1. InfORmATIOn fROm ThE AGRICULTURAL InDUsTRy | july 2011
AGRICULTURAL DIALOGUE 13
EDITORIAL
Dear Readers,
The extreme climatic condi-
tions together with unpre-
cedented appetite for agri-
cultural commodities have depleted world food
stocks to historically low levels and sent prices
to record highs.
The agricultural price outlook is cause for
concern, particularly given the current volatility
that hinders farmers’ ability to plan and has major
repercussions for world food security.
Food Security in Focus As a big global player in the farming sector and
an economy reliant on world trade, Europe is well
placed to promote the agricultural expansion
In January this year, world food prices hit their highest level since records began
needed to balance world supply and demand.
in 1990. Once more the world was entering a period of food volatility and supply
The challenge is to produce enough to satisfy
disruptions. Food security became a topic of major public concern, in Europe and
demographic and economic growth, energy
beyond after droughts, floods and fires significantly reduced the world’s agricultural
requirements as well as fill the poverty gap.
capacity.
Modern agricultural solutions are key to achieve
efficient and sustainable production. But efforts
Having a secure food supply not only supports the nutrition of a nation, but also
should go further, as increasing production alone
contributes to other societal factors such as its political and economic stability.
is not enough to combat food insecurity often
Agricultural research and the implementation of new technologies urgently need to
caused by poverty and insufficient infrastructure.
be encouraged. A clear political framework is a decisive factor in fostering research
and development to further productivity, but there are other mechanisms that can In this edition, we examine ways of tackling the
also increase the production capacity in food insecure countries – for example, land volatility of farm commodity prices. We also share
tenure security or access to banking and microcredit. with you the insights of Abdolreza Abbassian, a
leading agricultural economist.
One way to guarantee food security is to boost farm production through the full
exploitation of innovative agricultural technologies. Simply planting more crops
however is not the solution. US agriculture secretary Tom Vilsack called on farmers
across the world to “continue to embrace existing and emerging technologies to
produce more per acre while using less”. Within Europe, the European Parliament
Markus Heldt
adopted in February a resolution for urgent measures to combat food price
President, Crop Protection Division, BASF SE
manipulation and ensure that food production is maintained in Europe.
2. AGRICULTURAL DIALOGUE 13 2
2
Another factor that needs to be accounted for is the issue of “land grabbing”.
Though Europe has sufficient food supply, its consumption of imported food has
an impact on food availability on the producing - often developing - countries.
A recent study by the Humboldt University of Berlin analysed the impact of
agricultural trade on land-use decisions outside the European Union, finding
that an area approximately the size of Germany was being used to grow crops
imported to the EU. The conclusions warned that the EU must encourage
agricultural innovation and productivity increases to avoid charges of virtual
“land grabbing”.
Did you Know
Food security, a global dialogue
■ The world population is set to rise to 7
With the aim of improving food security, France, a country with a longstanding
billion people at the turn of 2011-2012
agricultural tradition, made tackling the volatility of world farm commodity
and to 9 billion by 2050. Currently about
prices the centrepiece of its 2011 G20 presidency.
78 million people are added to global
population each year.
Significantly, the G20 grouping countries, which produce 85% of the world’s
agricultural output, said in June 2011 in its first-ever communiqué on the issue ■ 70% of the world population will
that this excessive volatility not only has “negative impacts on access for food live in urban areas in 2050.
for the poorest but it could also hamper investments and an effective market
response to a long-term increase in demand for food and may harm confidence ■ According to FAO, the rate of growth in
in international markets.” agricultural production is expected to
fall to 1.5% between now and 2030.
Other interest groups as diverse as corporates and charity organizations are
seeking action. ■ Food spending in low-income house
holds in developing countries garners
This widespread concern reflects the fact that food security, previously an issue up to 80% of the family budget,
mainly confined to non-governmental and international organizations, has moved according to the United Nations
up the political agenda since the 2007-08 food crisis and the price shock of Conference on Trade and Development.
2010-11. This second price spike in four years was held to be partly responsible
for the wave of unrest across the Arab world, which in turn affected global energy ■ The World Bank estimates that 44 million
markets. “In low-income countries, increases in the international food prices lead people have fallen into extreme poverty,
to a significant deterioration of democratic institutions and a significant increase living on less than $1.25 a day, as a
in the incidence of anti-government demonstrations, riots and civil conflict,” result of food prices rising by 36%
according to an International Monetary Fund report published in March 2011. during the past year.
