The Future in a Global Context

Transcription

1 The Future in a Global Context

2 Founded in 1998 by Thomas Mack McLarty President Clinton s Chief of Staff An international strategic advisory firm. We counsel investors, corporations & non-profits on: Strategic planning Government issues and advocacy Mergers and acquisitions Political and economic risk issues Assist with high-level commercial and political negotiations, including market access requests

3 Major changes affecting world agriculture between now and 2030: One: Shifting Production Two: Rising Food Security Concerns Three: Growing Global Middle Class Four: Changing Rich Country Consumption Five: Environmental Constraints Six: Continuing Science Anxiety Seven: Rising Non-Trade Concerns Eight: The Energy Issue Nine: Moving Beyond the WTO

4 Increasingly globalized supply chain China will increase production but can t keep up Concentration in Ukraine, Brazil, US, Europe & Africa Increasing trade flows & murkier national origins New technology introduction More use of IT in production & logistics Intensification such as hydroponics Nano, biotech and in-vitro meat production People move off the land, increasing farm size Future 2030: New technology and more dependence on Ukraine, Brazil, US, Europe & Russia Action Items: Land ownership/tenure reform Increase productivity Firmer embrace of technology Trade liberalization & rebalancing trading system to new entrants

5 Links of food and national security Rising competition for resources such as land & water Increasing land & other input prices Could affect political stability & military priorities More defensive moves in export & imports Reducing price & supply volatility Protecting local production in many markets Market access a concern in export dependent countries More technical trade issues Future 2030: More use of safeguards, SPS & anti-dumping Attempts to secure resources and local production Action Items: Support training & technology Reduce import/export trade barriers Need to allow scale to develop in agriculture Embrace new producers we need them

6 Low Land Availability in Large Growth Markets Arable Land (ha/person) Russia Source: FAO United States EU Brazil Turkey Iran Nigeria Mexico Ethiopia India Pakistan Indonesia China Vietnam Philippines Bangadesh Japan

7 Increasing demand in developing countries Middle class will increase by 104% by 2020 in poor & middle income countries versus 9% in rich countries Eating out & meat consumption to increase sharply In East Asia and Sub-Saharan Africa, per capita meat consumption by weight is projected to increase by 55% and 42% by 2030 Modernized distribution spreading Cold chain & logistics to cut waste, reduce consumer prices & increase farm prices More sales through modern retail formats Future 2030: Continued strong increases in food demand could press resource limits & strain transport Action Items: Adaption to huge consumption increases Improve logistics to facilitate trade Reduce trade barriers to control prices

8 Source: Global Insight Note: Households with PPP incomes greater than $20,000 Middle Class to Increase by 83% by 2021 China India Russia Brazil Mexico Indonesia Egypt

9 More stress on production systems Meat Consumption, Percent Increase South Asia SE Asia CIS S America China E Asia (ex Source: FAO, USDA China) N America EU

10 Demand for ag products has been flat Move away from red meat Exception: Increasing immigration Consumption changing Obesity affects 500 million Local, organic & health food in rich countries Nutrition, allergens and new concerns to arise Future 2030: Exports will likely drive future growth & food characteristics will become more important Action Items: Need export/trade growth Secure market access Change products to meet demand Increasing information content & big ag data How to feed the world with more demands on ag sector?

11 Changing weather patterns Erratic waterfall and limited availability Increasing water stress conditions Emerging diseases issue More need for sustainability Soil erosion and biodiversity issues Reducing waste in production and inputs Falling utilizable arable land Urbanization & need to supply in Asia/Africa Offset by increases in Ukraine, Africa & elsewhere Future 2030: Likely falling returns to scale because of environmental constraints. How to utilize waste? Action Items: Focus on long-term water, land & other resource sustainability Define property rights more clearly (land/water)

12 Loss of faith in regulators BSE, Dioxin-chicken in Europe May happen in America & elsewhere Consumer questions about biotech Resistance in Europe North America, Latin American & China Africa caught in the middle Could affect support for research & development Undermine emerging technologies? Future 2030: Persistent science skepticism could drive need to improve system with traceability & improved regulation Action Items: Rise of traceability & private standards More pro-science policy on biotech & other technology Support agricultural extension, research & development

