Agriculture for Sustainable Economic Development: A Global R&D Initiative to Avoid a Deep and Complex Crisis

Agriculture for Sustainable

Economic Development: A Global

R&D Initiative to Avoid a Deep and

Complex Crisis

Joachim von Braun

Director General

International Food Policy Research Institute

Charles Valentine Riley Memorial Lecture

Washington D.C., February 28, 2008

Joachim von Braun, IFPRI, February 2008

Overview

1. The world food equation: Out of balance

2. Unsustainable agriculture: Risks and

insecurity

3. Actions needed now: Technology and

policy change


DemandIncome growth

Poverty and inequality

Consumer behavior

Bioenergy

Biomass (CO2)

Trade and MarketsInformation & Standards

Supermarkets

ProductionLand

Water

Inputs & Transport costs

Workforce

Climate change

Agrarian structure

Technology

The food and agriculture equation: Changes


The new situation: Surge in prices

0

100

200

300

400

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

0

20

40

60

80

100Corn

Wheat

Rice

Oil (right scale)

Source: Data from FAO 2008 and IMF 2008.

Commodity prices (US$/ton)


Cereals price changes: IFPRI projections

Source: M. Rosegrant (prelim. results with IMPACT-WATER)

.

0

100

200

300

2000 2005 2010 2015

Rice Wheat Maize Soybean

US$/ton


Income growth: Rising consumption

Growth (2004-06 per annum)

• 9% in Asia, 6% in Africa

• 2% in industrialized countries

Since 2000, global cereal use for:

• Food 4%, feed 7%

• Industrial purposes 25%

India, 2000 – 2025 Scenario:

• Meat 176%, milk and vegetables 70%

• Grain 27%

Sources: FAO 2003 and 2007b; Kumar, et al. 2007.


Shift towards high-value commodities

India China Brazil Nigeria

Cereals 1.0 0.8 1.2 1.0

Meat 1.2 2.4 1.7 1.0

Milk 1.2 3.0 1.2 1.3

Fish 1.2 2.3 0.9 0.8

Fruits 1.3 3.5 0.8 1.1

Vegetables 1.3 2.9 1.3 1.3

Source: Data from FAO 2007.

2005/1990 ratios of per capita consumption

Future grain consumption is driven by

income growth, population growth, and feed

for meat and dairy production


Food

retailers

top 10: $1,091

bln

• Wal-Mart

• Carrefour

• Metro G

• Tesco

• Seven & I

C o

n s

u m

e r s

$4

.00

0 b

lnDrivers of change:

Globalization of the agri-food business chain

Food

processors

and traders

top 10: $409 bln

• Nestle

• Cargill

• ADM

• Unilever

• Kraft Foods

Agricultural

input

industry

top 10: $40 bln

• Syngenta

• Monsanto

• Bayer C

• BASF AG

• Dow Agro

Farms

Agricultural

value added:

$1,592 bln

No. of farms:

ca. 450 mln

Size distr.

>100 ha: 0.5%

< 2 ha: 85%

Source: von Braun 2008.


World cereal production: Not growing enough

0

300

600

900

1,200

1999 2000 2001 2002 2003 2004 2005 2006 2007*

800

1,200

1,600

2,000

Wheat Coarse grains Rice Total (right)

Source: Data from FAO 2003, 2005-07.

* Forecast.

Million tonsTotal Million tons

Agricultural production:Decreasing share of developed countries

0 5 10 15 20

United States

India

W Europe

China

Brazil

Africa

1984-6 2004-6

Agricultural production, % of world total

Source: FAO 2008.


Cereals: The world eats more than it produces

0

100

200

300

400

500

600

700

2000 2001 2002 2003 2004 2005 2006 2007*

Source: Data from FAO 2003, 2005-07.

* Forecast.

Million tons

Total cereal stocks

China


IFPRI biofuel scenarios by 2020

Scenario Biofuel expansionPrice changes

(% by 2020)

1Actual plans & assumed

expansions

corn: +26

sugar: +12

oilseeds: +18

2Doubling of Scenario 1

expansion

corn: +72

sugar: +27

oilseeds: +44

Source: IFPRI IMPACT–model projections.


