield as current production in the country it was purchased. I think this depends on assumptions over the availability of labour to farm this land if it were left free and the marginal product of labour (i.e. would we expect average yields to increase if people left some farms to take up the free land). Oxfam seems to be relying on a pretty optimistic opportunity cost to these land deals – that the counter-factual is a world in which this land sprouts average yields instantly and international food distribution gets the food to the right people who need it.

Of course Oxfam’s calculations may not be considering the counter-factual of no land deals – instead they might just be pointing out the value of the land, in terms of feeding potential, is quite high. This notion is reinforced by the fact that a large chunk of the land deals are for the purpose of growing food to feed people in other countries. A debate about the impacts of these land deals should also consider the impacts on the hungry in investing countries, as they are part of this one billion figure. Anyway, I’d like to hear your comments about the underlying assumptions.

Klaus Deininger, Rabah Arezki and Harris Selod have a recent paper showing that land deals more likely to happen in countries with poor land governance and tenure security. While the Oxfam report does point this out, the violation of the rights and lack of compensation paid to displaced landholders might be a more solid starting point than numbers generated primarily to alarm people. Then again, I suppose that’s the goal of these reports.

*Apologies for the lack of posting – I’m currently in the last couple of months before submitting my PhD, so expect I’ll be able to return full-force by the end of the year.

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