Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact & Partnerships at the Agricultural Research Council; mkhabelat@arc.agric.za. Photo: File
Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact & Partnerships at the Agricultural Research Council; [email protected] Photo: File

The role of state in providing agricultural outlook data

By Opinion Time of article published Nov 26, 2020

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Henry Taylor, the chief of the United States Department of Agriculture (USDA) in the early 1920s, aptly asserted that agricultural prosperity in general depends primarily upon the ability of farmers to anticipate the future.

One might add that the availability, in real time, of accurate and unfettered agricultural outlook data, sometimes referred to as forecasting, is indispensable in order for the agribusiness sector to astutely anticipate the future and prepare accordingly. The foregoing introduction makes a strong case for public provision of forecasting.

Thus, public provision of forecasting services can be viewed as an intervention by governments to correct perceived deficiencies in information flows from agricultural markets in order to improve outcomes for producers and consumers. The effectiveness of any government intervention depends at least partly on how well it is designed to address a specific problem.

The problem is usually a failure and/or deficiencies in services provided by markets or existing institutions. Analysing this requires deconstructing the logic used to justify each intervention and comparing it to the nature of the problem and the range of policy options for addressing it. Political discourse analysis provides one method for deconstructing policy arguments to reveal how well these justify government intervention.

Political discourse analysis frames arguments in favour of (or against) government intervention in terms of actions with potential to bridge the gap between desired future states (such as informed, fair and stable agricultural markets) and perceived current circumstances (poorly informed, unfair and volatile agricultural markets).

Actions themselves are based on value judgements that particular means such as strategies and activities will allow progress towards meeting goals. Perceptions of the current and desired future states of agricultural markets—and the actions that should be taken to achieve these desired future states, are derived from a set of underlying and often contested values about what should matter to governments.

Given the history of South Africa, it is important that any agricultural development and advancement is sector-wide and does not leave any section of the sector behind, thus the public provision of agricultural forecast data is indispensable in addressing the problem of information asymmetry. Market information asymmetry disadvantages smallholder and Land Reform farmers.

Economic theory has always emphasised the posited economic value that forecasts provide through the efficient operation of markets, with benefits to consumers and producers. Thus, economist tend to be equivocal about whether and to what extent these services should have been exclusively funded by governments.

Reliable forecasts can help reduce the uncertainty that farmers face when committing resources to production well in advance of knowing demand at the time of marketing. Consumers benefit through the timely availability of high quality and reasonably priced food. This provides an incentive for both consumers and producers to contribute to the cost of forecasts. Economic thinking can also be used to understand the value derived from using forecasts to make markets more equitable, and to support policy development.

Policy demand for agricultural forecasts remains strong into the 21st century although the emphasis on industries and issues changes constantly. Forecasts and related market information are used to respond to stakeholder concerns and form policy responses to emerging issues, and continue to be used by policy makers and planners for macroeconomic forecasting. South Africa does not have a dedicated agency that provides such public forecast information which is essential for policy applications where independence from industry and markets is essential.

Beyond this policy role, globalisation, and the recent and current Covid-19 pandemic, has dramatically changed the policy arguments shaping the future public provision of forecasting services for South African agriculture. This article proposes that the South African State should develop capacity to provide such agricultural forecasting services as a public good accessible by all in the sector.

The growing sophistication of forecast users and development of interactive web-based technologies, means that public sector forecasting services should focus on providing intermediate data and analyses that users can recombine to produce their own forecasts.

In government, this would build the capacity of policy advisers to Taylor advice in response to emerging issues. In the private sector, this would boost the value of public good data and analyses that consultants and others use to taylor commercial forecasts.

The growing expertise of users increases their independence from expert forecasters and creates a store of knowledge that forecasters should draw on. This will require that the South African public sector should not try to go it alone in competition with the private sector as an expert-centric institution, but rather facilitate expert forecasters to engage meaningfully with diverse groups of forecast users.

This is likely to involve greater use of social media and interactive web-technologies that support innovative approaches to consensus-based fore-sighting of deeply uncertain future market scenarios.

Globalisation has fundamentally altered relationships between farmers and other participants along vertically integrated value chains. Former adversaries in spot markets are now mutually dependent on one another in vertically integrated value chains, which potentially improves the flow of information between them. This means that future forecasting services can no longer focus exclusively on farm-gate prices, but need to inform the creation of value along vertically integrated value chains.

The proposed public sector forecasting services should eventually evolve a complementary focus on fore-sighting, using scenarios built through consultation that draws on diverse types of expertise and multiple perspectives. Scenario analysis that anticipates the future vulnerability of agricultural industries would support proactive policy design, particularly for significant and uncertain step-wise change that is difficult for markets and industries to assess and adapt to. It would also support the investigation of significant new investments and forays into unfamiliar markets by increasingly sophisticated forecast users.

Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact & Partnerships at the Agricultural Research Council; [email protected]

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