The World Food Situation

The World Food

Situation

Joachim von Braun

International Food Policy Research Institute

CGIAR Annual General Meeting, Beijing December 3, 2007

Joachim von Braun, IFPRI, December 2007

Overview

1. New world food equation

2. Food: Scarcity and energy price links

3. Poverty, food, and nutrition

4. Pro-poor policy actions


Forces changing the world food equation

World food = f {income growth, climate

change, globalization, urbanization,

energy scarcity, biofuels, …}

Changes in food availability,

prices, and

(super) markets

will impact the poor and hungry, and farmers.


Changing supply, demand and price for

cereals 2000 - 2006

100

D2000

S2000

D2006

S2006

153

P

2,070 million tons

2000=100

1,917 Q

Source: Based on data from FAO 2003, 2005-07.


Drivers of change: Income growth

• Growth (2004-06 per annum)

- 9% in Asia

- 6% in Africa

• Scenario 2025: Consumption with 5.5% annual

GDP growth in South Asia

- meat, eggs, and fish 100%

- milk and vegetables 70%

- rice 4%

Sources: IMF 2007; Kumar, et al. 2007.


Shifting consumption


Drivers of change:

Urbanization and globalization

• 61% of population in urban areas by 2030

• Asian diets towards wheat, temperate zone

vegetables and dairy

• Rural poverty will continue to exceed urban


Consumption: 2005/1990 ratios of per

capita consumption

India China Brazil Nigeria

Cereals 1.0 0.8 1.2 1.0

Meat 1.2 2.4 1.7 1.0

Milk 1.2 3.0 1.2 1.3

Fish 1.2 2.3 0.9 0.8

Fruits 1.3 3.5 0.8 1.1

Vegetables 1.3 2.9 1.3 1.3

Source: Data from FAO 2007.

Future grain consumption is driven by

feed for meat and dairy production and

by population growth


World cereal production: not growing enough

and future growth hampered by climate change

0

300

600

900

1,200

1999 2000 2001 2002 2003 2004 2005 2006 2007*

800

1,200

1,600

2,000

Wheat Coarse grains Rice Total (right)

Source: Data from FAO 2003, 2005-07.

* Forecast.

Million tonsTotal

Million tons


Disruptions in production (2004-06)

However, coarse grain output 12% in China and

rice output 9% in India.

Wheat Coarse grains

US 16% 12%

EU 14% 16%

Australia 52% 33%

Source: Data from FAO 2006 and 2007.

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The World eats more than it produces:

cereal stocks decline

0

100

200

300

400

500

600

700

2000 2001 2002 2003 2004 2005 2006 2007*

Source: Data from FAO 2003, 2005-07.

* Forecast.

Million tons

Total stocks

China


High-value food production

on the rise (2004-06)

0.30.6

0.20.2

4.0

3.02.9

4.0

0

1

2

3

4

5

Vegetables Fruits Meat Milk

Developed countries Developing countries


Average production growth (%)


Trade policy: stagnation at global level,

movement at regional levels

• Global (WTO) agreement: stalled; gains for

developing countries not realized

• Regional agreements: number of deals increased

from 86 to 159 (2000-07)

• Share of developing countries in global exports

increased from 32% to 37% (2000-06), however,

share of Africa only from 2.3% to 2.8%

Source: UNCTAD 2007.


Food

retailers

top 10:$777bln

• Wal-Mart

• Carrefour

• Royal Ahold

• Metro AG

• Tesco

C o

n s

u m

e r s

$4

,00

0 b

illion

The world food chain from a corporate perspective

Food

processors

and traders

top 10: $363 bln

• Nestle

• Cargill

• Unilever

• ADM

• Kraft Foods

Agricultural

input

industry

top 10: $37 bln

• Syngenta

• Bayer

• BASF

• Monsanto

• DuPont

Farms

Agricultural

value added:

$1,592 bln

450 million

>100 ha: 0.5%

< 2 ha: 85%

Source: WDI 2007, von Braun 2005


A “corporate view” of the world food system

Sales of top 10 companies (billion $US)

Source: Planet Retail 2007, Morning Star 2007, company financial reports.