World food equation: Reasons for imbalance

1. Income growth

2. Biofuels

3. Lack of technology to respond

4. Low stocks

5. Production shocks

6. High input and transport costs due to energy price

7. Population growth


Overview



insecurity


policy change


0

1

2

3

4

5

6

1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003

Avera

ge a

nnual g

row

th r

ate

(%

)

maize

rice

wheat

Source: World Development Report 2008.

Declining productivity growth


Sources of cereal production growth

-0.5

0

0.5

1

1.5

2

2.5

LAC ESAP SSA CWANA NAE

Area expansion Yield improvement

Source: IFPRI IMPACT projections 2007.

Annual cereal production growth rates, 2000-2050


Competition

for land

Field and

pastures: ~40%

Forests: ca. 10

million km2

(~ 20%)

Cities, roads:

2%

Foley et al., SCIENCE 309, 2005


Climate change and sustainability

• Agriculture is part of the problem:

13.5 % the CO2 of equivalents

(Transport: 13.1%)

• Agriculture is part of the solution:

Biomass; CO2 sequestration

• CO2 trade: A new agricultural

commodity market of the future?


Agriculture: Other sustainability threats

Water resources

Irrigation = 80% of water use in developing countries

Soils

Overgrazing, deforestation, inappropriate agricultural practices

Biodiversity

Traditional crops replaced by genetically uniform modern varieties


970 million people live on less than $1 a day

Subjacent poor

($.75 cents – $1)

485 million people

Medial poor

($.50 cents – $.75 cents)

323 million people

Ultra poor

(less than $.50 cents)

162 million people

Source: Ahmed, et al. 2007.


GHI: Hunger remains high

0

10

20

30

1990 2007 1990 2007 1990 2007 1990 2007 1990 2007

proportion of calorie deficient people

prevalence of underweight in children

under-five mortality rate

South Asia East Asia &

Pacific

Middle East &

N. Africa

L. America &

Caribb.Sub-Saharan

Africa

Source: Wiesmann, et al. 2007.

Contribution of components to the Global Hunger Index


Bangladesh: Household price effects

Five-person household living on one dollar-a-day per

person spends its $5

$3.00 on food

$0.50 on household energy

$1.50 on nonfoods

A 50% increase in food and energy prices cuts $1.75

from their expenditures

Food expenditures will be cut most, and will be

accompanied by:

• Reduced diet quality

• Increased micronutrient malnutrition

• Delays in wage rate adjustments


Security synergies and conflicts

Food insecurity Political security risks

Rising food prices:

• The poorest suffer silently, the middle class

protests and lobbies

• Mass protests against rising prices

Decline in building international agriculture

capacity contributes to insecurity


Overview



insecurity


policy change

Agriculture to address poverty in the Critical Square

Innovation

& Capacity

Economic

GrowthGovernance

& Conflicts

Productivity

(in agriculture)

Why invest in agriculture? Agricultural growth is more pro-poor

Projected Poverty Rate in Ethiopia

(Both with 5% of GDP annual growth)

26

28

30

32

34

36

38

40

42

44

2003 2005 2007 2009 2011 2013 2015

Ag-led grow th Nag-led grow th Base run

Source: IFPRI, 2007


Global public agricultural R&D

0%

20%

40%

60%

80%

100% Middle East-North Africa

Latin America-Caribbean

Other Asia-Pacific

India

China

Sub-Saharan Africa

Developed

1981$15.2 billion*

2000$23.0 billion*

Source: Pardey, 2006

* in 2000 international prices


Policy responses NOT to choose

• Export stops (“starving your neighbor”)

• Food subsidies for vocal middle class

• Maintaining outdated production controls

• Continued public underinvestment in agriculture productivity increases

• Exclusion of agriculture from climate change mitigation strategies


Five milestones for the roadmap

1. Global political attention at the highest levels

2. Specific policy action to protect the poorest

from excessively high food prices

3. Major investments in services, rural

infrastructure and input supply and finance for

small farmers

4. A global R&D initiative for accelerated

agricultural productivity

5. Enhanced collaboration of old and new key

global agricultural players


A global initiative

Accelerated investment in agricultural

productivity now:

• makes economic sense

• is pro-poor and good ethics

• enhances sustainability

• serves security

Documents

Agriculture for Sustainable Economic Development: A Global R&D Initiative to Avoid a Deep and Complex Crisis