Exploring Food Price Scenarios Towards 2020

and Beyond with a Global Multi-Region

Computable General Equilibrium Model

Dirk Willenbockel

Institute of Development Studies at University of Sussex

ODI Meeting Food Prices: Where to Now?

London - 7 October 2011

Background

Dirk Willenbockel (2011) Exploring Food Price Scenarios

Towards 2030 with a Global Multi-Region Model. Oxfam

Research Report

Government Office for Science (2010) Food System

Scenarios and Modelling. Foresight Project on Global Food

and Farming Futures Synthesis Report C4.

Michael Reilly, Dirk Willenbockel (2010) Managing

Uncertainty: A Review of Food System Scenario Analysis and

Modelling. Philosophical Transactions of the Royal Society B

365, 3049-63.

Aim of Oxfam Background Paper

Simulation of business as usual scenarios for 2020

and 2030 under current growth and productivity

projections. The focus is on price projections for the

major traded staple crops (rice, wheat and maize /

other coarse grains)

Focus on implications for production and per-capita

food consumption in selected low-income regions

Simulation of climate change impacts towards2030

Focus on long-run fundamentals – not short-run

volatility around trends

Advantages of a Global General Equilibrium Approach

Simultaneous determination of sectoral and economy-

wide variables, taking full account of system-wide

constraints and feedbacks including input-output

linkages between crops, livestock and processed food,

but less sectoral and geographical resolution than

multi-market partial equilibrium models

Endogenous determination of trade flows while taking

consistent account of balance-of-payments constraints

Main Features of the GLOBE Model

Dynamic version of McDonald, Robinson, Thierfelder (2007)

Trade: Imperfect substitutability between domestic goods

and imports, and between imports by origin

Product differentiation between output for domestic markets

and exports, and between exports by destination

Consumer demand derived from maximization of Stone-

Geary utility functions => LES demand system

Producers maximize profits subject to CES-Leontief

technologies and price taking behaviour in input and output

markets

Calibration to GTAP 7.1 global database which

captures global structure of production and trade in 2004

Model Aggregation

Regions Europe

Russia

North America

Oceania

High-Income Asia

China

Other East Asia

India

Other South Asia

Central Asia

Andean

Brazil

Other South America

Central America

North Africa

West Africa

Central Africa

East Africa

South /South-East Africa

Sectors Paddy Rice

Wheat

Maize / Other Coarse Grains

Other Food Crops

Livestock

Meat Products

Processed Rice

Other Processed Food

Minerals

Non-food Manufacturing

Trade and Transport

Other Services

Main Drivers of Long-Run Change

Population growth

Per-capita income growth -> Changes in diets

and energy demand

Climate change

Agricultural productivity trends

Land and water availability constraints

Key Assumptions for Drivers of Change 1

Population growth: UNESA Medium Variant Projections:

World population rises from 6.9 billion in 2010 to 7.7 billion in

2020 and to 8.3 billion by 2030

Agricultural productivity growth by crop and region:

Based on a synopsis of the corresponding projections in

Jaggard, Qi and Ober (2010), Nelson et al (2010) and the UN

Millennium Ecosystem Assessment (Alcamo et al, 2005).

Key Assumptions for Drivers of Change 2

Agricultural land use:

Based on a synopsis of projections in Smith et al (2010),

Nelson et al (2010) and Alcamo et al (2010).

Factor productivity growth in non-ag sectors

Calibrated residually to be consistent with World Bank(2010)

GDP growth projections and with Nelson et al (2010)

Attention: “2010” is not 2010

In the following slides, 2010 prices are “fundamental prices”

based on a forward projection from the 2004 GTAP database –

not actual observed 2010 prices

The focus is on long-run trends – not on temporary price hikes

and causes of short-run volatility around the trend

In the model, prices in each region are measured relative to the

region’s consumer price index.

World Market Food Price Indices – Base Scenario

World Market Food Price Indices – High TFP Growth Scenario

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

2010

2020

2030

CGE Model Projections for World Market Food Prices –

Willenbockel (2011) (2010 = 1.00)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2030 Baseline

2030 Climate Change

Example: CGE Model Projections for Per-Capita Production in

Africa – Willenbockel (2011)

0

0.005

0.01

0.015

0.02

0.025

0.03

NAfrica WAfrica CAfrica EAfrica SSEAfrica

Maize / Other Coarse Grains

2010

2030

2030CC

Beyond 2020: Policy Messages from Long-Run Scenarios 1

No pure Malthusian doom and gloom – but reasons for

concern in semi-arid low-income regions with continued high

population growth

Key role of future evolution of agricultural factor productivity

For SSA, measures to raise productivity in smallholder

agriculture are certainly part of the solution – the aim is

precisely not to perpetuate small-scale subsistence farming

Global long-run food security requires the accelerated

transition to a low-carbon growth path not only in the OECD

but also in the rising powers

Food security in low-income countries requires sustained

funding for climate change adaptation

Beyond 2020: Policy Messages from Long-Run Scenarios 2

Urgent need for further research to extend the knowledge base

required to ensure that adaptation funding is channelled into

uses that promise maximum returns.

While the existing climate change adaptation and development

literature is replete with extensive bullet point lists of desirable

policy measures, efforts to set clear priorities are very limited.

Setting priorities is important in the presence of limited funding,

and this requires detailed knowledge of the costs and

prospective benefits of different policy options. Yet systematic

evaluations of these cost and benefits at a disaggregated

geographical scale are in short supply at present and should be

assigned a high priority on the future development policy

research agenda.