Jozimo Santos Rocha - Agro-Industry Officer (Agribusiness and Value Chains), FAO Regional Office for the Near East and North Africa
Food losses and waste (FLW) have been a challenge in the Near East and North Africa (NENA) region since long before the COVID-19, but this calamity, that rapidly became an economic crisis, is bringing disruptions to food systems that may manifest in greater levels of FLW. Containment and prevention measures are affecting the complex web of interactions along value chains, involving producers and input/service providers, intermediaries, and consumers.
Global estimates, prior to the COVID-19 crisis, suggest that 13.8 percent of food produced for human consumption in 2016 was lost from the farm up to, but excluding, the retail stage. In NENA this figure is about 11 percent (FAO, 2019). Adding retail and consumption, the region loses up to 250 kg per person each year, a figure that surpasses the global average. In average NENA countries 14-19 percent of grains; 26 percent of fish and seafood; 13 percent of meat; and 45 percent of fruits and vegetables are lost or wasted (FAO, 2014).
With growing momentum to reduce FLW, especially in the time of COVID-19, we observe a tendency among policy analysts and practitioners to focus on what should be considered loss or waste, and on measuring physical quantities of losses. Yet, many important questions go unaddressed. Should policy makers aim to eliminate FLW? Are there acceptable –optimal from some perspectives– levels of FLW? Why do we observe higher loss rates of tomatoes in comparison to similarly perishable meat? How are losses determined across a food value chain (FVC)? How does reducing losses downstream in FVCs affect losses upstream? Will this reduce the total losses in the food FVC? These questions call for reflection on the drivers of FLW in terms of the choices and behaviors of economic agents, their incentives for reducing losses, and the mechanisms through which loss-affecting actions play out across the FVC.
Our recent work takes an analytical economic perspective on why losses might exist and if they are rational or optimal for economic agents. Economic agents determine levels of FLW through their decision-making, balancing benefits and costs of reducing losses given their resource and technological constraints. We can understand these micro decisions using three economic agents:
- Farmers, who produce food and determine losses starting at harvest. They face a tradeoff between reducing losses and enhancing output productivity, which is often related to scale. For example, moving from manual to mechanical harvesting will increase productivity but likely increase losses;
- Intermediaries, for whom food is an input. Food is transformed, and sold. Unlike farmers, intermediaries have clear incentives to reduce their losses, which are expected to reduce with scale. For example, can you produce more pasta while increasing percentage losses of wheat?
- Consumers, with whom food comes to an end. Consumers balance the monetary cost of food with the cost of time required to acquire and prepare food. Poor consumers have a high price-response and may choose to reduce losses to increase income. Consumers increase losses when incomes rise.
These economic agents share a common characteristic as they all seek to make best use of their resources. Losses affect the productivity of economic agents, and changes in their productivity are communicated through prices. Therefore, reducing losses at one node likely has downstream and upstream impacts.
A FAO project in Tunisia studied the wheat VC and found wheat loss as perceived by farmers to be 7.3% in Siliana Governorate and 4.6% in Bizerte. Notably, farmers linked their losses to harvesting practices and consider “setting” the combine harvester to field conditions before each use the most important action to reduce losses. This alone reduces losses by 2.6 percentage points, or about 50% of the average perceived loss.
The empirical analysis of this data indicated, firstly, that the gains from setting the machine decrease with size. For 0-3 ha farms, losses can be reduced by almost 3%, while the reduction in losses is negligible and not statistically significant for farms over 35 ha.
