agricultural markets and the challenge of global food security · • food security exists when all...
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Agricultural Markets and the Challenge of
Global Food Security
Jonathan Brooks, OECD
Società Italiana di Economia Agraria
The future of agriculture between globalization and local markets
San Michele all’Adige, 22nd September 2016
Questions to be addressed
• Can we meet the supply side challenge of feeding ≈
10 billion people?
– The answer is “yes” but it is less clear that we will do so
sustainably (using basically the same land and less water)
• What role will agricultural markets play and how can
policymakers ensure those markets function
smoothly?
Two aspects:
– Ensuring long term food availability
– Providing resilience to short term shocks
2
Summary of the challenge• Population expected to reach 9.7 billion by 2050 –
30% higher than now (1/3 in China & India)
• Rising incomes will raise demand for livestock
products and animal feed
• The population will be more urban – 70%, 50% in
mega cities
• Non-food demand (fuel and fibre) will increase
• Food chains will be longer, more complex, more
energy intensive
• Climate change will have net negative effects on
agricultural productivity
• Increased pressure on land and water resources3
A definition of food security
• Food security exists when all people, at all times, have
physical, social and economic access to sufficient, safe
and nutritious food to meet their dietary needs and food
preferences for an active and healthy life (FAO World
Food Summit, 1996)
• 4 dimensions: availability, access,
utilisation, stability
• Focus here on role of markets: availability,
access (via impact on prices) and stability
Modelling approaches
• OECD–FAO ten year Agricultural Outlook
– Partial equilibrium model of supply and
demand relationships for major agricultural
commodities (Aglink-Cosimo)
• Situate relative to a wide range of models
projecting through to 2050 and beyond
– CGEs: Envisage (World Bank); Magnet (LEI);
– Partial equilibrium: IMPACT (IFPRI);
GLOBIOM (IIASA).
Global food supply growth continues
to outpace population growth
OECD Trade and Agriculture Directorate 7
0
1.5
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7.5
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10.5
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100
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1960 1970 1980 1990 2000 2010
Food production index, 1961=100 Population, billion
Food production
Total population
Global calorie demand (kcal/cap/d)
86TH AGMIP GLOBAL WORKSHOP, 06/29/2016 Montpellier
14%
14%
15%
15%
16%
16%
17%
17%
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18%
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Animal VegetableAnimal Share
Source: FAOSTAT Food-Balance-Sheets
Gradual increases in food demand
Slowing population growth
Declining Engel elasticities
Latent demand for animal protein
Projected consumption trends across
major food groups
0%
5%
10%
15%
20%
25%
30%
Gro
wth
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13/1
5 t
o 2
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Food Consumption Population
• Strong demand growth for meat, fish and dairy products
• Food consumption of cereals stagnates
• Shift toward livestock products induces additional need for feed crops, particularly coarse grains and protein meals
• Strong increase in sugar and vegetable oil consumption
Yield growth has been decliningGrowth in world cereal yields, % per year
Wheat other grains barley maize rice soybeans
But yield is a partial measure of
productivity
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USDA-ERS estimates tell a more
positive story for TFP growth
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Production growth through intensification and
efficiency gains, but regional differences
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0
5
10
15
20
25
30
35
South andEast Asia
LatinAmerica andCaribbean
NorthAmerica
Sub-SaharanAfrica
EasternEurope &
Central Asia
WesternEurope
Middle Eastand North
Africa
Oceania
% Yield Growth Area Growth
Change in arable production between 2013-15 and 2025, weighted by acreage; regions are sorted by overall arable acreage
• Prices to remain overall flat,
but to change in relative
terms
• Relative price changes
reflect adjustments in the
composition of demand and
differences in supply
conditions
• Is this a “new normal”?
