Policy Options Panel Discussion by Tassos Haniotis

Transcription

1 Policy Options Panel Discussion by Tassos Haniotis Power Point Presentation for the International Agricultural Trade Research Consortium Analytic Symposium Confronting Food Price Inflation: Implications for Agricultural Trade and Policies June 22-23, 2009 Seattle, Washington

2 Confronting Food Price Inflation: Implications for Agricultural Trade and Policies Policy Options Panel Discussion IATRC Symposium, Seattle, WA, June 22-23, 2009 Tassos Haniotis Head of Unit, Agricultural Policy Analysis and Perspectives DG for Agriculture and Rural Development European Commission

3 Assessing myths, realities and uncertainties The myth: strong food demand drives future food challenges World population will grow towards 2050 at half its corresponding past rate World GDP growth in the future is also expected to be slower than in the past Emerging economies are already at income levels of marginal food demand growth The reality: supply response is the main food challenge Lagged supply response characterises agricultural markets, but area reserves exist Yields grow faster where food pressures are higher (except for SSA) Food grains and the livestock sector are not the challenging sectors Maize and soybeans are the sectors raising most (policy-related) questions The uncertainty: the link of agriculture to the macro environment The price of oil sets a new band for agricultural commodities - but at what ceiling? Policy responses to climate change will affect the maize/oil price link - but how? Climate change will affect agricultural supply but what will the overall balance be? T. Haniotis IATRC - June 22-23,

4 The longer-term trends 7% % annual rate of growth 6% 5% 4% 3% 2% 1% 0% World GDP World population T. Haniotis IATRC - June 22-23,

5 Growth rates for population and GDP 10% annual rate of growth ( % ) Source: FAO 8% 6% 4% 2% 0% Population Real global GDP Real global per capita T. Haniotis IATRC - June 22-23,

6 Total grain demand growth 14% 12% 10% 8% 6% 4% 2% 0% annual rate of growth ( % ) Source: FAO -2% Rice Wheat Barley Maize Soybeans T. Haniotis IATRC - June 22-23,

7 Meat and feed demand growth 14% 12% 10% 8% 6% 4% 2% 0% annual rate of growth ( % ) Source: FAO -2% Beef Pork Poultry Maize for feed Wheat for feed Barley for feed Soybean meal T. Haniotis IATRC - June 22-23,

8 Ethanol and edible oil use 14% annual rate of growth ( % ) Source: FAO/USDA 12% 10% 8% 6% 4% 2% 0% US maize industrial use Palm oil Soybean oil Rapeseed oil T. Haniotis IATRC - June 22-23,

9 Assessing myths, realities and uncertainties The myth: strong food demand drives future food challenges World population will grow towards 2050 at half its corresponding past rate World GDP growth in the future is also expected to be slower than in the past Emerging economies are already at income levels of marginal food demand growth The reality: supply response is the main food challenge Lagged supply response characterises agricultural markets, but area reserves exist Yields grow faster where food pressures are higher (except for SSA) Food grains and the livestock sector are not the challenging sectors Maize and soybeans are the sectors raising most (policy-related) questions The uncertainty: the link of agriculture to the macro environment The price of oil sets a new band for agricultural commodities - but at what ceiling? Policy responses to climate change will affect the maize/oil price link - but how? Climate change will affect agricultural supply but what will the overall balance be? T. Haniotis IATRC - June 22-23,

10 Production/consumption gap 3 main grains mio mt 3-year moving averages EU US Major exporters Other exporters CHN/IND World T. Haniotis IATRC - June 22-23,

11 Chinese wheat supply and demand 120 mio mt 3-year moving averages Ending stocks Production Consumption T. Haniotis IATRC - June 22-23,

12 Crop yield growth 5% annual rate of growth ( % ) Source: FAO 4% 3% 2% 1% 0% Wheat Rice Maize Barley Cotton T. Haniotis IATRC - June 22-23,

13 Yield compared to demand growth 5% annual rate of growth ( % ) Source: FAO 4% 3% 2% 1% 0% Wheat yields Wheat use Rice yields Rice use Maize yields Maize use T. Haniotis IATRC - June 22-23,

14 Assessing myths, realities and uncertainties The myth: strong food demand drives future food challenges World population will grow towards 2050 at half its corresponding past rate World GDP growth in the future is also expected to be slower than in the past Emerging economies are already at income levels of marginal food demand growth The reality: supply response is the main food challenge Lagged supply response characterises agricultural markets, but area reserves exist Yields grow faster where food pressures are higher (except for SSA) Food grains and the livestock sector are not the challenging sectors Maize and soybeans are the sectors raising most (policy-related) questions The uncertainty: the link of agriculture to the macro environment The price of oil sets a new band for agricultural commodities - but at what ceiling? Policy responses to climate change will affect the maize/oil price link - but how? Climate change will affect agricultural supply but what will the overall balance be? T. Haniotis IATRC - June 22-23,

15 f and an eventual impact on the real economy 9 GDP ( annual % growth ) Commodity prices ( 2000 = 100 ) Source: World Bank Real GDP growth Real non-energy commodity prices Real energy commodity prices T. Haniotis IATRC - June 22-23,

16 Searching for the drivers of food prospects If stronger food demand were the main challenge, then Shifts in demand growth patterns would drive supply response Pressures for more intensive production methods would be inevitable Quantity considerations would tend to overwhelm quality concerns If weaker supply response were the main challenge, then Productivity growth should better balance environmental concerns with food demand Technology should promote a balanced supply response for both quantity and quality The link to energy should provide incentives for both output and input adjustments When supply and demand interact, it is essential that Price signals could be allowed to do the main job of driving supply responses Policy response could mainly focus where market risks to fail (environment; poverty) Climate change impact could still remain uncertain (posing risks of policy failure) T. Haniotis IATRC - June 22-23,

17 Implication for policy priorities and responses On trade, development and research priorities Policies distorting price signals among commodities confuse market response Most poverty issues are linked to access to food, not availability of food The new green revolution needs to also be environmentally green! Is price volatility the market failure we want to address? Price volatility depends on the mean - thus the level of the price outlook matters Product price support is irrelevant under both competing price outlooks for agriculture Type of a non-product safety net for price volatility depends on farm price outlook Safety nets for income or for revenue? Income safety nets are more representative because they also account for costs Revenue safety nets are easier to implement, but ignore input costs (thus oil link) The outlook of both output and input prices matters for future policy design T. Haniotis IATRC - June 22-23,