Economic  Implications  Jeff  Vitale V3
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  • Important if your objective is to achieve food security that there exists a clear definition. You have probably heard many defintions so far for food security. Let me spend a minute or two on the working defition I like to use. Most people have their own take on this like ugali, but in my expereince the development community has more ore less embraced this general definition of food security. Access is a particular problem in Kenya and Uganda with the topography.
  • Hand out answer sheets with a though d on them. All stand in begiinning and then people with wrong answers sit down. Last one standing wins.
  • This is obviously why we are here and why you made the trip. I’d like to take a quick snap shot of where we are today. We need to admit that things aren’t that great today.putfactidsonquiz use wfpqioz, and tyson notes and other questions from my notes and questions from the videos
  • Mention the report I worked on.try to update this. Also try to show where the gap is between required consumption and actual consumption.
  • We’ll use global food prices since domestic food prices are often maintainedartifically low but that is still at a large cost to countries.
  • This is obviously why we are here and why you made the trip. I’d like to take a quick snap shot of where we are today. We need to admit that things aren’t that great today.putfactidsonquiz use wfpqioz, and tyson notes and other questions from my notes and questions from the videos
  • Put malthus on quiz
  • Put malthus on quiz
  • This kind of work could be done locally/regionally.
  • This is where the dismal science steps in. What are some good examples of scarce uses and competing uses???
  • Follow greenplate’s paper !!!
  • Put boserup on the quiz
  • Suggest that this is what try to discuss into as a group. Put our eggs in this basket.
  • Good time to hand out papers.
  • Put policies along value chain: biotechnology. What can this group do to provide assitance??

Economic  Implications  Jeff  Vitale V3 Economic Implications Jeff Vitale V3 Presentation Transcript

  • Economic Implications of Food Security in the 21st Century
    Jeffrey Vitale
  • Presentation Outline
    What is food security?
    Food security: Current status
    Global challenges for food security
    Role of economics in enhancing food security
    Opportunities
    Next steps
  • What is Food Security?
    “When all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life”. The World Food Summit of 1996.
    Economists like this definition since it is strong and comprehensive, especially this last part. By removing constraints on nutrition, food security enables societies to fully develop their human capital. This definition goes far beyond a “survival” definition of food security.
    However, this is a general definition and it’s vague on how to quantify achievement.
  • Indicators & Determinants
    DIRECT ACCESS
    • Home production
    (Yields & area)
    • Household transfers
    INDIRECT ACCESS
    • Distribution
    • Market prices
    • Disposable income
    • Food aid
    FOOD
    SECURITY
    ADEQUACY
    • Consumption
    UTILIZATION
    • Nutrient content
    • Food safety
    • Human health
    STABILITY
    • Supplies over time
    • Access over time
  • Food Security Quiz
    Let’s take a look at some questions on food security to get our minds focused on the topics.
  • Critical Needs for Sub-Saharan Africa
    Virtually all of the food security indicators are underperforming in SSA:
    Direct access to food is weakened by low productivity, i.e. low crop yields
    Indirect access to food is weakened by low disposable incomes, high transportation costs, and global price shocks
    Food consumption inadequate for even basic energy requirements, let alone improved nutrition
    SSA diet remains starch-based, lacking in nutrition.
  • Direct Access of Food: East Africa
    Current performance is weak.
    Typically need 212 kg per person of cereals per year.
    This leaves a significant gap ...
  • Maize Imports
    Gaps in domestic production are made-up through food imports that are risky when prices rise ...
  • World Maize Price ($ per MT)
    As the world witnessed in 2008 and perhaps may see again soon
    $2.25 per bu
    Price shocks leading to social and political unrest
  • World Food Prices
  • Here’s an illustration of how different food access and disposable income vary “North to South”
    Territory size shows the proportion of all people living on PPP US$ 100-200 a day worldwide that reside there.
  • Distribution & Marketing
    Graph illustrates shipping cost from port of entry to destination.
    Entry point is either Dar es Salaam or Mombasa, whichever has lowest cost.
    Oklahoma: transportation costs $0.20 per ton mile
    In East Africa, the red areas are about $2.40 per ton mile
    Compare with previous slide and see that transportation costs are more than the world price of maize.
    Source: Stan Woods, IFPRI
  • Critical Needs for Sub-Saharan Africa
    Virtually all of the food security indicators are underperforming in SSA:
    Direct access to food is weakened by low productivity, i.e. low crop yields
    Indirect access to food is weakened by low disposable incomes, high transportation costs, and global price shocks
    Food consumption inadequate for even basic energy requirements, let alone improved nutrition
    SSA diet remains starch-based, lacking in nutrition. Barb Stoecker will be discussing this.
    Unfortunately, achieving food security milestones will become increasingly difficult over the coming decades
  • Future Challenges & Constraints: Has Malthus Returned??