Market fundamentals point to flat real prices
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USD/T (Meat & Dairy)
USD/T (Crops)
Wheat RiceSoybean WMPBeef and Veal
Divergent long-term projections
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400
600
800
1 000
1 200
1 400
1 600
USD/tReal price Long term trend OUTLOOK LS-low LS-high
Long term wheat price
• Volatility from oil prices, economic growth, exchange rates and yield variations
• Climate change will add to them
• Policy-induced uncertainty not included but will compound volatility
• A crisis more likely when the wrong policies compound volatility
Stochastic analysis suggests a substantial
risk of a major price swing
80% probability range for maize price
Undernourishment projected to decrease
but not in SS Africa, SDG2 not met globally
1910.06.2016 , World Outlook Conference, Amsterdam
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2024
Million
Other Latin America and Caribbean
India China
Asia and Pacific (excluding China and India) Sub-saharan Africa
North Africa
Bottom line on long-term outlook
• No question the world can be fed. But at what price?
• Prices matter: an important driver of the real incomes of producers and consumers.
• But even rock bottom prices won’t be enough to ensure access of the poorest – their problem is income generation
• Wide uncertainties on each of the supply and demand shifters, and hence on prices
• Long term drivers can be overwhelmed by bouts of international price volatility
• Need to work on both supply and demand dimensions to improve global food availability
Ways of increasing global food
availability
Increasing food supply Limiting food demand
Improved agricultural
productivity (more efficient use
of inputs, such as labour, land
and water)
Healthier diets (including less
meat consumption, reduced
over-consumption)
Expansion of land area Reduced consumer waste
Reduced supply chain
(especially post-harvest) losses
Climate change adaptation
Less diversion of crops to non-
food uses (e.g. biofuels)
Huge questions with respect to
sustainability
• More scope for raising yields than increasing area sustainably
• Much of the world’s population lives in areas of severe water stress, and water is not used sustainably
• But pricing natural resources for sustainable use may imply trade-offs with immediate food security
• “Sustainable intensification” necessary, e.g. improved water management, no-till agriculture
• Agriculture’s contribution to climate change mitigation a major uncertainty
Note: Agriculture and fisheries products included in the Outlook
Rising exports from Latin America
Increasing imports into Africa and Asia
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Bil
lio
ns
of
Co
nst
an
t $
20
04
-06
Regional net trade
Americas Asia Africa Others
With slowing production and consumption
growth, trade will grow more slowly
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ultry
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ole
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wde
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Skim
milk
pow
der
Eth
an
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Bio
die
se
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Co
tto
n
Crops Meats Dairy Biofuels
%
2006-15 2016-25
But tradability not projected to change much
0
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60
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%
2013-15 2025
OECD-FAO Agricultural Outlook 2015-2024 | www.agri-outlook.org | #AgOutlook 28
World exports to remain highly concentratedShares of top five countries in global exports in 2025
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%
Country5 Country4 Country3 Country2 Country1 2013-15 top 5
OECD-FAO Agricultural Outlook 2015-2024 | www.agri-outlook.org | #AgOutlook 29
Imports in 2025 more dispersed…but China
matters!Shares of top five importers in world imports
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%
China Country5 Country4 Country3 Country2 Country1
Trade’s importance to food security
• Most food is produced and consumed
domestically
• But areas of demand growth ≠ areas where
production can be increased sustainably
• Many countries will require imports to meet their
additional food needs (esp in Africa & S. Asia)
• A few key exporters will supply those growing
import demands
• Imperative that those exporters are reliable
suppliers
30
Policies to make global markets work
• Opening markets should help stabilise domestic markets
• But we should expect episodic shocks and bouts of international price volatility
• International price stabilisation very difficult– Thickening markets can help
– Avoiding policies that export instability (export subsidies & taxes)
• Domestic price stabilisation of varying effectiveness and it exports instability
• Many countries perceive the need for trade protection to support domestic policy choices (e.g. price guarantees, buffer stocks) but domestic instruments can target the beneficiaries more efficiently
For further information
Or visit our web page: www.agri-outlook.org