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 expansionIn 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 satisfydisruptions. Food security became a topic of major public concern, in Europe and demographic and economic growth, energybeyond 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 effortsHaving a secure food supply not only supports the nutrition of a nation, but also should go further, as increasing production alonecontributes to other societal factors such as its political and economic stability. is not enough to combat food insecurity oftenAgricultural 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 researchand development to further productivity, but there are other mechanisms that can In this edition, we examine ways of tackling thealso increase the production capacity in food insecure countries – for example, land volatility of farm commodity prices. We also sharetenure 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 fullexploitation of innovative agricultural technologies. Simply planting more cropshowever is not the solution. US agriculture secretary Tom Vilsack called on farmersacross the world to “continue to embrace existing and emerging technologies toproduce more per acre while using less”. Within Europe, the European Parliament Markus Heldtadopted in February a resolution for urgent measures to combat food price President, Crop Protection Division, BASF SEmanipulation and ensure that food production is maintained in Europe.
AGRICULTURAL DIALOGUE 13 2 2Another factor that needs to be accounted for is the issue of “land grabbing”.Though Europe has sufficient food supply, its consumption of imported food hasan impact on food availability on the producing - often developing - countries.A recent study by the Humboldt University of Berlin analysed the impact ofagricultural trade on land-use decisions outside the European Union, findingthat an area approximately the size of Germany was being used to grow cropsimported to the EU. The conclusions warned that the EU must encourageagricultural innovation and productivity increases to avoid charges of virtual“land grabbing”. Did you KnowFood security, a global dialogue ■ The world population is set to rise to 7With the aim of improving food security, France, a country with a longstanding billion people at the turn of 2011-2012agricultural tradition, made tackling the volatility of world farm commodity and to 9 billion by 2050. Currently aboutprices 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’sagricultural output, said in June 2011 in its first-ever communiqué on the issue ■ 70% of the world population willthat 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 marketresponse to a long-term increase in demand for food and may harm confidence ■ According to FAO, the rate of growth inin 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 areseeking action. ■ Food spending in low-income house holds in developing countries garnersThis 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 Nationsup 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 responsiblefor the wave of unrest across the Arab world, which in turn affected global energy ■ The World Bank estimates that 44 millionmarkets. “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 ain 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 theworld’s population set to reach 9 billion by 2050, severe weather conditions world’s food production and has drivenregularly destroying crops and biofuels production eating into grain supplies, the up food prices by as much as 20% overneed 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 protectionwithin 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 periodsystem 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 andaggressive action to tackle global warming, prices of basic staple foods areexpected to skyrocket in the coming two decades.Securing our food supply starts by allowing farmers crucial tools in achievingproductive, sustainable agriculture. This does not only mean better products, butalso targeted, smart and safe use of technology as part of sustainable farming.Modern agriculture technologies can help raise yields, while at the same timeaddressing the numerous other challenges facing farmers and play a vital role inthe quest to improve food security.
InfORmATIOn fROm ThE AGRICULTURAL InDUsTRy | JULy 2011 3Food 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 developingHow much of a problem are high food commodity prices? countries and countries in transition mo- dernise and improve agriculture, forestryThey are not necessarily a problem in that high prices can lead to more and fisheries practices and ensure goodinvestment 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, homeis very strong. According to our outlook for the period up to 2020, prices to 70% of the world’s poor and hungryare 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 averageweather conditions, we will be producing only as much as is needed. That About Abdolreza Abbassianmeans there will be very little buffer in the form of stocks. So price volatilitywill become the norm rather than the exception, unless political action is As an economist, Abbassian leads thetaken by countries to find ways of reducing it. And my feeling is that we Food Outlook team of the FAO, which iscannot count on that in the medium term. responsible for the publication Food Out- look, the leading bi-annual publication onSo, from your point of view, volatility is the real problem? short-term outlook for food commodities. Given the strategic role of grains in foodThe volatility that we are seeing makes it almost impossible to take security, Abbassian is also the FAO’sinvestment 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 itspriorities this year, and all members are trying to find possible solutions toaddress the problem of price volatility. One of these concerns improvingmarket transparency and market information. There is a feeling that thesector was caught off-guard last year with the severe drought in Russia, sothis is a fair view, although I am not so sure that it is that influential a cause ofvolatility. There is also the possible role for flexible mandates (biofuels). Worldstock levels of food commodities are in themselves very low, but in additionthe biofuel sector is playing a role in this. The agricultural commodities goinginto biofuels can be seen as virtual stocks, and the G20 may consider thepossibility of diverting these stocks in case of extreme shortage. If this isagreed, I think the prospect of increased supply in times of need could bringsome stability to the sector. The third element is the role of the financial sectorand what should be put in place. There is general agreement that Europe hasto do a lot more and, as a starting point, introduce a framework similar tothat in the US. Currently, it is hard to see who the market participants are andwhat products they are trading.
AGRICULTURAL DIALOGUE 13 InfORmATIOn fROm ThE AGRICULTURAL InDUsTRy | JULy 2011 4What role do you see agriculture technology/crop sciences playing in the For more informationfood security debate?World food production ought to increase by 70% by 2050 to feed an additional ■ Action plan on food price volatility and2.3 billion people. We are 7 billion today. In developing countries, food produc- agriculturetion 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.pdffrom 3.2% per year in 1960 to 1.5% in 2000. The real challenge for technologyis to reverse this decline, a formidable task given climate change and its impact ■ FAO - Special Programme for Foodon 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 yieldgaps. ■ Farming First, Food Security http://www.farmingfirst.org/foodsecurity/How important is increasing production? ■ Food Security (Standford) Climat TrendsThere is a need for improved yields. We have seen a decline in yield growth in and Global Crop Production Since 1980recent 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 needto 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 Foundationincluding modern biotechnology, are essential in accelerating yields as well as http://www.gatesfoundation.org/Pages/closing yield gaps. home.aspx ■ Global Food and Farming FuturesFAO 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-futures250 - Dietary changes 10 - Unpredictable weather 9B - Increase pressure on natural resources 09 ■ Growing a Better Future, Oxfam’s210 08 7B 8B 07 Research170 - 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 Pakistan130 - Food crisis. Drought - Rains in Canada and USA 04 - High energy prices - Low food stocks - Floods in Australia - Russian export Ban 03 ■ James Hutton Institute90 02 http://www.hutton.ac.uk/ 0150 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 email@example.com www.agro.basf.com