    Feeding the world over the next few decades is going to be a major challenge
    Some even expect that food security could be a “North country” problem as well
    World will need to produce substantially more food over the coming decades to feed increased population (9 billion by 2050) as well increased demand from higher incomes, including large increases in demand for meat (primarily from Asia)
    Numerous constraints and challenges will limit the capacity to increase food supply in the future
    Can the world, as Malthus doubted, feed itself over the coming decades?
  • Constraints & Challenges to Global Food Security
    Shrinking land supply from urban encroachment
    Environmental degradation
    Global climate change
    Water scarcity
    Rising energy prices and its effect on fertilizer and other input prices (high fertilizer use in food on quiz)
    Competing uses of agricultural land from energy crops and “neo-colonial” enterprises
    Urbanization and decline of farm population
    Pest damage
  • Rising Energy Prices ($ per barrel)
    What happens if/when oil reaches $250 per barrel and stays there??
  • High energy prices result in higher production costs and ultimately impact grain prices when ending stocks are low…
    Fertilizer prices explode: phosphates up from $390/ton in 2006 to $1,727/ton in April 2008
  • Climate Change
    2004 study I was involved with at Texas A&M
    Forecasts of what is expected to happen to agriculture over next 50 years in SSA, including Kenya
  • Global Climate Change
    Change in Rainfall
  • KENYA
    Changes in Crop Yield (%) (Under Canadian GCM projection out to 2050)
  • Cereal Production
    Changes in Cereal Production (%)
  • Cereal Import
    Changes in Cereal Import (%)
  • Price Index
    Price Index (Base = 100)
  • Role of Economics in Food Security
    Allocate scarce resources under competing uses to meet societies needs and wants
    Guide policy makers towards making optimal use of resources under scarcity and imposed constraints
    Identify agricultural alternatives and policies that generate highest social rate-of-return
  • Economic Framework
    Economic implications and policy outcomes are assessed in a supply-demand framework
    Demand: How much food needs to be produced given population, economic growth, and food security goals (policy)
    Supply: How much food can actually be produced given the availability of inputs (land, water, labor, etc.), the condition of the natural resource base, and climatic factors
  • Economic Framework
    Think of demand as our goals and objectives: determines how much food do we need to produce
    Demand
    Think of supply as how much food the world can produce
    Both supply and demand will depend on price, but do so in opposing ways.
    Demand decreases when prices rise but supply increases.
    Supply
  • Economic Framework
    Market outcomes are determined where supply and demand meet.
    Demand
    The market outcomes tell us how much food is produced and what price consumers paid.
    Both market price and quantity are highly important indicators and measures of food security.
    We need to have affordable food for consumers so they can satisfy their requirements while giving producers ability to produce at low costs.
    Supply
    Policies have traditionally been biased towards keeping food prices low but as we will see that is difficult unless supply is strengthened.
  • Economic Framework
    Economic implications and policy outcomes are assessed in a supply-demand framework
    Best to think of demand as what and how much we need to do and the supply as how we go about meeting our needs
    The economic framework paints either a gloomy or hopeful picture depending on whether you believe Malthus or Boserup
  • Demand: How much food needs to be grown?
    Higher incomes in merging and emerged countries means increased demand for food
    Population growth will be an issue in many parts of the world, including SSA.
    More diverse diets (i.e. red meat) at least in Asia
    This means that demand will increase significantly over the coming decades
  • Food Demand: Future Forecasts
    Demand is projected to increase Think of demand as our goals and objectives: determines how much food do we need to produce
    Demand
    Think of supply as how much food the world can produce
    Supply
  • Income and population growth will continue to be key drivers of increased food consumption
    Where would Kenya and Uganda be located on the graph??
  • Globally, meat consumption is forecast to increase by more than 2% per annum between 2005 and 2015 or over 60 billon MT
    Trend expected to continue, with only a modest leveling off
    • Demand growth from diet change combined with population growth
    • Meat consumption to increase from 50 kg per capita to 56kg between 2005 and 2015
    • Poultry continues to take share from beef, albeit at a reduced rate. Pork gains due to China
    • ~ 20% more feed grains will be needed to meet this demand
    Source: FAO, FAPRI, OCED
  • Economic Framework: Inc Demand
    Virtually all projections have global food demand increasingly significantly over the coming decades.
    Demand
    For economists, we have to rework our modeling framework to account for the growth in demand.
    Demand curves shift outward, indicating that the quantity demanded by consumers is increasing. The effect is an increase in food prices. We can’t say how much prices will increase until we consider how supply will change over time, which we’ll look at in some upcoming slides.
    Supply
  • Supply Considerations
    For sake of discussion, we can consider two opposing view points: Malthus vs. Boserup.
    Malthus argued that the world would run out of food since the supply of land is fixed. We’ll look at his supply curve on next slide.
    Boserup argued that through science and technology, societies are able to overcome limits on land supply by increasing ag productivity. We’ll also look at her supply on the next slide.
