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Globalizing food markets: Food Security and Environmental Effects in Latin America Insa Niemeyer CEIGRAM, FMB Water Observatory, May 12th 2011.

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Presentation on theme: "Globalizing food markets: Food Security and Environmental Effects in Latin America Insa Niemeyer CEIGRAM, FMB Water Observatory, May 12th 2011."— Presentation transcript:

1 Globalizing food markets: Food Security and Environmental Effects in Latin America Insa Niemeyer CEIGRAM, FMB Water Observatory, May 12th 2011

2 Contents 1.Statement of the Problem: General Trends 2.The Gains from Trade: a Theoretical Perspective a.Effects on Food Security b.Environmental Implications 3.Hypothesis 4.Methods: Data from 5 Latin American Countries 5.Preliminary Results 6.Next Steps

3 Statement of the Problem Challenge Rapid demographic changes How can we feed the world in a sustainble manner? Impact on global food demand Urbanization Unevenly distributed natural resources land water Food supply Climate change effects on yields higher year tor year volatility Bio fuel demand Diatary changes

4 Statement of the Problem virtual water trade = solution of sustainability prospects? Altered product quality standards Current development on global food markets Implications on water and land resources Blue water Green water Increasing global farm trade Globalising world: Trade liberalization by WTO Bilateral FTA Supermarket buying power global commodity chains Impacts on food availability (quantity) and access (prices) LUC Food trade = increasing or decreasing food security?

5 The Gains from Trade: A theoretical perspective a) Effects of trade relevant to food security The effects of international trade are shown as: the difference between the domestic price of a good without trade and the world price of a good, the difference between total supply quantities without trade and world trade. Theory of comparative advantages PaPa PwPw Q domestic supply Q domestic demand QaQa Price supply demand welfare gain Food importer PaPa PwPw Q domestic demand Q domestic supply QaQa Price supply demand welfare gain export volume import volume Food exporter Quantity

6 The Gains from Trade: A theoretical perspective a) Effects of trade relevant to food security EXPORTERS: domestic producers win, domestic consumers lose IMPORTERS: domestic producers lose, domestic consumers win Trade raises the economic well-being of importing and exporting nations Winners and losers of international trade: Implications for food security IMPORTER: reduced food prices > if food cheaper in real terms depends on income change Specialization on non-food industry > promotes economic development > poverty reduction EXPORTER:food prices higher > if food more expensive in real terms depends on income change Trade with food commodities > promotes economic development > poverty reduction

7 The Gains from Trade: A theoretical perspective b) Environmental implications Basic trade theory does not consider environmental effects: IMPORTER:s = marginal cost curve > if no environmental externalities included s e = marginal cost curve + environmental externatlities Production substituted by imports > reduces environmental costs by area ABCD > additional welfare gain for importing nations! EXPORTER:Welfare loss through environmental damage reduced by area ABCD > still gain from trade? PaPa PwPw Q domestic supply P domestic demand QaQa Price S B Food importer PaPa PwPw Q domestic demand P domestic supply PaPa Price S D Food exporter SeSe SeSe D D C A A C B D

8 The Gains from Trade: A theoretical perspective b) Environmental implications Open trade may provoke negative and positive effects on the environment + PROS +- CONTRAS - More efficient use of natural resources“Race to the bottom” > reduction of environmental standards in order to gain competitive advantage Optimal global resource allocationIncreased scale of production > increases pressure on the environment Spread of environmentally friendly technologies Increased value of farmland > uncompetitive small-scale farmers migrate to sensitive ecosystems Environmental Kuznets Curve

9 Hypothesis Environment Globalising food markets adds environmental pressure on exporting nations and releases pressure on importing nations Food security Globalisation of food markets helps achieving food security for both importing as well as exporting nations