Marginal effects of setting the combine harvester before harvest, by land size
| Cereal land (Has) | Cereal losses with and without setting the Combine Harvester (%) |
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| No | Yes | Difference | Difference p-value | |
| 0-3 Ha | 9.4 | 6.4 | -2.9 | 0.00 |
| 3-8 Ha | 7.4 | 4.8 | -2.6 | 0.00 |
| 8-35 Ha | 5.3 | 3.1 | -2.2 | 0.00 |
| >35 Ha | 0.04 | 0.0 | -0.04 | NA |
Source: Anriquez, el al., 2020
Secondly, the revenue gains per hectare are greatest for smaller farms in Siliana and Bizerte and decrease with farm size. However, when distributed over the whole farm area, the total gains for small-scale farms is minor (USD $5.2 - 15.6). Small-scale farmers consider the cost of setting in terms of additional rental time and qualified labor, and may act rationally if they decided not to do it.
Reduction of losses in terms of revenue by farm-size
| Region | 0-3 ha | 3-8 ha | 8-35 ha | >35 ha | Total |
| Average loss reduction per ha (US$) | |||||
| Bizerte | 7.8 | 8.6 | 8.5 | 7.2 | 8.1 |
| Siliana | 2.6 | 1.4 | 0.7 | 0.5 | 1.4 |
| Total | 3.7 | 3.8 | 5.0 | 2.4 | 3.8 |
| Average loss reduction per farm (US$) | |||||
| Bizerte | 15.6 | 47.6 | 127.5 | 1,451.2 | 368.9 |
| Siliana | 5.2 | 7.3 | 9.5 | 159.4 | 47.5 |
| Total | 7.4 | 20.7 | 74.6 | 538.3 | 158.5 |
Source: Anriquez, el al., 2020 (based on a farm gate price US$ 150/ton)
In Egypt, tomato losses are often attributed to the sharp, ragged edges of palm crates used from farm-level until retail. Experts have proposed replacing the traditional palm crates with potentially loss-reducing plastic stackable crates. Recently FAO measured and analyzed losses occurring along the tomato VC through packaging and transportation, from farm to retail, comparing traditional to improved packaging technologies. A 10kg and a 22kg plastic crates were studied.
Marginal effects of package type on attributes, compared to palm crates, by day
Source: Anriquez, el al., 2020
The large plastic bins in fact reduce losses, but these reductions are so small that they become economically efficient only when plastic bins exceed their expected life-cycle. Farmers and intermediaries almost certainly behave rationally when preferring palm crates that lead to higher losses. A migration towards plastic containers would be possible in the future, should the price of tomatoes increase, or rising wages make traditional crates more expensive.
These results do not imply that economic interests supersede our moral, social and environmental concerns regarding FLW. Nor that FLW should simply be accepted as the cost of doing business. On the contrary, we all must do every effort to tackle this perfectly addressable problem. However, we must not underestimate the power of incentives (price signals) on agents’ FLW-reducing decisions.
This understanding of behaviors and decision-making of VC actors can help policymakers to rethink, redirect and prioritize efforts to reduce FLW, especially during the COVID-19 crisis. Containment measures, are likely making it more difficult and costly for farmers and other VC actors to implement loss-reducing activities, which coupled with the likely reduction in farm-gate prices (caused by the economic slowdown) give us reason to expect an increase in food losses.
There is now a real concern that lower prices may contribute to increase pre-harvest losses, especially in fruits and vegetables, as farmers may sadly find leaving the products in the field as more cost-effective. While higher losses should eventually help to “level-up” prices, in the short- and medium-term policy makers should think of effective mechanisms to help farmers to reduce losses while also achieving their owns business objectives. Some options include alleviating the costs of labor for producers, avoiding export restrictions, temporary reductions of VAT taxes, and easier farmers’ direct access to consumers.
References:
FAO. 2019. The State of Food and Agriculture 2019. Moving forward on food loss and waste reduction. Rome.
FAO. 2014. Food loss assessments: causes and solutions. Case studies in small-scale agriculture and fisheries subsectors. Save Food. Rome.
Anríquez, G., Foster, W., Santos-Rocha, J., Ortega, J. & Jansen, S. 2020. “Refining the definition of Food Loss and Waste from an economic perspective: Producers, intermediaries, and consumers as key decision makers”. Cairo, FAO. Manuscript submitted for publication.