  • Econ Framework: Malthus vs. Boserup
    Malthus believed that because land has a fixed supply, there is only so much food that can be produced once land supply is exhausted. So his supply curve bends up.
    Demand
    In Malthus’ world, prices would skyrocket as demand increases over time. World won’t be able to feed itself once land has been used up.
    Increasing Global Demand for Food
    Supply
  • Econ Framework: Malthus vs. Boserup
    Science & Technology
    Boserup believed that with science and technology supply can be increased. Boserup’s supply curve is to the right, meaning that it produces more food at cheaper prices.
    Demand
    In Boserup’s world, prices would only increase modestly with increasing demand. Consumers would pay a premium for more intensive production. World should still be able to feed itself.
    Increasing Global Demand for Food
    Supply
  • Economic Framework: Malthus
    Malthus believed that because land has a fixed supply, there is only so much food that can be produced.
    Demand
    Malthus didn’t have a framework, but if he did he would have predicted higher and higher food prices as demand increased. This is illustrated by the demand curves moving to the right.
    Eventually, according to Malthus, a growing population will run out of food.
    Supply
  • Economic Framework: Boserup
    Boserup believes that with science and technology, agriculture can increase productivity and feed even fast growing populations.
    In her framework, supply is able to increase with scientific advances as shown by the supply curve moving to the right.
    Quantity of food produced in her model increases and prices have only a minimal increase
  • Lessons Learned
    Nearly all development economists believe Boserup: with science and technology agricultural production can be increased and prices kept loweven when land supply has been exhausted.
    Evidence from the science-led agricultural development of the US in 20th century and the Green Revolutions in Mexico, Brazil, and Asia make it hard to dispute Boserup’s viewpoint
    For SSA, lesson is clear. As population grows, there is a need for a science based agricultural revolution to increase productivity.
    However, as we discussed earlier, the constraints to future growth are a source of concern for even strong believers in Boserup.
  • Achievements of a Science-Based Agriculture
  • How can we grow more food: Is Boserup correct?
    To satisfy demand, most estimates suggest that crop yields will need to increase by an average of 2% per year over the coming decades to satisfy world food needs.
    Daunting challenge since developed countries such as US averaged only a 2.1% yield increase since World War II
  • Africa’s Green Revolution (AGRA)
    Nearly all agree that the needs are so large that they cannot be met with the status quo.
    Clear need for a Green Revolution in Africa
    Asian revolution not transferred to Africa
    Need new innovations to meet challenges
  • What Might Africa’s Green Revolution Look Like?
    Biotechnology
    Irrigation
    African led, science-based research and development
    Address “orphan crops” that have been ignored by developed countries
    Energy efficient
    Water efficient
    Better policy
    Better physical infrastructure
    Reinforce existing capacities
    Extension
    Research and development (inc gdp share)
    Increased commercialization
    Public-private partnerships
    Continued support from foundations (Gates, Buffet, etc)
  • Alternatives
    Put in a nice table of alternatives
  • Empirical Evidence
    Bt cotton in West Africa
    Bt maize in Kenya
    Striga in maize
  • Bt Cotton in Burkina Faso
    An initial glimpse of what the Green Revolution could look like Bt cotton in West Africa
    Private firm, Monsanto, assisting in transferring technology
    Cooperation between technology provider and government, public research institutues, and smallholder prodcuers.
  • Benefits to Producers
    An initial glimpse of what the Green Revolution could look like Bt cotton in West Africa
    Private firm, Monsanto, assisting in transferring technology
    Cooperation between technology provider and government, public research institutues, and smallholder prodcuers.
  • Summary
    Without more investments in agriculture in agriculture, including in science-based R&D, it’s difficult to be optimistic about future food security in SSA
    Develop your own definition of food security and QUANTIFY even though it’s not easy
    Identify food security indicators
    Assess future food needs (demand) in your region
    Identify policy alternatives and new technology options
    Get farmers involved and strengthen extension
    Assess and rank constraints to production, including climate change
    Quantify whenever possible
    Everyone needs to think globally
  • Next Steps
    Surveys
  • The End
  • Global protein consumption per capita is highly correlated to the change in GDP per capita
  • China (along with India) has become a major global economic force…with much more to come over the next 30 years
    Global GDP Growth
  • High energy prices result in higher production costs and ultimately impact grain prices when ending stocks are low…
    Fertilizer prices explode: phosphates up from $390/ton in 2006 to $1,727/ton in April 2008
  • Higher per capita income
    Lower per capita income
    The protein value chain...
    Impact of raising commodity prices?
  • Developing countries and the poor disproportionably feel the impact of food inflation- When food prices raise by 33% living standards are reduced 3% in rich countries and over 20% in poor countries – G. Becker Nobel economics laureate Univ. of Chicago
    Source: USDA Economic Research Service, 2004 Data – Household final expenditures spent on food at home. Represented as
    fraction of household expenditures on goods and services.
  • Value Chain
  • Food insecure regions and countries at risk by climate event