13 These NTC include: Environmental (agriculture contributes 12 14% of greenhouse gas) Human rights & child labor Animal welfare, vegetarian & vegan Religious issues Halal Aging & health issues Rising activity of NGO & Social Media Focused on means of production Major interest of younger generations Future 2030: Trade increasingly affected by NTC but may split along class lines. Multifunctionality spreading Action Items: Improve agriculture s environmental footprint More effective risk communication More technology to support consumer choice Value -added for producers

14 Energy demand is rising Consumption projected to increase by 45% between 2006 and 2030 Already diverts 30% of US corn, oils, sugar Put pressure on food and feed prices Energy supplies are also rising North American & other energy production Return to early 20th century food/feed/fuel land use patterns Next generation biofuels on the horizon Future 2030: Energy prices affected by demand & supply changes Action Items: Reduce energy intensivity Need to balance resource (land/water) use Adapting to changes in energy and consumer prices Prepare for disruptive technologies

15 WTO has limited effectiveness. Doha has too many actors and demands unanimity Gridlock defining sound science (Codex) Dispute Settlement often not effective (EU-US ag) Countries moving to FTA and other agreements More than 600 bilateral or regional trade agreements in place by 2010 Increasing FTAs could complicate sourcing rules of origin Most agreements not likely WTO consistent Future 2030: WTO pushed aside by FTAs & other agreements Action Items: Increase gains from trade Negotiate FTAs aggressively Strong enforcement mechanisms needed Better SPS/TBT disciplines

16 History of low growth Total Middle Class: 10% of population Many in Kyiv Highly industrialized Donetsk & Dnipropetrovsk regions Now situation worsening Large macroeconomic imbalances Hryvnia down 55% in last 12 months Disruption: Steel, coal & power EU agreement delayed to end of 2015 Inflation expected to reach 26% in 2015

17 15.0 Falling GDP Growth GDP Growth Source: World Bank, Ukraine Government, 2015 is Forecast

18 Major ag producer w/ potential* 1/3 of world s black earth Increased past investment Slowly improving ag policies Result: Ag sector grew by 4.6% in 2014 Agriculture still needs: Farm machinery & fertilizer Infrastructure investment (railcars & storage) More quality farm labor Land reform Source: CIA, USDA

19 Conflict with Russia affected sector Cut credit for planting season Reduced investor interest in Ukraine Rail & road transport disruptions Loss of exports to Russia Risk of further problems However, sector is still resilient Conflict areas have small effect so far Luhansk & Donetsk: Only 7% of grain area Mariupol: Only 2% of grain exports Source: CIA, USDA

20 14000 Ukraine Sunflowerseeds Prod (1000 MMT) Source: USDA

21 30 Ukraine Wheat Production (MMT) Source: USDA

22 35 Ukraine Corn Production (MMT) Source: USDA

23 1200 Ukraine Poultry Production (1000 MT) Source: USDA

24 1600 Ukraine Beef Production (1000 MT CWE) Source: USDA

25 China 6% Turkey 3% ROW 14% Sunflowerseeds Production Ukraine 27% Argentina 6% EU 20% Russia 24% Source: Percent of World Production (MT), USDA

26 Wheat Production Ukraine 3% ROW 26% EU 21% Canada 5% China 17% Russia 7% United States 8% India 13% Source: Percent of World Production (MT), USDA

27 Ukraine 6% ROW 20% Wheat Exports EU 18% Canada 14% Russia 12% United States 29% Australia 12% Source: Percent of World Production (MT), USDA

28 ROW 15% Corn Exports Argentina 14% Ukraine 14% Brazil 17% Russia 3% United States 37% Source: Percent of World Production (MT), USDA

29 Forecast Grain Export Increase to 2021 (MMT) Brazil Canada United States Uruguay Argentina Russia Ukraine Source: Eurostat, FAO, Ukrstat

30 Ukraine has top potential for: Corn, barley, sunflowerseeds & many others How to realize this? Lay the base for land privatization Create a welcoming environment for inbound foreign investment Grain storage & handling Animal & horticultural production Increase credit access for farm inputs Support use of modern farm machinery Cut duties and regulation and increase credit access Support the adoption of biotech crops

31 Eric Trachtenberg Director, Food & Agriculture Sector McLarty Associates 900 Seventeenth St, Suite 800 Washington, DC Acknowledgements/Sources: USDA/Foreign Agricultural Service (FAS), USDA/Economic Research Service (ERS) Congressional Research Service International Centre for Trade and Sustainable Development