Christopher B. Barrett Sydney Ideas Lecture University of Sydney (Australia) May 16, 2012

1. The Global Food Security Challenge In the Coming Decades Christopher B. BarrettSydney Ideas LectureUniversity of Sydney (Australia)May 16, 2012

2. Overview Agricultural success over 1940s-80s enabled dramatic poverty reduction and better global standards of living 5-6 billion people have adequate calories today, up from only about 2 billion 50 years ago. Public/private sector ag research and policy reforms (esp. in China) led to unprecedented productivity growth far outpacing demand growth and driving down real food prices, lifting hundreds of millions from poverty. Land/water use efficiency increased dramatically. Successes enabled population growth, urbanization and income growth … and induced a dangerous complacency.

3. Overview • We now face major challenges as food demand and supply will evolve significantly (and predictably) over the coming generation. • These structural patterns will have major effects on: • Prices, including price volatility • Induced technological change • Global food security and poverty • The natural environment • Policy, business and consumer behavior must and will adapt to these structural changes.

4. Demand Drivers Main Demand-Side Drivers • Population – slowing rates of growth, especially in high-income nations, but large absolute growth, almost all in developing countries. • Urbanization – especially in developing countries, demand for purchased food increases faster than aggregate demand as rural people migrate. Increased demand for processed foods, especially. • Income Growth – especially in developing countries, with major implications for commodity composition of diets and trade.

5. Demand Drivers Population growth is slowing globally, but large absolute growth due to population momentum concentrated in less developed countries Source: United Nations Population Division, World Population Prospects: The 2010 Revision, medium variant (2011)

6. Demand Drivers Urbanization increases the share of the population purchasing food from markets

7. Demand Drivers Real per capita GDP Growth IMF forecasts for real per capita growth 2012-17: US: 16.4% All advanced economies: 13.1% Emerging and developing economies: 35.2% But initial scales trump growth rates in dollar terms. Real GDP per capita (thousands 2000 US$, PPP terms)

8. Demand Drivers Income Elasticity for Food But food demand grows at a decreasing rate with income growth. Marginal food demand growth due to income growth in low-income countries is 5-8 times that in US. Hence the concentration of food demand growth in the Global South.

9. Demand Drivers Changing Diets • Bennett’s Law: demand for variety and quality in diet grows with incomes. • Biggest shifts are in diet composition, especially oils, meat, dairy, sugar, fruits and vegetables, as well as processed foods. • Modest demand growth for staple foods (wheat, rice, other cereals).

10. Demand Summary Over the coming generation, there will be significant growth in market demand for food. So both production and distribution systems will be put under stress.This is due to both population and income growth, especially in urban areas, as well as predictable dietary transitions. Growth will be disproportionately in developing countries and for higher value commodities.

11. Supply Drivers Main Supply-Side Drivers • Land and water scarcity– Little untapped arable land and significant soil degradation in many regions, plus growing water scarcity. Limited capacity for expanding the agricultural frontier other than in Africaor Latin America. • Climate Change– Shifting climate patterns, especially volatility and extreme events, force greater and changing trade patterns and reinforce North-South differences. • Technology– Slowing growth in yields. Rapid spread of biotechnology. Added pressure for new breakthroughs to address land and water scarcity as well as evolving pest and pathogen pressures, especially with climate change.

12. Supply Drivers Arable Land • Only 0.4% growth in arable land 1990-2007 (14.1 million km2) • Total arable land is essentially fixed without major (ecologically risky) conversion of forest, wetlands, or drylands. • On a global scale, no land shortage for agriculture, but major shortages will pose problems in specific regions. • These patterns help stimulate international land acquisitions.

13. Supply Drivers Arable Land • 80% of global agricultural land expansion expected in Africa and Latin America, often resulting in soil mining and stagnant or declining yields. Soil nutrient loss is already a serious challenge in many developing countries. • Sources of competition for prime agricultural land: • Urban expansion • Feed crops for livestock • Biofuels • FAO estimates a tripling-quadrupling of land in biofuels (from 14 mn hectares in 2004 to 35-59 mn by 2030). • “Land grabs” in the developing world by emerging market (sovereign wealth funds, etc.) and urban investors threaten to dispossess smaller producers.

14. Supply Drivers Water • Globally, agriculture accounts for almost 70% of human water usage, but well over 80% in Africa and Asia. • To keep pace with global food demand, annual freshwater withdrawals are estimated to increase by 14% over the next 30 years. • 1 in 5 developing countries will face water shortages by 2030.

15. Supply Drivers

16. Supply Drivers Climate Change & Agriculture • Northern Latitudes expected to benefit: • Temperature increases more pronounced in northern temperate zones. Extends growing season, increases suitable cropping land, decreases costs associated with overwintering livestock, increases crop yields. • Increased atmospheric concentrations of CO2 will act as a natural fertilizer for crop production. • Tropics and Water-Scarce Regions at risk: • Increased temperatures lead to increased evapo-transpiration and decreased soil moisture levels. • Some tropical grasslands and cultivated areas will become increasingly arid and unsuitable for cropping.

17. Supply Drivers Climate Change & Agriculture (cont.) • Increasing temperatures will expand the range of agricultural pests and milder winters will increase the ability of pest populations to survive • Higher temperatures will induce higher rainfall amounts, but rainfall distributions will not be even. • Greater inter-year volatility in rainfall, with extreme events especially problematic in the Global South. • Expected sea level rise will flood fertile, low-lying coastal lands and lead to greater inland seawater intrusions, contaminating freshwater supplies and agricultural land. • In general: climate change reinforces differences b/n wealthier, temperate and poorer, tropical regions.

