Do we really understand the importance of agriculture?

I can’t count how many times I’ve been live on television lately, especially on weekends. On Instagram and other social platforms, I’ve welcomed not only experts, but friends from Turkey and all over the world. In these talks, everyone was agreed upon one thing: agriculture

There is this saddening fact that Turkey manages agriculture poorly despite its attribute as one of the world’s top agricultural producing countries. Whenever agricultural prices in global markets start falling, prices in Turkey tend to go up. Every state on the face of the earth tries to regulate agriculture and agricultural markets. In Turkey, however, the government has just left the agricultural industry to its fate, except for minor interventions.

Unfortunately, agriculture is seldom addressed in economics books. As the emergence of economics coincides with the early years of the Industrial Revolution, the first economists seemed like they have been very attentive in putting economics in a place apart than agriculture.

When Atatürk said, “Turkey’s true master is the peasant”, he indeed placed a strong emphasis on the critical nature of the situation. However, it is obvious that, after 1950s, agricultural sector has suffered a scale problem just like other sectors in Turkey. As I don’t intend to go into details about this subject here, for further insights, I would like to urge you refer to “Milestones in Turkish Economy” co-authored with Yalın Alpay. Just talking about this makes me sad already. So, why don’t we just focus on the current problem?

“Agricultural commodity prices are rising…”

Commodity markets have been functioning problem-free agricultural commodity wise, up to now. But, things have changed with introduction of export ban and when some countries started to stock up on agricultural products. Staple food prices started to sharply rise in certain regions when global supply chains were negatively affected by the pandemic.

Rice and wheat prices, for instance, drastically rose in futures and spot markets. Given the fact that these two crops supply a major proportion of the world population’s energy and nutrient needs, sharp price increases appear more understandable. In oil-rich Nigeria, the retail price of rice has risen 30% just over the last four days of March. It is quite concerning indeed that staple food prices keep on rising as oil prices go down.

But no one can provide a rational answer to the sudden increase in prices. Despite forecasts saying that the world will not face food shortage, it’s still a big unknown that whether food producers will be able to supply food in the right time, and the right amount of food at right prices. This may be the reason why prices are going through the roof. We should know that concerns about food supply grow as pandemic deepens.

Meanwhile, imposing price ceilings on food may cause the emergence of a black market. On the other hand, the governments do not have the luxury to let food prices choose whatever direction they want. So, it looks like they will have some hard times ahead.

A survey was recently conducted with food retailers in Turkey, which revealed that Turkey’s largest food retailer has a net profit margin of 3%. We can therefore assume that price increases are mostly associated with supplier behaviour.

According to the survey, the price of beef and veal has increased by 13,57%. The reason for such changes was interpreted as the fact that meat and poultry producers have increased their prices gradually after the export ban.

The result of the survey also suggests that we should expect sharp price increases in food items that Turkey is forced to import while it emphasizes the fact that people prefer imported pulses when shopping at discount grocery markets.

Food retailers who participated in the survey said that Turkish households have already stocked up on rice and pulses that could last for a couple of months. The survey company indicated that supermarkets too have tendency to stock up against the threatening price increase, which is good and bad news.

This is good news because we have a 6-month stock of rice and pulses; this is bad news because products stocked up for cheap will be sold to people at higher prices. I think we need some severe government controls to avoid any such unpleasant situations.