Lecture 2. The Global Food Situation Download the Powerpoint slides What we want to learn about this topic how well has global food supply matched global demand for food in the past? Will this continue into the future? the continuing role of hunger and what can be done about it changing international trade patterns in food and agriculture has globalisation of food markets helped poor countries and poor producers? Short introduction to the issues Trends in the global supply-demand food balance Declining real food prices in the post-war period suggest that the global capacity to produce food has outpaced the growth in demand for food during this period. Demand growth now largely takes place in developing countries and is a factor of demographic growth and growth in per capita incomes. FAO projections suggest that the peak of demand growth has passed and that percentage growth rates in demand are now falling - although as these growth rates are applied to ever-larger base quantities, the absolute increments in demand in successive periods remain large. More uncertainty surrounds the supply side. Past growth in production was partly driven by extensification - more resources employed in agricultural production, particularly land and water - and also by intensification - growth in yields per unit of land - due to improved technology and greater use of purchased inputs - fertilisers, chemicals, machinery, and so on. But the extensive margin is rapidly closing off - only a few countries have significant additional land reserves which can be brought into production - and there is some evidence that yield growth is also beginning to slow down. However, this may simply reflect the significant reduction in investment in agricultural R&D in the last decade rather than biological limits to increased yields. The Brown and Lomberg readings below give opposing viewpoints on this debate. Overcoming hunger and malnutrition Despite enormous improvements in global nutritional status, FAO statistics suggest that up to 800 million people may still consume fewer calories than are needed for basic subsistence. Many of these people are children for whom malnutrition has longer-term adverse consequences for their development. The Millennium Development Goals set a target of reducing the proportion of people suffering from undernutrition by half. Most regions appear on target to meeting this goal, with the exception of sub-Saharan Africa. Increasing, the health consequences of over-nutrition, or obesity, are moving centre stage, and not only in the developed countries of the world. Changes in international agricultural trade At the global level, international trade was seen as the exchange of commodities (food and mineral resources) produced by developing countries for manufactured goods produced by developed countries. Over time, the importance of agri-food trade in total merchandise trade has been falling, and a growing amount of this trade, at least up until the 1990s, has been in the form of processed foods rather than bulk commodities. However, the most significant change has been the turning of developing countries from net food exporters to net food importers - this happened for the least developed ocuntries as long ago as the 1908s. This change has important implications for the consequences of agricultural trade liberalisation for developing countries. The emergence of global supply chains Linked to the growing importance of differentiated food products in international trade has been the growth of global supply chains linking retailers, processors and primary producers. Unlike traditional forms of competition which took place in commodity markets, competition today is as often between rival supply chains. A feature of supply chains is their preference for dealing with a limited number of suppliers, potentially creating barriers to entry particularly for smaller producers trying to gain a foothold in the world market. Another important issue is the division of the rents along the supply chain, with many commentators highlighting the declining share of the final consumer dollar or euro received by the primary producer. Implications of changes in global food markets Reversal of secular trend of decreasing agricultural prices would produce a new environment for agricultural policy reform. Some protection mechanisms would no longer be needed (although import tariffs would still raise domestic prices in sectors in structural deficit). Higher farm prices, and presumably farm incomes, would undermine the legitimacy of direct payments to producers, while also boosting the demand for land and threatening (by raising the cost of) environmental and conservation programmes. The implications of agricultural policy reform in developed countries for developing countries is very different depending on whether they are net exporters or net importers of protected commodities. Changes in the structure of marketing of agricultural commodities and the emergence of global supply chains has implications for the governance (rule-making) of agricultural trade including issues of standards setting, food safety regulations and the distribution of rents. Reading suggestions Von Braun, J., The World Food Situation: An Overview, Paper prepared for the CGIAR Annual General Meeting, Marrakech, Morocco, December 6, 2005, Washington, International Food Policy Research Institute. Supplementary reading Gehlhar, M. and Regmi, A., Factors shaping global food markets, in Regmi, A. and Gehlhar, M. eds. New Directions in Global Food Markets, USDA Agriculture Information Bulletin No. 794, Washington: United States Dpeartment of Agriculture, 2005, pp. 5-16 (read just this first paper in the collection which concentrates on the market for processed foods) Pinstrup-Andersen, P., Pandya-Lorch, R., and Rosegrant, M., 1997. The World Food Situation: Recent Developments, Emerging Issues and Long-Term Prospects, Washington, International Food Policy Research Institute. (This remains a very good discussion of the underlying factors likely to affect global food supply-demand balances, although the actual figures themselves are now a little out of date). For a gung-ho perspective on global food markets, see Lomberg, B. 2001, Chapter 9 'Will we have enough food?' in The Skeptical Environmentalist: Measuring the Real State of the World, Cambridge, Cambridge University Press. Lecky Library 301.3 P13. For a less sanguine view of the future, look at chapters of the book by Lester Brown of the Earth Policy Institute on-line Brown, L., 2004, Outgrowing the Earth: The Food Security Challenge in an Age of Falling Water Tables and Rising Temperatures, Earth Policy Institute. (note by clicking on Table of Contents you can access the individual chapters in html or pdf format) Making projections is a risky business, and the forecasters' record is not particularly impressive. Read a short analysis of the performance of the main forecasting agencies and why they tend to be self-correcting. McCalla, A. and Revoredo, C., 2001. Prospects for Global Food Security: A Critical Appraisal of Past Projections and Predictions, 2020 Vision Brief #71, International Food Policy Research Institute. Websites There are a number of international organisations which regularly undertake projections about the world food situation, including the UN Food and Agricultural Organisation (FAO), the Organisation for Economic Cooperation and Development (OECD), and the Food and Agricultural Policy Research Institute (FAPRI). Browse through some of their recent studies. FAO Economic and Social Department Its biannual Food Outlook presents detailed information on supply, demand and prices for individual commodity markets - current version is June 2007 See its annual State of Food and Agriculture report Global Perspective Studies Unit World Agriculture : Towards 2030/2050 Interim Report OECD-FAO Agricultural Outlook (Medium term projections of agricultural commodity markets) FAPRI Agricultural Outlook University of Missouri (Medium term projections of agricultural commodity markets)