Post on 14-Feb-2017
Opportunities and Challenges Facingthe Food and Agricultural Sector
Jikun HuangCenter for Chinese Agricultural Policy
Chinese Academy of Sciences
Major Changes in Food and Agricultural Economy
Demand:• Food, feed and fibre:
Driven by conventional forces (income and population) in developing countries
• Biofuels: Driven by new forces
Supply:• Shifting land/water/labor
away from agriculture during economic transformation in developing countries
• Technological changes(botech)
• Climate changes• …
Trade patterns will experience substantial changes due to trade liberalization and biofuel development: meat and feed
World meat production (million tons), 1961-2005
0
50
100
150
200
250
300
1961 1966 1971 1976 1981 1986 1991 1996 2001
Increased 4 times
Source: FAO
About two third of increase in meat output has been come from Asia since early 1990s
0
50
100
150
200
250
300
1992 1994 1996 1998 2000 2002 2004
Rest of world Asia
Per capita meat and total living expenditure in ChinaPer capita meat and total living expenditure in China
Source: CCAP and SOW-VU, 2002.
Urban
Rural
Real GDP growth and projected trend in China, 1080-2030
0
1000
2000
3000
4000
5000
6000
7000
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Real GDP(1980=100)
A similar growth trend has also experienced in South Asia (e.g. India) and Southeast Asia(e.g., Vietnam, Indonesia and Thailand)
Shares of Asian maize production in the world (%)
Asia15%
RoW85%
Asia28%
RoW72%
1961 2006
Source: FAO
Emerging trend in world production of biofuels
Source: IEA analysis based on F.O.Lichts – IEA World Energy Outlook 2006
Bioethanol production
0
4
8
12
16
20
2000 2001 2002 2003 2004 2005
Mill
ion
ton
oil e
quiv
alen
Brazil United states European Union China Inida Other
Biodiesel production
0.0
0.5
1.0
1.5
2.0
2.5
2000 2001 2002 2003 2004 2005
Mill
ion
ton
oil e
quiv
alen
Germany France Italy Rest of Europe United states Other
Why are governments interested in biofuels?
• Major arguments:- Energy security: to
improve national and global energy security- Environment protection:
to lower air pollution and greenhouse gas emission- Agricultural and rural
development: to support farming by expanding the agricultural output markets
Energy security
Environmentprotection
Agriculture
While the order of importance of the arguments used by governments to promote biofuels differs among countries, there are many developed and developing countries that are decisively moving into biofuels……..
Projected Total Biofuel (bioethanol and biodiesel) Production in the Next 30 Years.
Source: Msangi, et al., 2007
However…….
• We believe that while arguments may be valid, much of the shift into biofuelsis being done without carefully understanding of its social, economic and environmental implications, especially in the case of developing countries.
Energy security
Environmentprotection
Driving forces for biofueldevelopment
Energy security
Environmentprotection
Agriculture
Policy and welfare implications
Agriculture
“Our opinion”
Despite substantial growth of biofuel in the future, it would not significantly improve global/national energy security
Share of biofuel in road transport fuel demand
00.5
11.5
22.5
33.5
4
2004 2030
Source: Claude Mandil, 2007. A Global Oil Outlook: Demand and Supply
%
Real crude oil prices(US$/barrel in real 2005 price)
0
10
20
30
40
50
60
70
80
90
100
1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005
Real cereal price index (All prices = 100 in 1960)
0
50
100
150
200
250
300
1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005
Wheat Maize Rice
Real cereal price index(All prices = 100 in 1960)
0
50
100
150
200
250
300
1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005
Wheat Maize Rice
Businessas usual
Real cereal price index (All prices = 100 in 1960)
0
50
100
150
200
250
300
1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005
Wheat Maize Rice
Biofuel era ?
Businessas usual
Our argument: if emergence of biofuels caused a large, sustained rise in food prices [unprecedented in last 100+ years], it could have HUGE effect on many parts of the population …
Thinking about the emergence of biofuels triggers many questions:
Will the prices of feedstocks (e.g., maize, sugarcane, etc) continue to increase forever?How will it affect other parts of the economy? (e.g. those that produce horticulture; livestock…) How will it affect poor farmers? Poor urban residents? How will it affect people in poor countries that import grains? How will it affect land and water uses as well as environment?How will it will affect global and regional trade?How will it affect R&D spending and investment in agriculture?…
Impacts on average farm income of producing 10 million kiloliters of bio-ethanol based on maize in China in 2020
Through price and cross-price effects, farmer income will rise in ALL regions (with more gains in maize production zone).
As the maize farmers are relatively poor, there is gain in income distribution
Impacts on regional maize production of producing 10 million kiloliters of bio-ethanol in China in 2020
While it will provide a great opportunity for farmers…, it will also has significant implications for land and water uses in Northeast, North China Plain and Southwest China
Technological changes:
(e.g., Biotechnologies)
Impacts of Bt cotton in China (By empirical study, per hectare)
• Increase yield: 9.6% 930 yuan• Reduce pesticide use: 60% 923 yuan• Reduce labor input: 7% 574 yuan• Increase seed cost: 570 yuan• Increase net income: 1857 yuan
(US$ 225)
Note: per capita income of sample farmers was 2160 yuan in 2001
Sources: Huang et al., Science, 29 Jan 2002: 674-677
Huang et al., 2005, Science
• Pesticide: - 80%• Yield : + 4~8%• Labor : - 5.5%• Net income: US$ 82~100 /ha
Impacts of GM rice in China (Based on pre-production trail of GM rice in farm fields)
Overall Impacts in China (million US$) in 2010
1097
5249
0
1000
2000
3000
4000
5000
6000
Millio
n US
$
Bt cotton Bt cotton + GM rice
Huang et al., 2004, JDE
Emerging challenge to food and agricultural production in the coming decades
Climate changes
Marginal temperature effect
Average farm
Irrigated farm
Rainfed farm
Source: Wang et al., 2007
Trade patterns will experience substantial changes due to trade liberalization and
biofuel development
• There will be large uncertainty on global trade of:– maize and other biofuel feedstocks– meat, and – many other food and agricultural products
Concluding remarks: Opportunities and Challenges Facing Agricultural Sector
• Opportunities:- Rising food and agricultural prices due to
increasing demand for food, feed and biofuels- Technological changes (biotech, IT, etc)- Increase investment in R&D and others-…
• Challenges: - Trade off among food, feed, and fuel- Intensification, sustainability, and uncertainty
of agricultural production- Substantial changes in global agricultural
trade (meat, feed and feedstocks)