Farmers and the Economic Crisis

The effect of the economic crisis on Asian farmers, 1998-12-01

Effect of the Crisis on Asian Agriculture

The big news about Asia for most of the last year has been the economic crisis. The reasons for it are complex, but it was set off by the devaluation of the Thai Baht, which in turn meant a withdrawal of overseas investment capital and massive sales of Asian currencies. The value of these currencies fell rapidly. This made it difficult for Asian firms who had borrowed from overseas to repay their debts. Bankruptcies and unemployment became widespread. Banks went under, as their loans became bad debts they would never see repaid.

We looked at the impact of all this economic turmoil on farmers in different Asian countries. We expected farmers to suffer with a falling demand for quality foods such as fruit and meat. In fact, demand seems to be holding steady. In Thailand, the Philippines and a number of other countries, the drought caused by El Niño has meant low yields and high prices, particularly for fruit. There may have been a slight fall in the consumption of fruit because of the economic crisis, but so little fruit was available that prices remained high.

In some countries, the economic crisis has even stimulated agriculture. The economic slowdown and the shortage of foreign exchange has meant that less food is being imported. Local farmers are filling the gap. Also, rural villages are getting their people back. The population movement from the countryside to cities is reversing as unemployed workers go back home to their family farms. Many overseas workers are coming home, the first to lose their jobs as unemployment in the region spreads.

Some economists in Thailand are talking of the regeneration of villages that had been abandoned by adult workers in their prime and left to children and old people. They wonder if after the crisis there might be better models of development that will bring more economic opportunities to villages, so that workers don't have to move away.

Farmers in highly industrialized countries seem to have fared the worst. In Korea, there has been a sharp increase in the price of livestock feed and oil, most of which are imported. Most growers of horticultural crops in Korea use plastic greenhouses which are heated during the cold winter. Heating costs have risen with the price of oil.

A recent survey by Korea's national cooperative movement, NACF, found that 34% of horticultural crop producers and 57% of livestock farmers have had to reduce their farming scale by 20-50%. There has been a fall in the demand for fruit, vegetables and animal products in Korea. Combined with the higher production costs, this has caused hardship for many farmers. There is a renewed emphasis in Korea now on low-cost farming methods which conserve energy.

In Japan, there has been surprisingly little fall in the demand for high-value food products like meat and fruit. People have avoided making large purchases like a house or car, and have tended to buy slightly cheaper cuts of meat, but by and large there has been little change in consumption patterns, at least as far as food is concerned. Grain yields in the United States and Canada have been high this past year, so that world grain stocks are also high and the international price of grain is low. This has helped to off-set the fall in the value of many Asian currencies and reduce the cost of imported grain.

Weather More Important to Asian Farmers Than World Stockmarkets

Every year, farmers suffer from fluctuations in both yields and prices. Surviving these is part of the farming way of life. Whenever conditions are good and yields are high, there tends to be a market surplus so that prices are low. When poor conditions bring low yields, prices are high but the farmer has little or nothing to sell.

For Asian farmers in general, any effects from the economic crisis over the past year have been much less than the effects of the unusual weather brought by El Niño. The economic crisis which has brought so much hardship to people in cities has not had much effect on most farmers. In fact, by reducing the imports of food, the crisis has even done some farmers good! In many Asian countries, farmers are in no hurry at all for the economic crisis to end.