The APEC Food System: Putting Theory into Practice
Mr. Ernest S. Micek
Chairman
Cargill, Incorporated
I'm glad to be back at another International General Meeting - and not just because it's in Hawaii. But because it gives me an opportunity to pick up where I left off last year. A year ago in Hong Kong, I gave an overview from, 40,000 feet of the benefits of the APEC Food System.
I talked generally about its environmental benefits, its economic benefits and of how it could improve food security. This year I would like to get more down to earth. Now is the time to get practical. The APEC Leaders, at their meeting in Auckland last year, endorsed the APEC Food System. The food system approach is now official APEC policy - and I'm sure most of you are familiar with the concept. (If not, we have some literature here today that lays it all out.) Our challenge now is to implement the APEC Food System -- to make it real.
I want to focus on our Sun Valley chicken-processing facility in Thailand to show how increased trade in food and agricultural products works in this particular case. That's what I mean by the title, "Putting Theory into Practice."
But before I get into the nuts and bolts of our Sun Valley operation, I'd like to say just a few things about food security and self sufficiency. In our view, they are two different things. The real issue here is money - not a lack of food.
With more income, people have greater access to more and better food. That's the bottom line. And it's the countries that have moved into the global marketplace that have become richer, which has provided greater food security -- even though their level of food self sufficiency has declined.
Food security means countries grow what they can efficiently and import the rest, the wealth they've developed from other areas of their economies so they can buy the food they need.
Self sufficiency means countries try to produce all their own food themselves, no matter what the economic or environmental costs.
Let me explain what I mean by highlighting three examples.
Taiwan went from supplying about 30 percent of its own food in 1981 to 15 percent today. But its per capita GDP more than doubled during that time - from about $5,000 to more than $13,000.
South Korea also cut its self-sufficiency nearly in half - from about 50 to 25 percent since 198 1. During the same time, its per capita GDP nearly tripled - from a little more than $3,000 to nearly $9,000.
The same general trend holds true for Thailand - even though its economy is not as developed and the country is a net food exporter.
Thailand's level of agricultural exports decreased substantially since 1981 while its per capita GDP more than doubled - from about $1,000 to nearly $2,300 in 1999.
In our view, the higher incomes in all three countries provide greater food security even though their self- sufficiency levels declined. With the globalization of the food system, there are always places to buy food - whether it's from Argentina, Brazil, China or the United States. You just need the money.
Developing the economy - and providing jobs - is the best way to do that.
While we're still a long way from adopting a true regional food system, I think our Sun Valley Thailand operation is as good an example as any to highlight the benefits of increased trade in food and agricultural products.
We entered the chicken business in Thailand back in September 1990 and exported our first chicken products a month later. Our Sun Valley plant is about 60 miles northeast of Bangkok and is a sister operation to a similar facility we have in the U.K.
We did receive some incentives from the Thai Board of Investment to build the plant in Saraburi. 1 Although we initially had a few rocky years in getting the business started, today we consider it one of our premier businesses. And I believe the Thai government is quite pleased with the benefits it has brought.
With Sun Valley, we've:
- Created 4,000 some jobs with competitive pay. About 2,000 of those jobs were created since 1997, when the unemployment rate began to soar following the collapse of the Thai baht.
- Created hundreds of more jobs by buying chickens from contract farmers.
- Invested a total of $US85 million to build the facility and subsequent expansions.
- Provided $25,000 in scholarships for more than 400 local students in 1999 alone. Opened a school within our facility to enable our workers to continue their educations through grade 12. The program is viewed as a model by the provincial government.
- Introduced world class food safety practices, which have been held up as a model by Thailand's Department of Livestock Development.
- Constructed a state-of-the-art wastewater treatment facility that has been recognized by government officials and environmental academics as one of the best in the region. Instituted one of the best worker safety programs anywhere in Cargill. (Sun Valley Thailand's safety index was just 0.0 1 in 1999.)
- Of course, the business has also performed very well for Cargill.
- So well, in fact, that it has received Cargill's highest quality award.
So when you look at what this facility has brought to the community through the prism of the APEC Food System vision, it has done very well.
Consumers have better access to food at affordable prices - both at home and in the European Union and Japan, our principal export markets.
The productivity of the food sector is enhanced through the efficient use of Thailand's excellent labor force.
Food security is improved by raising people's living standards - providing greater access to more and better food.
And the prosperity and vitality of rural communities is enhanced by providing both farm and non-farm employment.
Saraburi is not a rural community, but our processing facility provides income to contract growers in the outlying region and jobs for those who wish to commute.
This is important because agriculture accounts for just 10 percent of Thailand's GDP but 60 percent of its workforce. Poverty in Thailand - as in much of Asia and the world - is concentrated in rural areas.
Our plant also helps to stem the migration of people to urban centers like Bangkok. Today, about 30 percent of Thailand's population live in urban centers. In 1970, just 13 percent of the population were urban dwellers. So the strategic location of facilities like Sun Valley in cities like Saraburi can have very real social and economic benefits.
And importing more land-intensive crops like soybeans and corn can have positive environmental benefits.
In Thailand, intensive fanning and logging have reduced forest cover to about 20 percent of the total land area, which has caused soil erosion problems. Salinization of the soil Is also reducing the amount of arable land to grow more crops.
With some modest government policy changes, the economic, environmental and social benefits of increased trade in food and agricultural products could be even greater.
Number one would be lowering the tariffs on imported feed ingredients, which is the most significant cost in poultry production.
Of the 11 countries surveyed in PBEC's The Value Chain for Poultry study, for example, only four had higher feed costs than Thailand. Brazil had the lowest feed costs - Just $181 per ton for feed in 1994.
In Thailand, it was $258 a ton - more than 40 percent higher. Although shipping costs are a factor, most of the discrepancy is caused by the tariffs on imported feed.
We don't disguise the fact that it's in our interest to ship soybean meal from places I the United States or Brazil to Thailand. But it's also in our interest to help make Thailand's poultry industry competitive on world markets.
By doing that, we believe we're also creating economic benefits, environmental benefits and improved food security in Thailand.
That's why we'd like to see lower tariffs on food and agricultural products - as called for under the APEC Food System proposal.
The adoption of this plan could go a long way toward creating even more benefits on both sides of the trade equation.
Thank you very much.