Download Global food security prospects and impact on EU agriculture (indlæg

Global food security prospects
and impact on EU agriculture
Alexandru Marchis
Policy Team Coordinator
OPERA Research Center
Herning, January,10th 2012
1. Considerations on global food security and
agricultural markets
2. EU Agricultural production and trade – virtual
“land grabbing”
3. Policy recommendations for market stability
4. CAP Reform
Perspectives for global food security
• Continued growth in global food demand
– Population growth
– Per capita income growth in developing countries
• Limited growth in global food supply
– Limited growth in agricultural area
– Declining annual productivity growth
Changes in global crop area
arable land + 5 % between 2000 and 2020
Change in global crop acreage by region
2000-2020 (von Witzke, 2008)
Region
Change in acreage (mill. ha)
European Union
4
Russian Federation & UA
13
USA
15
Canada
2
Latin America
45
Sub-Sahara Africa
6
Asia and Australia
-4
Other challenges
• water - ever scarcer and more expensive
• public demand for environmental protection
• development of bio-economy
• increasing energy prices
• climate change
Perspectives for global food security – higher
prices
• OECD-FAO
• 15-40 % higher over the next 10 years
• COM Communication on commodities prices
• Prices higher than their historical averages
• High volatility
• Input prices to remain higher
• COM – “Prospects for Agricultural Markets and income in the EU” commodity prices are expected to stay firm due to:
– growth in global food demand,
– development of the biofuel sector
– the long-term decline in food crop productivity growth.
COM – “Prospects for Agricultural Markets and income
in the EU 2011- 2020”
“High prices at world level would support EU agricultural exports in spite of
the decline in competitiveness.”
• Arable crops: tight market conditions, 150 to 170 EUR/t, low stock levels
and prices remaining above long term averages
• Meat: net trade position of the EU is projected to deteriorate over the
outlook period, driven by an increase in meat imports
• Milk: expansion of world demand and preference for dairy products are
the main drivers. Sustained import demand, from emerging countries,
have a positive impact on dairy commodity prices
Real commodity price indices
(World Bank nominal price indices, 2000 = 100)
600
500
400
300
200
100
Agriculture
Energy
Fertilizers
Metals & minerals
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
0
Energy, agriculture and fertilisers…
(World Bank nominal price indices, 2000=100)
600
525
Fertilisers + 163 %
Energy + 223 %
450
375
300
Agriculture + 50 %
225
150
75
Source: World Bank.
Composition: Beverages, food and agricultural raw materials.
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
0
…EU agricultural terms of trade…
(real price index, 1996 = 100)
110
100
90
80
70
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Output prices - EU-27
Source: Eurostat
Input prices - EU-27
2. EU AGRICULTURAL
PRODUCTION AND TRADE:
Can more efficiency prevent increasing ‘landgrabbing’ outside of Europe?
Methodological framework: Coverage of the study
• 240 tradable products are converted into commodities.
• SITC categories:
- Food and live animals;
- Beverages and tobacco;
- Oilseeds and oleaginous fruits;
- Cotton and wool;
- Animal and vegetable oils.
• More than 40 commodities are included for the EU-27 and
the time period 1999-2008.
Theoretical framework: Trade in virtual agricultural
land
• When agricultural commodities are traded, the inputs used in
their production are traded „virtually“.
– Concept of virtual input trade: developed for water
(Allan,1993).
• Relevance of virtual land trade:
Quantification of negative economic externalities (side
effects) through expansion of acreage:
- loss of natural habitat
- greenhouse gas emissions.
The EU together with China is the worlds leading
agricultural net importer
1999-2008
EU net imports in 2008: 45.5
billion US$
– Export quantity:
decrease by 3 mill. tons
– Import quantity:
increase by 25mill. tons
Net trade quantities, EU-27, 1999-2008 (in million tons)
China net imports in 2008: 44.5
billion US$
Source: von Witzke et al, figure based on EUROSTAT
(2010).
Change in EU-27 agri net trade (mill. tons),
1999/2000-2007/08
Source: von Witzke and Noleppa, 2010
Wheat
Corn
Other grains
-2.56
-7.66
-9.65
Veg. oils
Dairy
Sugar
-6.49
-0.20
-4.79
EU virtual net land import
2007/08
• Net land import: 34.9 mill. ha.
– Territory of Germany 35.7 mill. ha.
Evolution 1999/2000-2007/08
• Virtual land exports: Decline to 14 mill. ha.
• Virtual land imports: Increase to 49 mill. ha.
 Virtual net import: Increase by
almost 10 mill. ha. (+40%)
 Territory of Portugal 9.3 mill. ha
EU virtual land net trade by selected crops,
2007/08 (mill. ha)
Source: von Witzke and Noleppa, 2010.
Soybeans
-17.53
Other oilseeds
-7.68
Coffee, cocoa, tea
-6.28
Fruits
-2.36
Corn
-1.92
Wheat, coarse grains
2.23
Total
-34.90
EU virtual land net imports 2007/08 under
alternative scenarios (mill. ha)
(+ 0.3 %)
(20%)
(10%)
34.9
- 5.3
+3.2
+10.2
Conclusions
• EU is one of the largest net importer of agricultural land
– Should strive for balance not necessarily for autonomy
• EU and world productivity growth have declined.
• Productivity growth is the key for:
–
–
–
–
agricultural growth
fighting hunger and malnutrition
mitigating climate change
preservation of natural habitats.