2004 2006

Agricultural

input industry

Food processors

and traders

Food retailers

1,0914094077736337


Overview






Surge in cereal and oil prices

0

100

200

300

400

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

0

20

40

60

80Corn

Wheat

Rice

Oil (right scale)

Source: Data from FAO 2007 and IMF 2007.

Commodity prices (US$/ton) Oil


Meat and dairy prices

50

100

150

200

250

300

Jan-0

0

Jul-0

0

Jan-0

1

Jul-0

1

Jan-0

2

Jul-0

2

Jan-0

3

Jul-0

3

Jan-0

4

Jul-0

4

Jan-0

5

Jul-0

5

Jan-0

6

Jul-0

6

Jan-0

7

Jul-0

7

Beef Poultry

Butter Milk


January 2000 = 100


What policy response not to choose to

deal with the high prices?

Not:

• Export stops (starving your neighbor)

• Food subsidies for vocal middle class

• Slow change in outdated production control

policies

• Continued public underinvestment in

agriculture productivity increases

But needed: sharing through open trade and

increased aid


World and domestic prices:

Maize in Mexico

60

80

100

120

140

160

Jan-0

4

Apr

-04

Jul-0

4

Oct

-04

Jan-0

5

Apr

-05

Jul-0

5

Oct

-05

Jan-0

6

Apr

-06

Jul-0

6

Oct

-06

Jan-0

7

Apr

-07

Jul-0

7

Mexico maize

World maize

Source: Data from Bank of Mexico 2007 and IMF 2007.

(Jan. 2004 = 100)


Biofuels: hopes and threats

• Can foster rural growth, and jobs: needs small farmer friendly technology

• Can mitigate climate change

• Can be positive or negative for forests, and soils

• Can create new lobbies: Subsidies for biofuels are anti-poor

Needed:

A global trade regime with transparent standards for biofuels

Criteria that internalize the positive and negative effects of biofuels (energy balance; and CO2 net- emissions)

Main concern: Food – fuel competition and food security of the poor

Sources: IEA 2004 and Henniges 2005.


The biofuels boom

0

5

10

15

20

25

30

35

40

1975 1980 1985 1990 1995 2000 2005

Billio

n lit

ers

Source: Worldwatch Institute, 2006.

Ethanol > 90% of biofuel production;

Brazil and US dominate ethanol

market

0

1

2

3

4

1991 1993 1995 1997 1999 2001 2003 2005B

illio

n lit

ers

Biodiesel: EU is the largest

producer and consumer

World ethanol and bio-diesel production, 1975-2005


Countries’ plans for expansion

Ethanol Biodiesel

USA: 16% USA: 19%

EU: 45% EU: 37%

Brazil: 8% Malaysia: 248%

India: 15% Indonesia: 143%

China: 3% Thailand: 70%

Source: USDA, 2006; 2007.

Annual growth in biofuel production…2010/12


IMPACT-Model: Biofuel scenarios by 2020

Scenario Biofuel expansionPrice changes

(% by 2020)

1Actual plans & assumed

expansions

corn: +26

sugar: +12

oilseeds: +18

2Doubling of Scenario 1

expansion

corn: +72

sugar: +27

oilseeds: +44

Source: IFPRI IMPACT–model projections.


Calorie consumption changes in 2020

compared to baseline (%)

Source: IMPACT-WATER.

-9 -6 -3 0

EAP

ECA

LAC

MENA

S Asia

SSA

N America

Biofuel expansion Drastic biofuel expansion


Reducing the food-fuel competition

• Second-generation technologies will:

- utilize waste biomass

- use less land (and water?) resources

2nd generation technologies will not overcome

the food-fuel competition unless they are

smart (e.g. joint product technology like

sweet sorghum; or algae based technologies)

Implications:

1.Slow down on biofuels now ! (wait smart 2nd )

2.Accelerate general food crop productivity

investments !


What Price Food in the future?

Projections have underestimated price increases.

Will they continue to do so?

FAPRI:

Wheat and corn P to by 2 and 4% by 2016

OECD-FAO:

Wheat and coarse grain P to by 20 and 34% by

2016

Projections need to accommodate the complex nature

of the world food equation


Modeling cereals price changes

(2000-05 and 2006-15)

Source: M. Rosegrant (prelim. results with IMPACT-WATER)

.

