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Current and future challenges for agriculture and food security Kostas G. Stamoulis Director, Agricultural Development Economics Division Food and Agriculture.

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Presentation on theme: "Current and future challenges for agriculture and food security Kostas G. Stamoulis Director, Agricultural Development Economics Division Food and Agriculture."— Presentation transcript:

1 Current and future challenges for agriculture and food security Kostas G. Stamoulis Director, Agricultural Development Economics Division Food and Agriculture Organization of the United Nations

2 Page 23rd Conference on Sustainable Agriculture The Art of Farming Brussels, May billion people hungry in 2009 Asia & Pac 642m SSA 265m LAC 53m NENA 42m Developed 15m

3 Page 33rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Rapid rise in the number of hungry in recent years Source: FAO

4 Page 43rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Short-term developments

5 Page 53rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Food price developments, FAO commodity price indices ( = 100) Source: FAO Food Outlook (Dec. 2009)

6 Page 63rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Food price index development, , adjusted for changes in exchange rates

7 Page 73rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Paradox 1: No serious production shortfalls Source: FAO Food Outlook (Dec. 2009) Global crop production

8 Page 83rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Price transmission (1) : International vs. domestic prices

9 Page 93rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Transmission of International prices : upward movement

10 Page 103rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 The Price Transmisson Paradox(2): Prices Inflexible downward

11 Page 113rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Paradox 3: Determining the impact of price hikes Households adjust differently: –Net producers, net consumers extent of separability between consumption and production decisions –Production/expenditure patterns –Liquidity constraints, investment capacity –Fact: MalawiZambiaUgandaMalawiZambiaUganda Changes in expenditure on maize Changes in quantity of maize consumed Impact of % 50 increase in the price of maize on food expenditure Source: FAO

12 Page 123rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Policy responses to short-term developments Objectives: –Ensure affordable access to food for the most vulnerable –Increase availability of food Wide spectrum of policy responses, differed by country Source: FAO (2008)

13 Page 133rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Policy response measures Trade related –Imports (e.g. import tariff reductions, tax breaks, financial support) –Exports (e.g. export bans) Tax related –e.g. Reductions in VAT, removal of transport taxes, tax reductions on fuels Market interventions –Management of public stocks Safety nets Food supply-based interventions/input support

14 Page 143rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Could a similar crisis happen again? Can some of the basic drivers be reproduced –Shortfall in stock levels ? Energy prices? Financial markets ? –Will underinvestment in agriculture continue ? –Who will be able to respond to the higher prices Incoherent policy responses –Initial reaction of exporters to food price increase (export restrictions) exacerbated price instability : Safeguards ? –Longer-term reaction of importers (land acquisition, supply arrangements) could reduce residual market size and further increase market instability –Loss in confidence in international markets En ergy and agricultural markets will become more strongly interlinked: can food prices be determined by much larger energy markets ? Will new players in international grain markets provide a safeguard ?

15 Page 153rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Long-term challenges

16 Page 163rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Food security in perspective Source: FAO (2009) Year Undernourished in developing countries (Million)

17 Page 173rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Key challenges Key overall challenge: To eliminate food insecurity Challenges for agriculture : –Meet the food and energy needs of 9.2 billion people by 2050 –Meet additional demands from energy markets –Cope with local resource scarcity and shift to more sustainable production methods –Adapt to the agro-ecological changes related to climate change and contribute to the mitigation effort –Protection of livelihoods as agriculture transforms and markets are integrated

18 Page 183rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Demand Outlook : Slow-down in global demand for agricultural commodities Slowdown in Population growth –+2.3 billion to 2050 after +3.3 billion over the last 40 years –Highest growth in the poorest regions: Sub-Saharan Africa (+114%) –Lowest growth in East and South East Asia (+14%) –+2.7 billion in urban areas, significant urbanization Optimistic on income growth –Overall a richer world by 2050 –+2.9% growth per annum for the world a a whole –higher in developing countries (5.2%), lower in industrial countries (1.9%) –Less poverty (scenarios differ), but low poverty line of US$ 1.25

19 Page 193rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Change in the composition of diets Source: FAO 2050 Average daily per capita consumption: 3068 kcal

20 Page 203rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 The global food outlook to past future past future past future Developing Developed World Agricultural production Source: Bruinsma (2009) Baseline: How much more needs to be produced by 2050? (%) past = 1961/63 to 2005/07; future = 2005/07 to 2050

21 Page 213rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 A Baseline Scenario shows that globally we can meet effective demand Globally: 91% from increased yields and cropping intensities In developing countries: 79% from increased yields and croppping intensity –Improved seeds –More efficient input-use (especially water and fertilizer) –Small increase in cultivated area Yield growth: considerable slow down: 0.8% p.a. in the future compared to 1.7% in the past Still considerable untapped/bridgeable yield potentials and increases in yield ceilings BUT R&D needed for crops that are important for the poor (millet, sorghum, R&T, pulses, plantains) Key Challenge : In 27 countries prevalence of food deprivation more than 50% in 2050 not counting climate change and bioenergy demand

22 Page 223rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Exploitable yield gaps for maize in Africa Source: WDR, 2008, Sasakawa Africa

23 Page 233rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Agricultural system transformation

24 Page 243rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Structural shifts in agriculture and agro-industry As economies develop and incomes rise, emphasis shifts to value addition, risk management, quality and safety characteristics –Trade liberalization and FDI intensifies the spread of agribusiness –Gains from scale economies dominate –Knowledge of how to manage complex systems Concerns: –Rapid transformations increase risk of smallholder marginalization lack of access to knowledge, capital of all kinds, organisation –Agriculture-development-poverty reduction link is broken

25 Page 253rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Structural transformation (1) Share of agriculture in GDP and per-capita GDP (180 countries) Note:GDP per capita refers to 2005 PPP USD. Source: World Development Indicators, 2009.

