Presentation of Wayne Jones, OECD, at Food, Fertilizers and Natural Resources Conference by...

Wayne Jones OECD Trade and Agriculture

Fertilizers Europe, Brussels, 19 October 2011

Food Security The need to increase productivity

OECD Trade & Agriculture 3

Good prospects for agriculture

global consensus on

medium term prospects for

agriculture and fisheries

• Higher average prices

• Growing food demand

• Increasing biofuel market

• Expanding trade

OECD Trade & Agriculture 4

Higher average commodity prices

% change in average real prices 2001-10 to 2011-2020

-10

0

10

20

30

40

50

60

OECD Trade & Agriculture 5

Growing demand

N.America 6%

L.America 10%

W.Europe 4%

E.Europe&C.Asia 5%

N.Africa&M.East 7%

S.S.Africa 11%

Asia&Pacific 56%

Oceania 1%

Share of global consumption gains

0-15% over the decade 15-30% over the decade +30% over the decade

OECD Trade & Agriculture 6

Increasing production of biofuels

Share of global production used for biofuel feedstocks

0%

5%

10%

15%

20%

25%

30%

35%

Sugar cane Vegetable oil Coarse Grains Sugar beet Wheat

2020 2008-2010

Percent

OECD Trade & Agriculture 7

Expanding trade

N.America 13%

L.America 27%

W.Europe 6%

E.Europe&C.Asia 11%

N.Africa & M.East

0%

S.S.Africa -1%

Asia&Pacific 38%

Oceania 4%

Share of export gains

OECD Trade & Agriculture 8

Future fertilizer demand?

Higher yields vs lower costs?

• Higher fertilizer prices

• Precision farming

• Seed technology

• Crop protection

• Environmental pressures

OECD Trade & Agriculture 9 9

Production costs, 2010, Heartland (USD/acre)1

Item Corn Soybeans Wheat

Operating costs: Seed 67.61 57.49 24.61

Fertilizer 105.82 (41%) 16.88 (14%) 83.89 (59%)

Chemicals 30.08 16.64 5.83

Custom operations 10.80 5.50 7.11

Fuel 26.79 (10%) 13.01 (11%) 10.28 (7%)

Other operating costs 14.24 12.90 11.47

Total operating costs 255.34 122.42 143.13

1 Data shown is for U.S. Heartland (corn belt)

Energy prices mainly affect fertilizer costs

OECD Trade & Agriculture 10

Good prospects but…

• Rising prod’n costs

• Environmental pressures

• Greater volatility

• Slower output growth

Risk management has, and

always will be, critical to

success in agriculture

OECD Trade & Agriculture 11

Volatility: food export restrictions

Region Export restricting countries

Export restricting measures

Africa 9 15

Asia 15 49

LAC 5 15

Others 4 8

Total 33 87

Sample of 105 countries 2007 to end-March 2011

Source: Ramesh Sharma, 2011 - based on WTO Annex 1 information

OECD Trade & Agriculture 12

The need to increase productivity growth

• Growing demand for food, feed and fuel

• Increasing competition for land

• Important water constraints

• Uncertain impacts of climate change

Improving agricultural productivity growth is not an option to consider –– it is an essential requirement for increasing global food supplies on a sustainable basis.

OECD Trade & Agriculture 13

• 47% pop’n under severe water stress by 2050

• Irrigation costs rise with energy prices

• Water pricing to agriculture will increase

• 60% freshwater withdrawals used by agr (2010)

• 40% freshwater withdrawals used by agr (2050)

Agriculture share of water use to decline

OECD Trade & Agriculture 14

Slower global output growth

Global agricultural production growth

2.60%

1.70%

0.0%

1.0%

2.0%

3.0%

2001-2010 2011-2020

OECD Trade & Agriculture 15

Wheat area and yield growth

Area harvested Annual % growth in yield

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

100.000

North America Europe Asia and Pacific Africa

Kh

a

1995 2000 2005 2010 2015 2020

0

0,5

1

1,5

2

2,5

3

3,5

NorthAmerica

Europe Asia andPacific

Africa

An

nu

al g

row

th r

ate

2000-2010 2010-2020

OECD Trade & Agriculture 16

Coarse grains area and yield growth

Area harvested Annual % growth in yield

0

20.000

40.000

60.000

80.000

100.000

120.000

North America Europe Asia and Pacific Africa

Kh

a

1995 2000 2005 2010 2015 2020

0

0,5

1

1,5

2

2,5

3

3,5

NorthAmerica

Europe Asia andPacific

Africa

An

nu

al g

row

th r

ate

2000-2010 2010-2020

OECD Trade & Agriculture 17

Oilseeds area and yield growth

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

90.000

North America Europe Asia and Pacific Africa

Kh

a

1995 2000 2005 2010 2015 2020

0

0,5

1

1,5

2

2,5

NorthAmerica

Europe Asia andPacific

Africa

An

nu

al g

row

th r

ate

2000-2010 2010-2020

Area harvested Annual % growth in yield

OECD Trade & Agriculture 18

Global total factor productivity growing

• Slower pace in developing

countries and LDCs

• Faster pace for emerging

and transition economies

• R&D the main driver;

benefits exceed costs

• Public sector remains the

main actor

• Wide diversity in R&D

support

OECD Trade & Agriculture 19

-1

-0,5

0

0,5

1

1,5

2

2,5

3

3,5

4

All developed countries All developing countries

% g

row

th r

ate

1970-79 1980-89 1990-99 2000-07

Average annual growth rate by period (%)

Agriculture TFP growth

OECD Trade & Agriculture 20

Agricultural TFP growth by region

Average annual growth rate by period (%)

OECD Trade & Agriculture 21

R&D expenditures by region in USD 2000

Page 21INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

Public Agricultural R&D Spending Trends, Public Agricultural R&D Spending Trends,

19761976--81, 198181, 1981--91, 199191, 1991--20002000

Source: Source: PardeyPardey et al. 2006et al. 2006

OECD Trade & Agriculture 22

The challenge for governments

Governments need to link

policies to priorities

• Invest in innovation

• Improve sustainability

• Facilitate producer risk

management

OECD Trade & Agriculture 23

Developing countries: enabling environment

Invest in education and extension

Reduce/remove distorting ag/trade policies

Develop better functioning markets

Adapt research and innovation to smallholders

OECD Trade & Agriculture 24

www.agri-outlook.org

Follow us on Twitter: @OECDagriculture

Contact

tad.contact@oecd.org

OECD Trade and Agriculture