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The relationship between economic growth or income and consumption is frequently discussed in the realm of economics and beyond. The economic crisis provides ‘laboratory’-like conditions in which to explore how stagnating or declining economies, falling incomes or decreased purchasing power affects what we buy and consume.

14698176_7c44839711Demand for fish, for example, has been argued by the Food and Agricultural Organisation (FAO) to be ‘sluggish’ in 2009 compared to 2008, which was a record year in fish production and consumption. According to the FAO ‘sales are sluggish in all major markets and prices and margins are under pressure for most seafood products’. Meat, dairy and fish have commonly been argued to be elastic products – that is, as incomes rise, consumption of these products also increases significantly. The crisis has demonstrated that the reverse is also true – as incomes fall, consumption decreases. However, the sheer variety of fish and seafood deems any generalised analysis of elasticity problematic. Cheaper, more ‘staple’ fish, for example, cod, may be inelastic and difficult to substitute, whereas more expensive fish, for example, tiger prawns, may be more elastic and can be replaced by other fish types or protein sources. For example, in the UK, some have claimed that fish and chips may be recession proof. More disaggregated data of fish consumption (by type or species) during the crisis is needed to draw any meaningful conclusions about elasticity, but we do at least know that consumption of fish overall has declined.  

For fish stocks the economic crisis may therefore come as a welcome break. Though a large proportion (approximately 45%) of our fish comes from farmed sources – aquaculture – the dominant proportion is still sourced from capture fisheries, i.e. the open sea. Concerns about the sustainability of fish stocks, particularly in regards to bluefin tuna, have dominated the media in recent months. A particularly controversial study carried out in 2006 argued that commercial fish stocks will have completely collapsed by 2046.

The New Scientist reports that there is some initial evidence that commercial fish stocks are recovering, although 63% of world fish stocks are still found to be at unsustainable levels, particularly in the developing world (which produces 80% of the world’s fish). Though the partial recovery in some stocks has been argued to be due to effective ‘conservation measures’ the economic crisis may well give these efforts an added boost.

The economic crisis may have momentarily achieved what many a public campaign could not and may signify a crucial turning point in the survival of some stocks. Ironically, the length of the recession may be a crucial determinant. However, there are equity issues involved, with the majority of people in the developed world eating fish in excess of their dietary needs whilst many in the developing world lack the purchasing power to consume enough fish to fulfil their basic nutritional needs. In the EU and US, people consume on average approximately 19kg per annum, whilst people in South America and Africa consume on average 8kg per person, per year.

For many the crisis will have a significant impact on total food consumption and may lead to far higher numbers of people who lack sufficient protein in their diets, are undernourished and go hungry.

Anecdotal evidence suggests that in some countries around the world the recession is having an impact on the levels of carbon dioxide – a gas that plays a key role in contributing to atmospheric warming – and other greenhouse gases being emitted into the atmosphere.

In the European Union (EU), for example, a 1.5% reduction in greenhouse gas emissions has been reported for 2008 (compared to the previous year) for all 27 members of the EU, by the European Environment Agency (EEA). In addition a 1.3% reduction in the EU 15 has been reported – the 15 wealthiest and oldest members of the EU. This reduction has been attributed to lower carbon dioxide emissions from fossil fuel combustion in the energy, industry and transport sectors which has occurred as a result of the economic recession.

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Similarly, a study in the UK has concluded that there has been a 31% decline in traffic on motorways over the past two years. This story is likely to be similar in other developed countries that have been affected by the recession and where car ownership and use is high. The fall in traffic in the UK is thought to be due to falling numbers of people travelling during morning and evening rush hours as unemployment rises. In addition people who have been fortunate enough to remain employed have made cost-savings by working at home, sharing lifts with other people and using public transport.

The United Nations Environment Programme also argued that 2008 was the first year when new investments in renewable energies were greater than investments in fossil-fuelled technologies.

Whilst these changes may bring some temporary respite for the environment, evidence suggests that as the economic crisis wanes old patterns will be re-established. However, if the recession has provided ample opportunity and motivation for investment in renewable energy in order to replace fossil-fuel based energy use then the recession may well have provided just one, although not insignificant, silver lining.

Smallholder farmers are the mainstay of agricultural production in the developing world. It is estimated that over 2 billion people in the developing world depend on smallholder farms for their livelhoods.