26 Page 263rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Structural transformation (2) A declining share of agriculture in GDP, but a high and rising share of agribusiness in GDP in developing countries Source: World Bank, WDR 2008

27 Page 273rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Importance of smallholders Who is a smallholder ?? 70 percent of worlds poor concentrated in rural areas where 2 out of 3 bn people reside in about 450 million small farm households. Focus on poverty reduction forces a better look at smallholders Smallholder growth has collateral positive effects on local economies.

28 Page 283rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 inclusive commercialization ?? Smallholder participation into markets –Traditional constraints ( infrastructure; input markets; information) –Which Markets ? –Ease of entry depends on market characteristics (e.g. volatility: volumes, prices; integration between rural, urban, regional, global) –Willingnesss of producers to generate sufficient surpluses Smallholder participation in value-chain development –Which Value chain ? –Ease of entry depends on the specific value-chain (e.g. capital intensity, knowledge intensity, land intensity; policy induced risks) What is the ultimate objective ( smallholder orthodoxy) –Operating through labour markets ( demand and supply)

29 Page 293rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Policy interventions/ VCD initiatives to alleviate constraints Characteristics of the constraint/market failure will determine appropriate delivery mechanism/intervention –Public/merit good research, extension, quality assurance, market intelligence, trade facilitation, dialogue, coherence –Private good access to/affordability of inputs (subsidies, distribution) output price support (level/volatility) When to deliver support/service? Who and how to deliver? –Trade Policy Target primary product ? Protect processed or raw material ? Characteristics of industries to be protected

30 Page 303rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Sources of Failure in Agricultural Markets Source of market failure: What is the constraint to private sector involvement? Possible PPP Solutions 1. Lack of enabling environment Unstable macro-economic environment; Inadequate physical infrastructure; Weak property rights and/or contract enforcement PPPs for provision and/or maintenance of infrastructure 2. Public goodsNon-excludability, non-subtractabilityContracting out for service delivery; Facilitate private coordination 3. Merit goodsLack of effective demand, hence market under-provides Contracting out for service delivery; Subsidies 4. Barriers to entryLack of access to: Capital, Training (technical information) Market information - 5. High transaction costs/risks Imperfect information about attributes or actions of other actors and/or attributes of goods being sold Certification; Publicly supported assurance schemes; Risk sharing schemes 6. Coordination failures (complementary investment) Asymmetric information, no mechanism to enforce commitments; hence lack of trust Deliberative fora

31 Page 313rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Policy challenges..and opportunities

32 Page 323rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Key Conclusions The world can produce enough food to feed itself in the long-run – if appropriate policies and investments are put in place also to deal with wild cards..biofuels and CC Producing enough food will not eliminate hunger – access to food must also be increased Improving the performance of agriculture is necessary to increase both food production and access to food Rapid transformation of the agri-food sector creates risks of marginalisation of small producers.

33 Page 333rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Interventions vs initiatives More creative role for public sector that goes beyond creation of basic enabling environment Mechanisms by which public sector support can be used to leverage greater private sector participation –State seeks to align incentives facing private sector with public policy goals such as service provision to poor groups –Public sector risk sharing to encourage greater participation and investment Counterproductive interventions –Crowding out –Policy environment (e.g. ad hoc use of trade restrictions)

34 Page 343rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Thank you For more information, please visit

35 Page 353rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Interventions vs initiatives More creative role for public sector that goes beyond creation of basic enabling environment Mechanisms by which public sector support can be used to leverage greater private sector participation –State seeks to align incentives facing private sector with public policy goals such as service provision to poor groups –Public sector risk sharing to encourage greater participation and investment Counterproductive interventions –Crowding out –Policy environment (e.g. ad hoc use of trade restrictions)

36 Page 363rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 How much land is available now and in 2050? Source: Schmidhuber (2009); Data from Bruinsma (2009)

37 Page 373rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Energy market challenge Oil prices per barrel versus food price per ton Source: World Bank, Global Economic Prospects 2009

38 Page 383rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Climate change Emissions from agriculture account for roughly 14% of global greenhouse gas emissions. 74% of the emission from agriculture and most of the technical and economic mitigation potential from agriculture are in developing countries Climate change will have a significant impact on agricultural productivity Source: IPCC (2007) Major impacts of climate change on crop and livestock yields, and forestry production by 2050 based on literature and expert judgement of Chapter 5 Lead Authors. Adaptation is not taken into account.

39 Page 393rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Population growth and urbanization, Source: United Nations Population Division

40 Page 403rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Importance of smallholders Population and land distribution ( rural land) Source: Karfakis and HammamHowe, 2009

41 Page 413rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Public and global policies Private investment is key but.. increased public investment and appropriate policies are crucial for attracting private investments –Infrastructure, research, safety nets –Quality is as important as quantity –Resilience and risk management –Sound regulatory framework Fundamental changes are needed in the global governance of the food and agricultural system based on all stakeholder participation Development plans need to be country-owned and country-led, but strategic coordination with development stakeholders needs to be enhanced Political will is essential at both national and international levels to address challenges that transcend traditional decision-making horizons.

42 Page 423rd Conference on Sustainable Agriculture The Art of Farming Brussels, May 2010 Public sector roles in facilitating private sector investment Developments should be private sector driven, but with significant role for public sector (e.g. investments in infrastructure, improved output and input markets to increase the productivity of staple food crops) Strategies depend on whether agricultural growth is intended to be driven by smallholder or commercial sector. –Focus on smallholders will require more inclusive policies Pessimism about smallholder market integration, especially integration into higher value chains may reflect lack of innovative approaches to service delivery


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