10 Methods Countries: Argentina, Brazil, Chile, Mexico and Peru Dynamics of trade (1996-2008, source: own elaboration, data from FAO (2011): 1.Most relevant crops > 80% imports, exports, production, area harvested 2.Trade intensity (in thousand tons and value) 3.Tradable, import-competing and non-tradable crops Environmental effects in importing and exporting nations 1. Green, blue and grey water footprint over time 2.Yield increase vs. agricultural land expansion, rate of technology (number of tractors) 3.Specialization (water intensive/water extensive products) Shannon-Wiener Index:Hs = magnitude of specialization in the production of certain crops s = magnitude of different crop categories p i = relative abundance of crop i Food security in importing and exporting nations 1.Domestic food supply over time: (production + imports – exports) 2.Consumer prices indices / income indices 3.GINI-index 4.International food price volatility, prices transmission analysis Access to food Availability of food

11 Preliminary Results Trade dynamics Total Latin American exports (left) and imports (right) of all crops (in thousand tons) Trade dynamics of Soybean and maize exports in Brazil (in thousand tons) Trade dynamis of Peruvian imports (left) and exports (right) (in thousand tons) Source: own elaboration, data from FAO (2011) Coffee: main importers constant: Europe, USA and Japan Maize: bulk of exports:1996-2000 shift from MENA to LAC, 2000- 2008 shift to Europe Soybeans: bulk of exports: 1996-2000 EU and Japan with a minor role China, 2000-2008 EU and China main importers, Iran and Thailand enter market EXAMPLE: PERU EXAMPLE: BRAZIL

12 Preliminary Results Environmental Effects Argentine green, blue and grey virtual water imports (left) and exports (right) of all most relevant crops (in km 3 ) Argentine green virtual water imports (left) and blue virtual water imports (right) (in km 3 ) Argentine green virtual water exports (left) and blue virtual water exports (right) (km 3 ) Source: own elaboration, data from Mekonnen, M.M. and Hoekstra, A.Y. (2010) The green, blue and grey water footprint of crops and derived crop products, Value of Water Research Report Series No.47, UNESCO-IHE, Delft, the Netherlands. http://www.waterfootprint.org/Reports/Report47-WaterFootprintCrops-Vol1.pdf EXAMPLE: ARGENTINA

13 Preliminary Results Environmental Effects Argentine’s production quantity (left) (in thousand tons), change of relative share of production (middle) (in%) and LUC (right) (in thousand ha) Source: own elaboration, data from FAO (2011) Dynamics of area harvested of most important crops in Argentina (left), total area harvested (middle) (in thousand ha), and change of relative share of area harvested (right) (in%) Trend to specialize in the production of Soybeans in Argentina Slight increase of agricultural area and decrease in forest area

14 Preliminary Results Food Security Argentine’s per capita GDP over time (left) (in USD), change of producer price index (right) (in %, base 2008) Source: own elaboration, data from FAO (2011), Instituto Nacional de Estadística y Censos http://www.indec.gov.ar/principal.asp?id_tema=748 (2011)http://www.indec.gov.ar/principal.asp?id_tema=748 Dynamics of domestic supply quantity in Argentina (left), food supply quantity (middle) (in thousand tons) and calory supply (kcal/cap/day)

15 Preliminary Results Food Security Argentine’s GINI-Index to measure income inequality Source:World own elaboration, data from Bank (pink sheet) http://blogs.worldbank.org/prospects/world-bank-publishes-latest-commodity-prices-october- 2010 (2011), World Bank Development Indicators: http://search.worldbank.org/data?qterm=GINI%20index&language=EN&format=html http://blogs.worldbank.org/prospects/world-bank-publishes-latest-commodity-prices-october- 2010 Development of world commodity prices (annual averages in nominal USD)

16 Next steps Development of a more precise theoretical framework Theory of environmental impacts of trade Theory of impacts of trade on food security Empirical analysis with data from 5 focal countries select more indicators suitable to answer the questions Statistical/econometric tests with the the data

17 Thank you for your attention! Email: insa.niemeyer@upm.es


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