System Dynamics and Sustainability of the Global Food Supply System

21 November 2019

The system dynamics currently operating in the global food supply system are working in a manner that is very injurious to the system’s long-term sustainability.  Food production is an illustrative example of how large complex systems can function in a manner that is pathological, without any agent in the system being at fault individually.  The basic setup of the system is the source of the problem.

Food production and distribution is the world’s largest industry.  More than one billion people are involved in different aspects of it.  Unfortunately, the food production and distribution system is one of the world’s most powerful generators of poverty, economic turmoil, political instability, and environmental damage.

Since the end of the Second World War, prices of major agricultural commodities (e.g., corn, wheat, potatoes, rice, and soy) have fallen by half or more while production has increased by factors of as much as 10.  Consumers get the benefit of the falling prices.  However, rural families around the world who depend on farm income are devastated by these trends.  Today, small farmers cannot produce commodity crops at costs competitive with large-scale agribusinesses.    As a result, today’s food system produces cheap food for the affluent and expensive food for the poor.

The system dynamics present catch all the participants in the global food production and distribution system in a race to the bottom.  Each agent is compelled to travel faster and faster towards a place where no individual one wants to go. Forces in multiple positive feedback loops create the difficulty:

1. The supply side is driven by rising production volume and increasing profits. The profits obtained provide incentives for more capital investment, causing further increases in capacity.  Large multinational conglomerates with preferential access to financial capital are best positioned to make these investments, and so come to dominate their industries.
2. This greater supply reduces prices and increases food availability to a wider range of customers. The increased market opportunities lead to further increases in the supply chain by food packagers, distributors, and retailers.
3. In order to maintain income in the face of falling farm commodity prices, local producers respond by investments to increase efficiency and expand land use. This further grows supply side capacity.

Investment includes extensive farm mechanization, which decreases farm labor employment per acre farmed.  Other investments include more extensive use of chemical fertilizers and pesticides along with greater use of irrigation, leading to damage of the land over the longer term.  As the land becomes less fertile, technical investments are increased, creating a vicious cycle.  More than a billion hectares of topsoil have been lost over the past fifty years as a result of the effort to keep up the land’s production under greater use.

The overall effect is one of continually increasing production and falling prices.  Wealthier governments respond to the resulting economic pressures by providing hundreds of billions of dollars a year in farm subsidies.  Poorer nations, of course, have little ability to use this means to ameliorate the stresses on their peoples.

The increasing inability of small farmers to make a living from their land is a major contributor to the movement of rural populations into the cities to seek other forms of employment.  It is also a major contributor to cross-border migration, causing many societal stresses from the difficulty of accommodating and assimilating the migrants.

Making the global food production and distribution system sustainable over the long term is going to require addressing the system from a whole systems perspective and involving the whole range of stakeholders, who often don’t otherwise interact directly.   Solutions to the problems of the global food production and distribution system will require fundamental changes to the rules of the game, so that the various participants in the system are not caught in competition with each other to the benefit of no-one.