However, smallholders face several barriers and challenges both for domestic production and production for export. Access to credit is just one of these and has long been a key barrier to production for smallholders, undermining smallholders’ abilities to invest in their farms and production, often leading to declining levels of productivity. In cocoa and coffee production – an important source of foreign exchange and income for many developing country governments and farmers –  a lack of access to credit (or at considerable expense) has meant that farmers have been unable to invest in new trees and have relied on older trees which have declining yields and, therefore, diminishing returns.

The UN has argued that access to credit and financial services is ever more important in the context of the financial crisis and declining levels of remittances, which serve as an important safety net for much of the world’s poor.

In April this year, the first ever meeting of G8 Agricultural Ministers took place. Kanayo Nwanze President of the International Fund for Agricultural Development (IFAD) said at the meeting that:

“Protecting and increasing the access of poor rural people to financial services is even more vital now…the well-being of 2 billion poor people who depend on smallholder farms in developing countries hinges on it…that is why we are encouraging ministers to return home and make sure that in all countries, rich and poor, we work together to keep agriculture at the top of their national agendas”.

IFAD argues that private sector involvement in agriculture is more important than ever, particularly with regard to the provision of services such as finance and marketing. 

For many large businesses who source from smallholders in the developing world, sustainability concerns (related in particular to climate change) are driving projects to ensure that smallholder production is economically, socially and environmentally sustainable. An example of this growing trend is the shift of two major confectionery brands – Mars and Cadbury’s – to using certification (in these cases, Rainforest Alliance and Fairtrade) as a means to bring about sustainable production. As part of these transformations, support services are also provided to the smallholders involved, a gap that developing world governments have often been unable to fill. For example Cadbury’s is implementing farmer education programmes that explore best cocoa management practices leading to improved quality cocoa and increased yields and offering enterprise loans to start up farming or small businesses. Several examples  have shown that investing in services for smallholders can be a win-win for businesses.

Let’s hope these trends continue and the recession provides ample evidence of the importance of private sector investment in agriculture.

Whilst researching the impacts of the recession on the demand for crocodile leather and stumbling over some tales of recession-induced woes, it seems Hermes, an internationally renowned luxury fashion brand, is the shining star – bucking all trends, and potentially single-handedly fuelling demand for exotic skins, like crocodile leather.

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Hermes sales rose by 3.2% at current exchange rates to €428.4 million over the first 3 months of 2009, despite the wider market context of a floundering global economy. Much of that growth is attributed to sales of leather goods, which rose 21.7% to €206 million and has been driven by ‘robust’ expansion in China and Korea (Hermes 2009).

Hermes’ Birkin bags fanatics, including celebrities like Victoria Beckham, are paying up to $US50,000 (with bags made from exotic skins hitting the 6-digit mark) for a single bag with a waiting list of 2-3 years. Beckham reportedly owns $US2 million worth of Hermes Birkin bags (Murray and Williams 2009). Three thousand coveted Saltwater crocodile skin bags will be made this year, and limiting them in number maintains the exclusivity, luxury image and mystique surrounding them. No doubt it helps that Hermes’ key clientele are unlikely to be affected by the recession and are seemingly “recession proof”, but Hermes ability to conjure such furore over a handbag can only be admired. The exclusivity of its brand is partly reflected in its differing sales results for own stores versus distribution networks, with a 16% growth in sales (at current exchange rates) in the former and a decline in the latter. Clearly stepping into Hermes’ own stores is a far more compelling shopping experience than that found in its distribution stores.

Experts argue that “the people who can afford these goods are not affected by the recession. Even if they lost millions of dollars in the market, they are still worth hundreds of millions of dollars. If you want something super special, if you want a handmade crocodile bag and you can afford it, Hermes is the only place you’ll go”.

Hermes, usually very closed-book about its activities, has claimed that “we cannot meet demand. We are facing massive over-demand. We are limited by our ability to train new craftsmen” [Patrick Thomas, CEO, cited in Goldman (2009)]. Craftsmen in a small French town of Pantin, spend up to 2 weeks preparing each bag. In order to guarantee supply Hermes is vertically integrating its supply chain, establishing new farms in Australia: “It can take three to four crocodiles to make one of our bags so we are now breeding our own crocodiles on our own farms, mainly in Australia,” and it is looking to add to its existing number of 1400 craftsmen to alleviate the bottleneck it currently faces in turning the leather into the exclusive Hermes handbag.

Whilst Hermes success might not be replicable in any market other than the ‘luxury’ fashion market, its role in fuelling demand for crocodile skin, and in driving the demand for 8 high quality skin and skilled, highly trained craftsmen can not be ignored.

This article is cited in the Crocodile Specialist Group Newsletter. See: http://iucncsg.org/.