ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES Trends on Global Food Markets: What Is the Significance of Biofuels? Stefan Tangermann Director for Trade and Agriculture Policies against Hunger: Bioenergy and Food Security Berlin, 17 December 27
Explosion of global food prices Concerns about food price inflation Governments begin to act nervously Have market conditions changed fundamentally? What is the role of biofuels? What does it mean for food security in developing countries? 2
OECD analysis www.agri-outlook.org www.oecd.org/agr 3
Million tonnes Shocks in world cereal markets: changes from 25/6 to 26/7 2 1-1 -2-3 -4 Wheat production Coarse grain production Cereal use for ethanol 4
Million tonnes Per cent Substantial drop in global grain stocks 35 28 21 14 7 5 4 3 2 1 Wheat stocks Wheat stock-to-use Coarse grains stocks Coarse grains stock-to-use 5
Short term and long term factors Extreme weather conditions (cereals, milk) Some production decline in important exporting countries (Argentina: milk; EU: milk) Low stocks Growing food demand in emerging economies Higher production costs: oil price Demand for biofuels Short term Short term (?) Short term Long term Long term Long term 6
Per cent Where is the world s population and income growing most? 7% Annual per cent change 27 to 216 6% 5% 4% 3% 2% 1% % Africa Asia and Pacific Latin America & Caribbean Oceania North America Europe World Income Population Source: OECD 7
Per cent Consumption gains mainly outside OECD 3.% 2.5% Annual per cent change 27 to 216 2.% 1.5% 1.%.5%.% Wheat Coarse grains Oilseeds Beef Pig Meat Cheese WMP OECD Non OECD Source: OECD 8
OECD Developing Food use remains an important driver in global wheat demand 216 24-6 1995-97 216 24-6 1995-97 Food Feed Other 1 2 3 4 5 million tonnes Source: OECD 9
OECD Developing while ethanol pushes coarse grain demand up 216 24-6 1995-97 216 24-6 1995-97 Food Feed Other 1 2 3 4 5 6 million tonnes Source: OECD 1
billion litres of ethanol million t (maize) billion litres of biofuels million t (crops) USA: Ethanol to double EU: Ethanol and biodiesel to grow 5 12 35 25 45 4 35 3 25 2 15 1 5 1 8 6 4 2 3 25 2 15 1 5 2 15 1 5 1996 21 26 211 216 22 24 26 28 21 212 214 216 Ethanol production Maize use Ethanol Wheat use Oilseeds use Biodiesel Maize use Source: OECD 11
Billion litres (ethanol) Million tonnes (sugar cane) Brazil: continued growth of ethanol China: ethanol to increase maize use 5. 45. 4. 35. 3. 25. 2. 15. 1. 5. 6 5 4 3 2 1. 1996 21 26 211 216 Ethanol production Sugar cane use Source: OECD 12
Billions liters Global biofuel production to expand 14 12 1 8 6 4 2 1995 2 25 21 215 Canada Biodiesel EU Biodiesel Canada Ethanol China Ethanol EU Ethanol USA Ethanol Brazil Ethanol Source: OECD 13
Million tonnes Cereal requirements for ethanol production World cereal production (excl. rice) in 216: 185 mill tonnes 16 14 12 China - maize 1 8 6 Canada - wheat Canada - maize EU - wheat EU - maize 4 USA - maize 2 25 26 27 28 29 21 211 Source: OECD 212 213 214 215 216 14
Per cent Feedstock requirements for bio fuels become a major new source of demand 7 6 The share of output used for biofuels (projection for 216) 5 4 3 2 1 Sugar Brazil Maize USA Wheat EU Oilseed EU Maize Canada Maize China Source: OECD 15
USD/t Outlook for world prices - Crops 4 actual projected 35 3 25 2 15 1 5 Wheat Maize Oilseeds Rice Sugar 1998 21 24 27 21 213 216 Source: OECD 16
USD/1kg Outlook for world prices Meat and Dairy 35 actual projected 3 25 2 15 WMP Butter Beef Pigmeat Poultry 1 5 1998 21 24 27 21 213 216 Source: OECD 17
World price changes, 1 year periods 5 27-16 against 1997-26 25-14 against 1995-24 4 3 % 2 1-1 Wheat Maize Rice Veg oil Oil meals Oilseeds Sugar WMP SMP Butter Cheese Beef Pigmeat -2 18
Food security and biofuels Hunger, malnutrition have economic causes: income, food prices Bioefuels affect food security in developing countries through income generated in domestic biofuel production world price impact of biofuel production in OECD countries Rising world price of food benefits producers, harms consumers 19
'Net consumers' dominate in developing countries Poor urban consumers are negatively affected by rising food prices Many poor farmers in developing countries are net food consumers Overall, developing countries are net importers of food, in particular cereals (in 216: 143 mill tonnes, excl. rice) Africa in particular is a net importer (SSA in 216: 18 mill tonnes, excl. rice) 2
Country size in proportion to cereal net exports Source: SASI Group (University of Sheffield) and Mark Newman 21
Biofuels policies of rich countries harm food consumers in poor countries Biofuel demand in OECD countries is largely driven by policies (subsidies, tax breaks, blending requirements, ) These policies raise demand for agricultural products and world prices of food and harm food consumers OECD tariffs harm biofuels producers in developing countries 22
What are the benefits of OECD biofuel policies? Energy security? Fighting climate change? Improving the environment? Supporting rural development? Creating economic benefits? Superior to improving energy efficiency? 23
Conclusions Current hike of world food prices is in part result of production shortfalls, transitory but also reflects growth of biofuel use which is expected to accelerate largely as result of rich country policies with questionable benefits and negative impacts on food security 24