As well as price volatility, other factors are threatening food security. With the ■ Global warming has already harmed the
world’s population set to reach 9 billion by 2050, severe weather conditions world’s food production and has driven
regularly destroying crops and biofuels production eating into grain supplies, the up food prices by as much as 20% over
need for a larger food supply is ever more urgent. This will only be made possible recent decades.
with the help of technology and innovation in biotechnology and crop protection
within the framework of sustainable agriculture. ■ Per capita demand for meat in China
has been projected to increase by 60%
Oxfam chief executive Barbara Stocking said in a recent report that “the food (or 29 kg per capita) during the period
system is pretty well bust in the world. We are sleepwalking towards an avoidable 2000-2050 (Rabobank, 2010).
age of crisis”. Oxfam’s research highlights that in the absence of urgent and
aggressive action to tackle global warming, prices of basic staple foods are
expected to skyrocket in the coming two decades.
Securing our food supply starts by allowing farmers crucial tools in achieving
productive, sustainable agriculture. This does not only mean better products, but
also targeted, smart and safe use of technology as part of sustainable farming.
Modern agriculture technologies can help raise yields, while at the same time
addressing the numerous other challenges facing farmers and play a vital role in
the quest to improve food security.
3. InfORmATIOn fROm ThE AGRICULTURAL InDUsTRy | JULy 2011 3
Food for Thought About the Food
and Agriculture
Abdolreza Abbassian, who has more than 20 years of
This United Nations body founded in
international experience in global food security, is the
1945 leads international efforts to de-
FAO’s Secretary of the Intergovernmental Group on
feat hunger. Serving both developed and
Grains. This Group, with over 60 countries among its
developing countries, the FAO acts as
members, is a principal forum for intergovernmental
a neutral forum where all nations meet
consultation and exchange on trends in the global
as equals to negotiate agreements and
grain sector. Abdolreza Abbassian explains the
debate policy. Also a source of knowle-
implications of high and volatile food prices.
dge and information, it helps developing
How much of a problem are high food commodity prices? countries and countries in transition mo-
dernise and improve agriculture, forestry
They are not necessarily a problem in that high prices can lead to more
and fisheries practices and ensure good
investment in agriculture, which would be positive. But the signs are that in
nutrition for all. It focuses special atten-
general with food commodities the likelihood that they will stay at high levels
tion on developing rural areas, home
is very strong. According to our outlook for the period up to 2020, prices
to 70% of the world’s poor and hungry
are not likely to be below the levels that we are seeing now. Unless there
people.
are fundamental shifts in crop production and an improvement in average
weather conditions, we will be producing only as much as is needed. That
About Abdolreza Abbassian
means there will be very little buffer in the form of stocks. So price volatility
will become the norm rather than the exception, unless political action is As an economist, Abbassian leads the
taken by countries to find ways of reducing it. And my feeling is that we Food Outlook team of the FAO, which is
cannot count on that in the medium term. responsible for the publication Food Out-
look, the leading bi-annual publication on
So, from your point of view, volatility is the real problem? short-term outlook for food commodities.
Given the strategic role of grains in food
The volatility that we are seeing makes it almost impossible to take
security, Abbassian is also the FAO’s
investment decisions in agriculture. Farmers simply cannot make investment
focal point on food aid matters and re-
decisions when there is so much volatility. Whether prices are high or low is
presents FAO in major international plat-
not necessarily the problem. What we cannot live with is the current volatility.
forms on food aid related issues such as
in Food Aid Committee meetings.
What are the options for tackling the problem of volatility?
The G20 has put agriculture and commodity prices at the forefront of its
priorities this year, and all members are trying to find possible solutions to
address the problem of price volatility. One of these concerns improving
market transparency and market information. There is a feeling that the
sector was caught off-guard last year with the severe drought in Russia, so
this is a fair view, although I am not so sure that it is that influential a cause of
volatility. There is also the possible role for flexible mandates (biofuels). World
stock levels of food commodities are in themselves very low, but in addition
the biofuel sector is playing a role in this. The agricultural commodities going
into biofuels can be seen as virtual stocks, and the G20 may consider the
possibility of diverting these stocks in case of extreme shortage. If this is
agreed, I think the prospect of increased supply in times of need could bring
some stability to the sector. The third element is the role of the financial sector
and what should be put in place. There is general agreement that Europe has
to do a lot more and, as a starting point, introduce a framework similar to
that in the US. Currently, it is hard to see who the market participants are and
what products they are trading.
