current and future challenges for agriculture and food security kostas g. stamoulis director,...

Current and future challenges for agriculture and food security Kostas G. StamoulisDirector, Agricultural Development Economics Division Food and Agriculture Organization of the United Nations

3rd Conference on Sustainable Agriculture “The Art of Farming” Brussels, 11-12 May 2010

Rapid rise in the number of hungry in recent years

Source: FAO


Short-term developments


Food price developments, 2003-2009

0

50

100

150

200

250

300

350

2003 2004 2005 2006 2007 2008 Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Year

FA

O C

om

mo

dity p

rice

in

de

x (

20

02

-20

04

=1

00

)

Meat Dairy Cereals Oils and Fats Sugar

FAO commodity price indices (2002-2004 = 100)

Source: FAO Food Outlook (Dec. 2009)


Paradox 1: No serious production shortfalls

0

200

400

600

800

1000

1200

1400

Wheat Coarse grains Rice Cassava Oilseeds Sugar

Pro

du

cti

on

(m

illi

on

to

nn

es

)

2007/2008 2008/2009 (estim.) 2009/2010 (forecast)

Source: FAO Food Outlook (Dec. 2009)

Global crop production


Price transmission (1) : International vs. domestic prices


The Price Transmisson Paradox(2): Prices Inflexible downward


Paradox 3: Determining the impact of price hikes

Households adjust differently:

– Net producers, net consumers• extent of separability

between consumption and production decisions

– Production/expenditure patterns

– Liquidity constraints, investment capacity

– Fact:

-4.79

-15.52

-30.03

15.69

3.110.94

-40

-30

-20

-10

0

10

20

Malawi Zambia Uganda Malawi Zambia Uganda

Changes in expenditure on maizeChanges in quantity of maize consumed

Impact of % 50 increase in the price of maize on food expenditure

Source: FAO


Could a similar crisis happen again?

Can some of the basic drivers be reproduced – Shortfall in stock levels ? Energy prices? Financial markets ?

– Will underinvestment in agriculture continue ?

– Who will be able to respond to the higher prices

Incoherent policy responses– Initial reaction of exporters to food price increase (export restrictions)

exacerbated price instability : Safeguards ?

– Longer-term reaction of importers (land acquisition, supply arrangements) could reduce residual market size and further increase market instability

– Loss in confidence in international markets

Energy and agricultural markets will become more strongly interlinked: can food prices be determined by much larger energy markets ?

Will new players in international grain markets provide a safeguard ?


Long-term challenges


Food security in perspective

664

556

370

810

823

1000

0

100

200

300

400

500

600

700

800

900

1000

99/0

1

2003

2006

2009

2012

2015

2018

2021

2024

2027

2030

2033

2036

2039

2042

2045

2048

Source: FAO (2009)Year

Undernourished in developing countries (Million)


Key challenges

Key overall challenge: To eliminate food insecurity

Challenges for agriculture:

– Meet the food and energy needs of 9.2 billion people by 2050

– Meet additional demands from energy markets

– Cope with local resource scarcity and shift to more sustainable production methods

– Adapt to the agro-ecological changes related to climate change and contribute to the mitigation effort

– Protection of livelihoods as agriculture transforms and markets are integrated


Demand Outlook : Slow-down in global demand for agricultural commodities

Slowdown in Population growth– +2.3 billion to 2050 after +3.3 billion over the last 40 years– Highest growth in the poorest regions: Sub-Saharan Africa (+114%)– Lowest growth in East and South East Asia (+14%)– +2.7 billion in urban areas, significant urbanization

Optimistic on income growth– Overall a richer world by 2050– +2.9% growth per annum for the world a a whole– higher in developing countries (5.2%), lower in industrial countries

(1.9%)– Less poverty (scenarios differ), but low poverty line of US$ 1.25


Change in the composition of diets

Source: FAO

Other, 5%Milk and dairy products, 3%

Meat and eggs, 7%

Fruits and vegetables,

5%

Vegetable oils, 10%

Sugar, 8%

Roots and tubers, 6%

Cereals, 56%

2000Average daily per

capita consumption: 2667 kcal

Other, 5%Milk and dairy products, 5%

Vegetable oils, 14%

Fruits and vegetable,

6%

Meat and eggs, 10%

Cereals, 46%

Roots and tubers, 6%

Sugar, 8%

2050Average daily per

capita consumption:

3068 kcal


The global food outlook to 2050

255

97

63

23

148

70

0 50 100 150 200 250 300

past

future

past

future

past

future

De

ve

lop

ing

De

ve

lop

ed

Wo

rld Agricultural production

Source: Bruinsma (2009)

Baseline: How much more needs to be produced by 2050? (%)

past = 1961/63 to 2005/07; future = 2005/07 to 2050


A Baseline Scenario shows that globally we can meet effective demand

Globally: 91% from increased yields and cropping intensities

In developing countries: 79% from increased yields and croppping intensity– Improved seeds

– More efficient input-use (especially water and fertilizer)

– Small increase in cultivated area

Yield growth: considerable slow down: 0.8% p.a. in the future compared to 1.7% in the past

