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As food prices soar, Ankara wobbles on solution

Turkey’s food inflation has climbed to nearly 30% amid an alarming decline in the agricultural sector, but Ankara remains far from a viable solution, wasting time with unrealistic projects.
People shop at a food market in Istanbul, Turkey, February 11, 2019. REUTERS/Murad Sezer - RC1FDE55C390

As we all know, if the first button of a shirt is fastened wrong, all the other buttons go wrong. Turkey, which used to be self-sufficient in food and free of a food security problem, has been grappling with alarming agricultural decline for some time, increasingly turning to imports as its agricultural and animal production no longer meet domestic demand. On April 25, the embattled Turkish lira tumbled to its lowest level since October, boding further hardship for import-reliant farmers and the economy in general.

Farmers complain of being neglected, and an exodus is ongoing from the sector. Although exports have been able to cover the supply shortage, the devaluation of the Turkish lira has meant higher foreign exchange prices, which, combined with other problems, have raised costs in the agricultural sector. As a result of the cost increase, coupled with an unhealthy supply chain between producers and consumers, year-on-year food inflation has soared to nearly 30%.

The first button was fastened wrong years ago, when Ankara moved away from planning and began to embrace — with little questioning — destructive market rules, recommended emphatically by the International Monetary Fund (IMF) and the World Bank.

The illusion of an omnipotent market led to the misguided move of lifting state support and protections in the agricultural sector, although such safeguards remain in place in many countries around the world. Most notably, the standby deal that Ankara had with the IMF to overcome the 2001 economic crisis included painful terms to end agricultural supports and privatize public enterprises in the sector. Lacking strong organizational ties and cooperative networks, the sector failed to fight back the bitter pills, bracing for more trouble down the road. The 2001 measures spurred an exodus from crop cultivation and stockbreeding, with many erstwhile producers flocking to urban centers to become low-paid, menial laborers in the flourishing construction sector.

From 2003 onward, after the Justice and Development Party (AKP) came to power, the country enjoyed abundant inflows of foreign funds, which facilitated external borrowing and cheapened foreign exchange. As a result, many sectors, including agriculture, were hit by a rising tendency to buy from abroad instead of producing at home. Meanwhile, the measures employed in the conflict with Kurdish insurgents in the southeast dealt an additional blow to farming and stockbreeding in the region, where agriculture is a principal mainstay.

The chain of mistakes and the lack of timely redress meant that Turkey increasingly turned to importing raw materials for vegetative and animal production and livestock from 2010 onward.

But as foreign currency prices began to rise in 2014, imported agricultural and animal products, fertilizers, pesticides and machinery became costlier, aggravating the problem of an import-reliant agriculture and insufficient domestic supply. In 2018, Turkey’s agricultural foreign trade included $17 billion worth of exports and about $16 billion worth of imports. While exports still exceeded imports in terms of food, the country had a significant deficit in terms of agricultural raw materials, having become dependent on foreign sources.

Turkey’s agriculture has not collapsed completely, but it is badly crippled. Many subsectors — though not all of them — have developed reliance on imports for no inextricable reason.

The Turkish Statistical Institute (TUIK) publishes annual “balance tables” for vegetative products, calculating the sufficiency rates in grains, vegetables, fruits and other products. The sufficiency rate denotes to what extent the local production of a certain crop meets the domestic demand.

According to last year’s data, Turkey is self-sufficient in terms of wheat and even has a surplus of 12 percentage points. But when it comes to grains such as barley, corn and oats — used mostly as animal feed — the output falls short of meeting the domestic demand, requiring imports. The same goes for legumes. The rice output, for instance, meets only 67% of domestic demand. Gaps are seen also in the production of haricots as well as lentils and chickpeas, where the sufficiency rates stand at 83% and about 90%, respectively. In the fruit category, Turkey is largely self-sufficient, except for bananas, and even boasts significant exports of hazelnuts, grapes, apricots and citrus fruits. Vegetable production also meets domestic demand, while the sufficiency rate in tea output is 93%.

The TUIK has yet to offer similar “balance tables” for livestock and meat production, but the large imports here show that the problem of insufficiency is predominant mainly in this category. In 2018, the combined imports of livestock, meat and meat products made Turkey a net importer by $1.3 billion.

The maladies of the agricultural sector are serious but not insurmountable. The sector needs a prescription that involves planning and incentives to boost production, minimize reliance on imported inputs, curb the fragmentation of arable lands, enhance productivity, encourage the output of products with high added value and encourage producers to organize, including in democratic cooperatives. An agricultural sector that allows producers to profit, while offering consumers healthy food at reasonable prices and even selling to foreign markets is not impossible. The incumbent government, however, appears to drift away from the path of solution, wasting time with rather unrealistic “projects.”

The economic reform program, announced April 10 by Treasury and Finance Minister Berat Albayrak, included reforms in the agricultural sector, among others. Soon, the Agriculture and Forestry Ministry was reported to have drawn up a “National Unity in Agriculture Project.” The hastily drafted blueprint was an instant disappointment. It outlined measures that are simply inviable and drew harsh reactions from stakeholders in the sector.

The project, submitted to President Recep Tayyip Erdogan for approval, calls for the government’s creation of a “National Unity Cooperative” by merging the provincial entities of the Agriculture Ministry and the Agricultural Credit Cooperatives. The model, which would sign up farmers in a corporatist style, has a second leg that involves the creation of a holding company in collaboration with the private sector. The company, which would be open to both local and foreign investors, would take in also the existing state agricultural enterprises as subsidiaries. The National Unity Cooperative would have a 35% stake in the company and the state agricultural enterprises would hold another 15%, while the other 50% share would go to local and foreign companies. The main criticism directed at the project is that it views farmers and producers as passive elements expected to play the roles they are given.

Cooked up without any consultations with stakeholders, the project has seemingly failed to impress Erdogan as well. An introductory gathering for the project, scheduled for April 25, has been postponed, with the sector continuing to await the right prescription for its maladies.

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