4. AGRICULTURAL DIALOGUE 13 InfORmATIOn fROm ThE AGRICULTURAL InDUsTRy | JULy 2011 4
What role do you see agriculture technology/crop sciences playing in the For more information
food security debate?
World food production ought to increase by 70% by 2050 to feed an additional ■ Action plan on food price volatility and
2.3 billion people. We are 7 billion today. In developing countries, food produc- agriculture
tion needs to double. Yet, the rate of growth in world cereal yields has dropped http://agriculture.gouv.fr/IMG/pdf/2011-
06-23_-_Action_Plan_-_VFinale.pdf
from 3.2% per year in 1960 to 1.5% in 2000. The real challenge for technology
is to reverse this decline, a formidable task given climate change and its impact
■ FAO - Special Programme for Food
on production systems. New technologies, crop management techniques, more
Security (SPFS)
input use efficiencies, and improved plant breeding techniques, including mo- http://www.fao.org/spfs/en/
dern biotechnology, are essential in accelerating yields as well as closing yield
gaps. ■ Farming First, Food Security
http://www.farmingfirst.org/foodsecurity/
How important is increasing production?
■ Food Security (Standford) Climat Trends
There is a need for improved yields. We have seen a decline in yield growth in and Global Crop Production Since 1980
recent years. This is a rather uncomfortable situation if we are to succeed in http://foodsecurity.stanford.edu/publica-
feeding 9 billion people by 2050. One option would be to expand the area of tions/climate_trends_and_global_crop_
production_since_1980/
productive land but we know there is a limit in that regard. We therefore need
to seek other ways of increasing output, in the absence of extra productive land ■ Food Security Portal (IFPRI)
and its impact on production systems. New technologies, crop management http://www.foodsecurityportal.org/
techniques, more input use efficiencies, and improved plant breeding techniques,
■ Gates Foundation
including modern biotechnology, are essential in accelerating yields as well as
http://www.gatesfoundation.org/Pages/
closing yield gaps. home.aspx
■ Global Food and Farming Futures
FAO Food Price Index* http://www.bis.gov.uk/foresight/our-
2002 - 2004 = 100
work/projects/published-projects/global
Beyond 2011
- Rapid Population growth 10 B
Billion People
food-and-farming-futures
250 - Dietary changes 10
- Unpredictable weather 9B
- Increase pressure on natural resources 09
■ Growing a Better Future, Oxfam’s
210 08
7B
8B
07
Research
170
- Oil price surge
06
http://www.oxfam.org/en/grow/reports/
- Declining Dollar
- Drought in Australia
- Canada weather related low yields
- Drought and re in Russia 05
growing-better-future
- Floods in Pakistan
130 - Food crisis. Drought - Rains in Canada and USA 04
- High energy prices
- Low food stocks
- Floods in Australia
- Russian export Ban 03 ■ James Hutton Institute
90 02 http://www.hutton.ac.uk/
01
50 00 ■ Price Volatility in Food and Agricultural
00 01 02 03 04 05 06 07 08 09 10 11 15 25 43 83
Years Beyond 2011 Markets: Policy Responses
http://www.unctad.org/en/docs/2011_
Real (The real price index is the nominal price index de ated by the World Bank Manufactures Unit Value Index “MUV”)
Nominal
G20_FoodPriceVolatility_en.pdf
Development of demand - From the UN Population Division.
*http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/
■ Rabobank - Sustainability and Security
of the global food supply chain http://
www.rabobank.com/content/images/
Rabobank_IMW_WB_report-FINAL-A4-
ImpRInT total_tcm43-127734.pdf
BASF SE Rainer von Mielecki ■ The World Food Programme
http://www.wfp.org/
Agricultural Center Limburgerhof AP/K – Public/Government Affairs
AP/K - LI555 Phone: +49 (0) 621 / 60-27 511 ■ World Food Situation (FAO)
http://www.fao.org/worldfoodsituation/
67117 Limburgerhof Fax: +49 (0) 621 / 60-27 512 wfs-home/en/
Germany rainer.mielecki@basf.com
www.agro.basf.com