From boom to bust: Short-term swings and long-term trends in global agriculture Bled, Slovenia, 6 June 2017 Josef Schmidhuber Food and Agriculture Organization of the United Nations (FAO)
The current market situation
Current world market prices: -2.8% in March 2017, but +13.4% above 2016. 3
But prices are way down from their peak levels Food Prices Indices Peak values March 2017 Change: March 2017 over peak values % FAO Food Price Index Feb-2011 240 171-29 Cereals June-2008 268 148-45 Oils Feb-2011 287 168-42 Sugar Jan-2011 420 257-39 Meat Aug-2014 212 163-23 Dairy Feb-2014 275 190-31 Quelle: FAO 4
Back to the long-term decline in real prices 140,00 120,00 World oil and food crisis fert prices 4 fold great grain robbery and depleted stocks export restrictions and bans Wheat: US price, CPI deflated 100,00 US$/t 80,00 60,00 40,00 Low stocks EU export tax Dec 95 Reduction of set'aside in 96/97 2007/2008 Export taxes Arg, India, Nepal Pakistan Import subsidies Egypt, Algeria 2010 Export ban by Russia 20,00 0,00
Long-term driver 1 Population growth, urbanization, ageing
Population (bn) 12,0 Global population growth to continue, but at a slower pace Increments over 10 years 0,9 10,0 8,0 6,0 4,0 2,0 0,0 1850 1900 1950 2000 2050 2100 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0,0 Source: UNPD, 2016
Urbanization to accelerate 7 6 billion people 5 4 3 2 1 0 Rural Urban 1950 1970 1990 2010 2030 2050
Long-term driver 2 Income growth
Consumption(kcal/pc) and GDP p.c. (62 Developing Countries)
The outlook in brief Demand to 2050
P End of the treadmill? End of falling real prices? D1 D2 D3 D4 D5 D*5 T 1 T 2 S1 T 3 T 4 S2 S3 S4 S5 S6 Q
From trends to swings (1): The impact of the energy sector
How big is the energy market? 1. Energy market (TPES): nearly 500 EJ 2. Biomass: 50 EJ (80% in developing countries) 3. Biofuels: 3.3 EJ, on ca. 33 million ha 4. Transport energy needs: ca. 95 EJ 5. Crop area to cover transport energy needs: >1000 million ha, i.e. 2/3 of global crop area. =>Energy market is large, creates perfectly elastic demand for agricultural produce up to break-even points (parity prices). =>Bio-energy subsidies have a price supporting impact, not price depressing as the traditional coupled agricultural subsidies. No WTO pressure to reduce/eliminate them
350,00 Corn and Crude oil prices 140,00 300,00 120,00 250,00 100,00 Corn in US$/t 200,00 150,00 100,00 80,00 60,00 40,00 Crude in US$/barrel 50,00 20,00 0,00 0,00 Corn (maize) Crude oil
From trends to swings (2) Back to ample stocks
Replenished stocks for cereals
replenished stocks particularly for wheat
Stocks to use ratio v maize prices 160 45,0 140 40,0 120 35,0 100 80 60 30,0 25,0 20,0 15,0 40 10,0 20 5,0 0 0,0 Maize price in USD/t 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/162/ % Stocks to Use Real maize price Stocks2Use
From trends to swings (3) Investment (GFCF) overhang and hangover?
Global investment overhang? Just trend growth, after all 340.000 Gross Fixed Capital Formation in Agriculture (million USD, CONSTANT 2005 prices) 320.000 300.000 MILLION USD 280.000 260.000 240.000 220.000 200.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GFCF 2000-2013 GFCF 2000-2008 Linearna (GFCF 2000-2008)
Eastern Europe: Considerable growth in fixed capital in 2007/08, but only trend growth afterwards 4.500 4.000 3.500 3.000 2.500 Eastern Europe - GFCF in Agriculture, forestry and fishery, million USD constant prices MILLIONS USD 2.000 1.500 1.000 500 0 GFCF 2000-2013 GFCF 2000-2008 Linearna (GFCF 2000-2013)
CIS grain exporters: Considerable growth in fixed capital in 2007/08, but only trend growth afterwards 14.000 Kazakhstan, Russia, Ukraine - GFCF in Agriculture, forestry and fishery, million USD constant prices 12.000 10.000 MILLIONS USD 8.000 6.000 4.000 2.000 GFCF 2000-2013 GFCF 2000-2008 Linearna (GFCF 2000-2013)
From trends to swings (4) What will China do?
What can we expect from China? 1. Slower overall economic growth, slower population growth, cont. urbanisation 2. Strong focus on food security and basic foodstuffs in the past 3. Ever more urgent resourceproblems, water scarcity, land erosion, etc. 4. Extremely high stock levels, particularly for maize. WTO dispute settlement panel, ethonol production and exports 5. Still high procurement prices, but sharply lower for maize 6. Pig industry goes through a period of structural change, higher feeding intensities, but also improved feeding efficiencies. 7. Lower stocks for maize, lower barley imports from the EU, lower sorghum imports from the US, more domestic soybean production, lower soybean and coarse grain imports?
China and the world 100 China's Soybean imports 90 80 70 Million Tonnes 60 50 40 30 20 10 0
Wrapping it up Trends 1. Declining population growth and growing saturation of food demand limit long-term potential 2. Price incentives of 2008-2012 have attracted private flows into agriculture, but no major investment overhang globally. 3. Enough investment in technology? 4. Medium term: no significant revovery, flat real prices. Swings 1. Low fertilizer/energy prices, ample grain stocks, and saturated biofuelmandates keep potential for short term price up-swing limited. 2. What will happen to China? Faster reforms? Lower prodcurement prices? Soybean, coarse grain imports? 3. Eastern Europe faces domestic demand constraints, shrinking and ageing populations, limited purchasing power from abroad (NENA) 4. We may have seen the bottom, milk, meat and sugar prices slightly higher
THANKS