What economic theory tells us about the impacts of reducing food losses and/or waste: implications for research, policy and practice

Martine M Rutten

doi:10.1186/2048-7010-2-13

Abstract

Whereas the prevalence of hunger and food insecurity is often cited as a motivation for reducing losses and waste in agriculture and food systems, the impacts of such reduction on food security and the wider economy have not yet been investigated. This paper gives insights into these effects, the factors of influence, and derives implications for applied research, policy and practice. We used economic theory to analyse the impacts of food loss reductions on the supply side and food waste reductions on the demand side. The analysis is graphical and uses intuitive low-dimension diagrams. The impacts of tackling food losses and waste differ from the size of food losses and waste and depend, in addition, on the extent to which they are avoidable, factors that cause them to arise (notably food prices) and the costs associated with measures to reduce them. Interactions within the food supply chain and the broader economy also affect the impacts. Trade-offs occur on the demand side where a reallocation of spending on previously wasted foods causes some producers to be worse off and some to be better off. Over time, producers tackling losses may have to incur welfare losses in the short run with gains in terms of increased revenues, if any, occurring later. Similarly, consumers may delay spending savings on previously wasted foods. As a consequence, the impacts, notably on food security and welfare, are ambiguous. Further research should quantify the factors that play a role and carry out economy-wide impact analyses, employing a combination of macro, meso and micro-level tools, and presenting a comprehensive set of indicators that adequately capture broader societal impacts of tackling food losses and waste. This allows policy makers to better target policy and resources, identify complementary policies, and move beyond target-setting to addressing the underlying causes, whereby it is important to consider the whole food supply chain. Supply chain actors could contribute in terms of practical and innovative solutions where they matter most, and feed research and policy makers on the bottlenecks that explain why food losses and waste occur, and their relative importance.

Highlights

Whereas the prevalence of hunger and food insecurity is often cited as a motivation for reducing losses and waste in agriculture and food systems, the impacts of such reduction on food security and the wider economy have not yet been investigated
It is useful to start an analysis of the economy-wide impacts of reducing food losses and food waste with a theoretical framework, which guides the interpretation of the outcomes of a more complex, empirical model with added real-life complexities
Reducing food losses in supply we examine the economic impacts of food losses in a low-dimension partial equilibrium analysis

Summary

Introduction

Whereas the prevalence of hunger and food insecurity is often cited as a motivation for reducing losses and waste in agriculture and food systems, the impacts of such reduction on food security and the wider economy have not yet been investigated. Evidence from the Food and Agriculture Organization (FAO) suggests that close to one third of the edible parts of food produced for human consumption is lost or wasted globally, equivalent to around 1.3 billion tons per year, and that the size of food losses and waste varies greatly by type of food, country or region and the stage in the food supply chain [2]. Compared to other types of food, fruit, vegetables, roots and tubers suffer from relatively high losses and waste throughout the supply chain. Whereas losses and waste in industrialised and developing countries are roughly the same in terms of quantity (670 and 630 million tons respectively), in terms of value they are very different (US$ 680 and US$ 310 billion respectively), and relative to the level produced in the market: for example, food losses and waste in Europe and North-America are around a third of production, whereas in sub-Saharan Africa and South and Southeast Asia this share is 25 to almost 40%. Reporting food losses and waste in terms of nutritional value leads to different numbers and percentages, though the patterns remain roughly the same [4]

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