Global Questions. Key Concerns, Where Most Agree: Biofuels and Food Security Making Sense of the Issues

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1 Key Concerns, Where Most Agree: Biofuels and Food Security Making Sense of the Issues Daniel Gustafson Food and Agriculture Organization of the United Nations Food production is important; everyone should have enough food to eat this this can be achieved. How and where food is produced is important. Environmental stewardship is essential and more important than ever. Global Questions Can we strike a sustainable balance between food security, natural resource use and energy production? How does global production matter in addition to household and national, challenges? Who is hungry and why? Is the food crisis under control? Why the concern with US corn and ethanol? Who is hungry and why? Poverty and hunger linked both ways Most poor and chronically undernourished are rural (farmers and landless laborers) Lots of vulnerabilities (poor land, lack of water, often female-headed) Very high proportion of family income goes to food, and most of this to basic cereals» Agriculture important for income and for food; improving production and access to food are both critical

2 New Reality of Global Poverty and Hunger The new bottom billion The large majority of the world s absolute poor almost 1 billion live in stable middle income countries 72% live in middle income countries 61% live in stable MICs (22% even if you take out India and China) 12% live in poor and fragile low income countries m illion tonnes What Happened in Most of the increase in cereal production occurred in Developed Countries + 9.9% + 0.9% % DEVELOPED DEVELOPING DING ex BIC A complicated context: Food security not under control: Chronic, long-term hunger crisis for 800+ million people, most of them rural; increasing agricultural productivity and incomes vital Spike in prices 2007/2008 had devastating impact on millions more, most vulnerable, who spend high % of income on food Large producer countries also have a high number of the world s s poor; the low income food importing countries are much poorer but do not represent a very big market. What they import is truly essential, but the volume is not that large. Cereal production in developing countries was good in 2010, up 3.8%, better than in the industrialized ones The food crisis Multiple factors blamed for the price spike: Long-term decline in prices, low investment in ag development, food imports looked like a safe option for many countries High price of oil, low value of the US dollar Panic buying and policy moves that stopped exports Poorer than expected harvests in some exporting countries Low stocks due to changes in supply and demand Large amounts of US corn production for ethanol Increased speculative activity GLOBAL CEREAL PRODUCTION

3 No consensus on relative weights; agreement that: Liquid biofuels of minimal importance in global energy supply but impact on food and feed may become much larger. The volume of US corn crop for ethanol is very large, even in global terms (e.g( e.g,, 5% of total global cereal production vs decline last year of 2% in global cereal harvest); other global demand not growing very fast. In US, long-term declining prices led to increased investment in non-food demand enhancement, coinciding with soaring gas prices, Wall St investment and US Gov interest that had been lacking: the new driver of very robust demand The role of subsidies and mandates is crucial at lowish oil prices Diverging Views March 2010 UK Dept for Environment, Food and Rural Affairs: Available evidence suggests that biofuels had a relatively small contribution to the 2008 spike in ag commodity prices July 2010 World Bank: The effect of biofuels on food prices has not been as large as originally thought 2010 IFPRI: The surge in US maize production for biofuels was of an order-of of-magnitude equivalent to the primary explanation of the crisis the surge in US wheat exports to the Soviet bloc. Why the different views? Without demand from corn/ethanol, the other factors may not have resulted in price spike.vs vs: Without other factors (e.g., high price of oil) corn/ethanol demand on its own was only a very partial explanation Agreement that the link between price of oil and price of corn now looks strong. Corn price = 2 x Oil price? A new rough rule of thumb? Price of Oil $/barrel Price of Corn $/ton (April May 10) (current) Price of Corn $/bushel Does a gas price above $3/gallon set the corn price?

4 Main concerns Rising prices for low income food deficit countries Impact on poor households in low and middle income countries Impact of policy moves (blocking exports, subsidies and mandate for biofuels) Even without mandates, new link between price of oil and price of food with high oil price expected to last WHAT S S IN STORE FOR 2011? Cereal production and utilization Year-to-year change in cereal production

5 THE LONGER-TERM OUTLOOK Global food production also changing (FAO-OECD): OECD): Despite uncertainty, there is a dynamic and highly predictable element at the heart of world ag markets: This is the inexorable shift underway at the core of agriculture towards and increasing role, and rising importance, of the developing and emerging economies in world agricultural production, consumption and trade. Why? Higher rates of income growth (total and per capita) and population growth Urbanization Changing diets (> income, > urban) Transformation of emerging economies, capturing higher share of value added component of domestically consumed ag products (e.g( e.g,, Brazil, Russian, India, Indonesia, China) 27 Some key production elements: Brazil the fastest growing ag sector over next 10 yrs: +40% by 2019 Russia + 26% Ukraine +29% China +26% India +21% US and Canada % 15% EU27 +4% 28 Population growth to continue, but at a slower pace Total population (billions) Annual increments (billions) Source: UN, World Population Assessment 2006

6 The long-term outlook: The world can produce enough food it is a serious challenge but can be achieved we can also meet hunger targets It will require increased investment for ag production + productivity and sustainable intensification for increased farm income Volatility will continue and likely increase: extreme weather, policy moves, energy prices Challenges of clean energy, climate change and food security all need to be tackled together -- with increased profitability for farmers Developing Developed World future past future past future past The global food outlook to 2050 Assuming no climate change, how much more needs to be produced by 2050? Agricultural production Source: Bruinsma (2009) Country level: What balance? Biofuel production competes with food for land & water potentially a large problem Biofuel investments could play pivotal role in rural development, energy supply, employment and rural incomes In many countries food insecurity driven by low agricultural yields, low investment, low output If smallholders produce feedstock, biofuels could regenerate stagnant agricultural sector Burden of firewood collection on farmers (women) is staggering Risks and Opportunities? For Tanzania, FAO s Bioenergy and Food Security Assessment optimistic if done right Conclusions from a global perspective No simple answers, energy and food prices are now linked Food prices,, not just global production are critical for food access, biofuels play a role Raising rural incomes, investing in agriculture essential to reduce poverty and hunger Biofuels can be part of the answer, also part of the problem, especially in the shorter term There can be synergies between food security, clean energy and climate change but they are not automatic or inevitable What the US does is very important, but what others do is also very important. We will see a lot of changes and innovations, both in food and biofuel production