• Reduction in EU virtual land imports:
Productivity growth
• Source of productivity growth in EU agriculture:
Technological progress
3. Policy recommendations for market stability
“Agricultural Market Stabilization
System - policy instruments to
be included in the CAP”
Nature and causes of market instability
Market instability is one among a set of interconnected risks agriculture
is subject to:
• Production risk: unpredictable weather and performance of crops and
livestock; climate change.
• Market risk: uncertainty about the price of outputs and inputs at the
time decisions are taken.
• Institutional risk: unforeseen government actions and change in
rules.
• Financial risk: interest rates rise; loans become unavailable.
• Other risks, as the rapid loss of confidence due to food safety
concern.
Causes of market instability
• The global balance between supply and demand and tight global
stocks for many commodities
• Climate change is increasing market volatility because of the greater
frequency of extreme climatic events.
• Trade liberalization traditionally was expected to contribute to
greater world price stability, albeit it can reduce it at local level.
• Food markets are increasingly interlinked with energy markets.
Particular impact is expected from quantitative targets for policy on
biofuels, reducing the price elasticity of demand for agricultural feed
stocks and exacerbating volatility in the relevant food markets.
Which system for market stability
An approach following five main directions:
• Develop the existing CAP instruments in order to realize





Supply stabilization mechanisms
Price and income stabilization instruments
Market transparency
Cooperation and structural improvement
Global dimension for food security
Supply stability
In the current/recent CAP: public intervention, private storage, quotas,
mandatory set-aside. Budgetary contraints, market orientation and
competitiveness concern lead to phase out these instruments.
Management of production risk must aim at:
– reducing yield volatility,
– improving crop and animal products quality;
– achieving sustainable intensification of production.
This calls for a substantial policy move toward innovation and diffusion
of R&D results.
Price and income safety net
Adapt existing instruments to better respond to extraordinary market
situations:
• Intervention purchasing and withdrawals - should be applied only as a
last resort, in exceptional circumstances.
• Aid for private storage - there should be the option of encouraging
additional private storage, through targeted aid.
• Avoid subsidies designed to promote internal consumption - possible
short-term use for counter-cyclical purposes.
• State aids - rules recently amended, should remain unchanged.
• Income safety net - an instrument should be made accessible, to provide
farmers with financial compensation for significant reduction of their
income; compatibility with WTO rules
Market based risk management instruments
New instruments should be promoted to reduce farmer exposure to
risks:
• Forward contracting has always played a role in helping producers to
manage price risk.
• Futures markets play an important role, but a number of drawbacks
must be addressed
• Revenue or income insurance - Interesting also as included in the
WTO Green Box (government financial participation in income
insurance programs, and payments for relief from natural disaster).
• Mutual funds: a pro-active attitude in supporting the development of
such mechanisms is needed wherever they are appropriate and
feasible.
Market transparency
Need to avoid unjustified practices and obligations along the food chain
and possible local/regional demand-supply imbalances due to lack of
trade/transportation infrastructures or disparities in marketing and
food safety standards.
• Price monitoring at different steps of the food chain - a major tools to
better understand markets and improve transparency.
• More frequent systematic projections on food prices - Transparent to
the public and farmers, should take into account different spatial
scales and vertical levels in the food chain.
• Competition law- more usable guidelines over competition policy are
needed
Cooperation and structural issues
• There is still very little dialogue between farmers, traders, processors
and supermarkets. Most of the products are processed, which makes
it difficult to ensure that agricultural producers are aware how to deal
with their purchasers.
• The CAP needs to develop pro-active mechanisms to promote
cooperation and integration on the food chain. Improving the
producer-processor-consumer relationship, even through financial
incentives, is one possible solution to empower farmers to be able to
respond to a rapidly changing market.
The global dimension for food security
• At global level the EU should avoid that the reduction in domestic
price volatility translates into increased volatility of international
prices.
• It should actively participate in developing effective solutions, on a
multilateral basis, to reduce the volatility of the international
agricultural markets and address food security issues.
4. CAP Reform
Conclusions and Recommendations
CAP reform key issues: Competitiveness
• Reaffirm food production as a benefit for society – food
security
• Access to best production tools
• Promote sustainable intensification of agriculture
• Gain consumer confidence on sustainable production
standards
• Support R&D
CAP reform key issues: Research and innovation
EU policy must address five major problems faced by the agricultural research
and development activities in Europe:
• horizontal coordination of research priorities across the EU and vertical
coordination with the needs of agriculture;
• financial support to agricultural R&D to a level comparable with the
resources employed by main competitors;
• creation of a business environment to promote public and private
research and public-private partnerships,
• information campaigns to change public perception of the results of biotechnological development;
• delivery mechanisms at farm level to increase and accelerate the uptake
of the results.
CAP reform key issues: Market volatility
•
•
•
•
•
•
•
•
“liberal” market, but extreme volatility is to be avoided
CAP should not “export volatility”
Price and income safety nets for low prices
Develop productive capacity as to take advantage of high
prices
Reduce yield volatility
Develop market risk management instruments
Stimulate cooperation vertical and horizontal
Improve market transparency
CAP reform key issues: Sustainable use of
resources and public goods
• Using the available land and resources more
efficiently to avoid “land grabbing” and
expansion into natural habitat;
• Promote simple and pragmatic management
measures to achieve sustainable production;
• Promote partnerships in delivering sustainable
production methods;
• Promote innovation and technological
development
Thank you for your attention!
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