18. Supply Drivers Climate Change & Agriculture (cont.) Agriculture also affects climate change processes • Agriculture contributes 10-12% of the total global anthropogenic emissions of greenhouse gases (GHGs)2 • 47% of anthropogenic methane emissions • 58% of anthropogenic nitrous oxide emissions • Largest sources of agricultural emissions: agricultural soils, enteric fermentation • Other significant sources: biomass burning, rice production and manure management

19. Supply Drivers Agricultural Technological Change Slowing/uneven yield growth rates. If yield growth <1.0-1.5%, supply begins to lag demand growth.

20. Supply Drivers And productivity growth has to occur when demand growth will occur because 85-90% of food is consumed within the country where it is grown, even with food trade growing faster than production.

21. Supply Drivers Much of the growth will come from continued rapid expansion of use of genetically modified crops, esp. in developing countries

22. Supply Summary Over the coming generation, arable land and freshwater for agriculture grow increasingly scarce. Areas with greatest physical capacity for expansion face greatest water and land management challenges.Climate change compounds these problems, especially due to coastal flooding and pest/pathogen pressures. Slowing yield growth must be reversed. Technological change must increasingly focus on abiotic and biotic stresses related to climate change and water scarcity.

23. Market Impacts Continued Growth in Agricultural Trade • Demand growth continues to outpace supply growth, especially in low-income countries, which increasingly become net food importers. • Thus, greater global demand for agricultural trade due to geographic patterns of supply and demand growth as well as impacts of climate change. • Renewed pressure for a WTO Agreement on Agriculture and reduced domestic support/protection in the OECD • >$1 billion/day in OECD subsidies to agriculture! • Far greater protection in agriculture (19%) than manufactures (4%) or energy (2%).

24. Market Impacts High and Volatile Commodity Prices • Continued demand growth outstripping supply growth will continue high real prices. OECD forecasts prices average 20% higher than 2012 levels for the next decade. • Prices also remain volatile due to supply shocks (including from energy and financial markets). Data source: FAO food price index, 1/1990-3/2012

25. Market Impacts Induced Innovation • Higher commodity and input prices will fuel greater private investment in land and water resources as well as in improved agricultural technologies. • Will also prompt greater FDI in developing country agriculture, which will help close yawning yield gaps. • Renewed government commitments to agricultural development will begin to pay off in a decade or so, reigniting yield growth in low-income agriculture. • Demand growth is altering agricultural value chains and inducing institutional innovation that boost productivity.

26. Market Impacts Land Acquisitions • Higher commodity and more volatility food prices, combined with growing land scarcity (esp. in Asia) are fuelling sharp increases in land investment. • Land acquisitions in Africa in 2009 totaled 39.7 mn ha (> agricultural land in Belgium, Denmark, France, Germany, the Netherlands, and Switzerland combined!) • Contentious because “land grabs” can displace margin-alized rural peoples and terms of deals often opaque. • 2008 Daewoo deal to lease 1.3 mn hectares led to overthrow of government in Madagascar. More to come?

27. Market Impacts Max Potential Value of Agricultural Output (US$/ha) Source: Deininger, Arezki & Selod, 2011

28. Humanitarian Impacts Persistent poverty and hunger are closely tied to agricultural stagnation Cereal yields and extreme poverty move inversely. Real GDP growth from agriculture is 2.7 times more effective in reducing extreme poverty vs. non-ag growth. South Asian Progress Sub-Saharan African Stasis Source: World Bank (2007)

29. Humanitarian Impacts Higher food prices pose serious risks to the poor

30. Humanitarian Impacts Micronutrient Deficiencies • Micronutrient deficiencies pose a larger, more stubborn and less visible challenge than dietary energy shortfalls. • Best addressed through income growth among the poor and productivity growth in higher-value commodities. • 633 mn suffer goiter (severe iodine deficiency) … 31% of developing world hhs don’t consume iodized salt • 100-140 million children are deficient in vitamin A, mainly in South Asia and sub-Saharan Africa • 2 billion people are iron deficient, mainly women

31. Environmental Impacts Future Environmental Impact • Greenhouse Gas Emissions • Agricultural nitrous oxide emissions are projected to increase by 50% by 2020 relative to 1990 levels • Combined methane emissions from enteric fermentation and manure management will increase by >20% by 2020 from 2005. Methane is 25 times more powerful a GHG than CO2. • Nitrogen Pollution • Excess nitrogen from fertilizer spurs plankton growth, which decreases oxygen levels in the ocean. EPA has identified 150 dead zones worldwide. The biggest are the Baltic Sea and the Mississippi River Delta.

32. Environmental Impacts Future Environmental Impact • Deforestation • Agriculture accounts for ~80% of deforestation worldwide, almost 10 million ha/year: Commercial agriculture 32%, semi-subsistence farming 48%. • Water Use • Necessary expansion of food production requires increased crop uptake of water. • Since 70% of human water use is already on agriculture, this will both stress water availability and demand increased efficiency in water use, as well as potentially seawater desalination.

33. Policy Inadequate Policy Responses • Sluggish public investment in agricultural research over past generation … poor productivity growth and increasing issues of corporate capture and IP. • Shortcomings in land and water tenure policy, especially for ensuring equitable and efficient control over land in the face of sharply increased demand (“land grabs”). • WTO multilateral trade agreement on agriculture stalled but trade will grow ever more crucial. • No significant progress on mitigating or adapting to climate change. • Failure to agree to renegotiated Food Aid Convention to ensure orderly global arrangements for international food assistance, especially in emergencies.

34. Summary Past success proves the potential of food systems to reduce human suffering. This is challenge that, together, we can meet. Structural demand and supply patterns for food pose major challenges. Failure to meet these challenges quickly and decisively risk significant market, humanitarian and environmental impacts in coming decades. Must focus most attention where the needs will be greatest : in Africa and Asia.

35. Thank you Thank you for your time, interest and comments!