Still considerable untapped/bridgeable yield potentials and increases in yield ceilings BUT

R&D needed for crops that are important for the poor (millet, sorghum, R&T, pulses, plantains)

Key Challenge : In 27 countries prevalence of food deprivation more than 50% in 2050 not counting climate change and bioenergy demand


Exploitable yield gaps for maize in Africa

0

1

2

3

4

5

6

Malaw i(n=4566)

Ethiopia(n=310)

Nigeria(n=2501)

Uganda(n=461)

Mali (n=163) Mozambique(n=508)

Ton p

er

hecta

re

Average national yield Average yield in farm demonstrations

Source: WDR, 2008, Sasakawa Africa


Agricultural system

transformation


Structural shifts in agriculture and agro-industry

As economies develop and incomes rise, emphasis shifts to value addition, risk management, quality and safety characteristics

– Trade liberalization and FDI intensifies the spread of agribusiness

– Gains from scale economies dominate

– Knowledge of how to manage complex systems

Concerns:

– Rapid transformations increase risk of smallholder marginalization

• lack of access to knowledge, capital of all kinds, organisation

– Agriculture-development-poverty reduction link is broken


Structural transformation (1)

Share of agriculture in GDP and per-capita GDP (180 countries)

Note:GDP per capita refers to 2005 PPP USD. Source: World Development Indicators, 2009.


Structural transformation (2)

Uganda

Nigeria

Kenya Cote d'Ivoire

Indonesia

Thailand

Malaysia

Brazil

Chile

Argentina

0

10

20

30

40

50

60

GDP per capoita, 2000 US$ log scale

Perc

ent share

of G

DP

AgricultureAgribusiness

Agriculture

Agribusiness

150 810030001100400

A declining share of agriculture in GDP, but a high and rising share of agribusiness in GDP in developing countries

Source: World Bank, WDR 2008


Importance of smallholdersWho is a smallholder ??70 percent of world’s poor concentrated in rural areas where 2 out of 3 bn people reside in about 450 million small farm households.

Focus on poverty reduction forces a better look at smallholders

Smallholder growth has collateral positive effects on local economies.


inclusive commercialization ??

Smallholder participation into markets

– Traditional constraints ( infrastructure; input markets; information)

– Which Markets ?

– Ease of entry depends on market characteristics (e.g. volatility: volumes, prices; integration between rural, urban, regional, global)

– “Willingnesss” of producers to generate sufficient surpluses

Smallholder participation in value-chain development– Which Value chain ?

– Ease of entry depends on the specific value-chain (e.g. capital intensity, knowledge intensity, land intensity; policy induced risks)

What is the ultimate objective ( smallholder orthodoxy) – Operating through labour markets ( demand and supply)


Policy interventions/ VCD initiatives to alleviate constraints

Characteristics of the constraint/market failure will determine appropriate delivery mechanism/intervention– Public/merit good

• research, extension, quality assurance, market intelligence, trade facilitation, dialogue, coherence

– Private good • access to/affordability of inputs (subsidies, distribution)• output price support (level/volatility)

When to deliver support/service? Who and how to deliver? – Trade Policy

• Target primary product ? • Protect processed or raw material ?• Characteristics of industries to be protected


Sources of Failure in Agricultural Markets Source of market

failure:What is the constraint to private sector

involvement?Possible PPP Solutions

1. Lack of enabling environment

Unstable macro-economic environment;Inadequate physical infrastructure;Weak property rights and/or contract

enforcement

PPPs for provision and/or maintenance of infrastructure

2. Public goods Non-excludability, non-subtractability Contracting out for service delivery; Facilitate private coordination

3. Merit goods Lack of effective demand, hence market “under-provides”

Contracting out for service delivery; Subsidies

4. Barriers to entry Lack of access to: Capital, Training (technical information)Market information

-

5. High transaction costs/risks

Imperfect information about attributes or actions of other actors and/or attributes of goods being sold

Certification; Publicly supported assurance schemes; Risk sharing schemes

6. Coordination failures (complementary investment)

Asymmetric information, no mechanism to enforce commitments; hence lack of trust

Deliberative fora


Policy challenges..and opportunities


Key Conclusions

The world can produce enough food to feed itself in the long-run – if appropriate policies and investments are put in place also to deal with wild cards ..biofuels and CC

Producing enough food will not eliminate hunger – access to food must also be increased

Improving the performance of agriculture is necessary to increase both food production and access to food

Rapid transformation of the agri-food sector creates risks of marginalisation of “small “ producers.


Interventions vs initiatives

More creative role for public sector that goes beyond creation of basic enabling environment

Mechanisms by which public sector support can be used to leverage greater private sector participation– State seeks to align incentives facing private sector with public policy goals

such as service provision to poor groups

– Public sector risk sharing to encourage greater participation and investment

Counterproductive interventions– Crowding out

– Policy environment (e.g. ad hoc use of trade restrictions)


Thank you

For more information, please visit

http://www.fao.org/economic

current and future challenges for agriculture and food security kostas g. stamoulis director,...

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