0

100

200

300

2000 2005 2010 2015

Rice Wheat Maize

Oilseeds Soybean

US$/ton


Overview


2. Food: scarcity and energy price links




Price increase: Impact on the poor

Source: Adapted from World Bank 2007.

Country- and crop-specific outcomes

Staple foods Bolivia

2002

Ethiopia

2000

Bangladesh

2001

Zambia

1998

% of total expenditure of all poor

Purchases by the poor 11.3 10.2 22.0 10.3

Sales by the poor 1.4 2.8 4.0 2.3


Price-effects for Bangladesh five-person

household living on one dollar-a-day per person

Spend…their $5

$3.00 on food

$.50 on household energy

$1.50 on nonfoods

A 50 percent increase in food and energy prices

requires them to cut $1.50 of their expenditures

Cuts will be made most in food expenditures:

Reduced diet quality, and

Increased micronutrient malnutrition


Looking beneath the $1 a day line

Subjacent poor

($.75 cents – $1)

485 million people

Medial poor

($.50 cents – $.75 cents)

323 million people

Ultra poor

(less than $.50 cents)

162 million people

Source: Ahmed, et al. 2007.


Looking beneath the $1 a day line

Subjacent poor

($0.75 and <$1):

485 mln in 2004

Ultra poor

(<$0.50):

162 mln in 2004

Medial poor

($0.50 and <$0.75):

323 mln in 2004

SA

16 2 .9 mln

SSA

9 0 .2 mln

EAP

5 1 mln

LAC

16 .6 mln

MENA

0 .9 mln

ECA 1.1 mlnMENA

0.2 mln

ECA 0.4 mlnLAC

11.5 mln

EAP

8.8 mln

SA

19.7 mln

SSA

121 mln

LAC

19 mln

ECA

3 mlnMENA

3.3 mln

EAP

109.3

mln

SSA

87.0

mln

SA

263.6

mln

Source: Ahmed et al. IFPRI, 2007.


-31

-38

-27

5

29

-45

-30

-15

0

15

30

Developing World East Asia & PacificSouth Asia L America & Caribb.Sub-Saharan Africa

Mil

lio

nThe growing number of the poorest in SSA

Living below US$.50/day (1990-2004)

Source: Ahmed et al. 2007.


Global Hunger Index (GHI)

0

10

20

30

1990 2007 1990 2007 1990 2007 1990 2007 1990 2007

proportion of calorie deficient people

prevalence of underweight in children

under-five mortality rate

South Asia East Asia &

Pacific

Middle East &

N. Africa

L. America &

Caribb.Sub-Saharan

Africa

Source: Wiesmann, et al. 2007.

Contribution of components to the GHI


Performance in hunger index and income

Trends in the GHI and GNI per capita (1981, 1992, 1997, 2003)

0

10

20

30

40

50

0 2,000 4,000 6,000 8,000

GNI per capita

GH

I

Ethiopia

India

Ghana

ChinaBrazil

Source: Wiiesmann, IFPRI.


Hunger, growth and governance

1990-2004

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

-10 -5 0 5 10

Low gov effectiveness Higher gov effectiveness

Annual growth rate in GNI per capita, 1990-2004 (in %)

Pro

po

rtio

n o

f u

nd

ern

. p

rog

res

s i

nd

ica

tor

Congo, DR

Ethiopia

IndiaChina

Brazil

Ghana

Kenya

Nigeria

Tanzania

Uganda

Source: Wiesmann, 2007.

Low government effectiveness is assigned to countries in the

lowest quartile of Worldwide Governance Indicators.


Overview






Pro-poor policy actions (1)

1. Developed countries

- Eliminate agricultural trade barriers, and expand / re-visit aid priorities

2. Developing countries

- Increase investment in agriculture, rural infrastructure and market access for small farmers

3. Science and Technology (CGIAR and NARS)

- Facilitate production response by agriculture science- and technology-based solutions (China, India, Africa)


Pro-poor policy actions (2)

4. Social-protection measures

- Need expansion; productive safety nets; and

focus on early childhood under-nutrition

5. Climate change agenda

- Incorporate agriculture and food issues for

adaptation now and for long-run mitigation

The World Food Situation

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