Chapter 3


 reason, come under pressure, then poor households will tend to be at a disadvantage
 compared to those with greater buying power, or exchange entitlements.

 1.5 The dynamics of the food chain

 The presentation of the food chain and its marketing functions so far has been rather static in
 nature. However, the food chain does more than just provide price information and short
 term access to and availability of food. The prices arising from the operation of the chain
 affect resource allocation in the longer term. Thus the articulation of the food chain and its
 efficiency at signalling information provides the dynamic of the agricultural system in terms
 of its contribution to economic growth. Prices signal comparative advantage which leads to
 specialisation in production. Specialisation and the resulting commercialization induce
 intensification in production. Intensification in turn leads to economies of scale in
 commodity production which reduces costs and, depending on relative market power, will
 result in some combination of reduced prices for consumers, increased returns to factors of
 production and increased prices. This again increases comparative advantage and the
 virtuous circle continues.

 Over time, increased specialisation, technical change and changing world prices will all
 affect the allocation of resources both within the agriculture sector and as between
 agriculture and other sectors of the economy. This will, in turn, change the relative
 importance of production based entitlements and trade based entitlements in the economy,
 and will change the focus of policy relating to food security, as development and growti1
 occurs, away from a heavy emphasis on food production as a major vehicle for improving
 food security towards a broader jproach, including food processing, other agro-industrial
 activities and gltimatelyall forms of employment-enhancing economic growth. .

 The links between the agricultural sector and other sectors in the economy are important in
 this context and are often underestimated. Recently, attempts have been made to quantify the
 importance of output in the agricultural sector for income, and therefore livelihood, in the
f non-agricultural sectors of the economy. In Kenya, it has been estimated that an increase in
 agricultural output of 10% will generate an additional increase in non-agricultural income of
 almost 5%. This arises primarily from increased output in trading and processing
 enterprises. These results are another way of illustrating the importance of food and
 agricultural commodity chains in the level of economic activity in many developing
 countries.

 1.6 Seasonal variations in the operation of the food chain

 The importance of different elements of the food chain will vary from season to season, as
 the production cycle varies. Food cultivation itself is a very seasonal activity, with differing
 labour requirements at different times of the year. Ground clearance, planting, weeding and
 harvesting all make different demands on the farm household and leave varying amounts of
 family labour available for off-farm activity, which might or might not be food-related.


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