SUSTAINING INCREASED FOOD PRODUCTION

The world is going to need more food to meet the demand from an increase in the world population of at least thirty per cent in the next four decades. Of that there is little doubt.  Increased production can only be achieved in one of two ways: either by increasing global farmed area or by increasing output from existing farmed land. In fact, it is likely that that given the also inevitable trend of urbanisation in less developed countries, significant parts of currently cultivated land will be overrun by  non-farm uses.  Which of the two paths to increased food supply should be taken marks the philosophical divide between so-called ’ environmentalists’ and those who argue that the only solution is increased agricultural  productivity.
Paradoxically, it is generally argued  by most of those of the  ‘green’ persuasion – but not all – that the only way to ensure the sustainability of world agriculture is through ‘low input’ farming. Put bluntly, this means not increasing agricultural productivity but, at best, stultifying productivity – if not actually reducing it. Only in this way, it is argued, can habitats be preserved, greenhouse gas emissions be minimised and the long run sustainability of world agriculture be achieved.
It is however likely that the opposite is the case. It can be convincingly argued that increasing productivity would be more likely to reduce, rather than increase the environmental challenge from agriculture.  A study by the Humbolt Forum for Agriculture suggests that average yields In the European Union would be 31 per cent lower if so-called ‘low input farming’ were to be widely adopted in place of the intensive agriculture generally practised in Europe’s main farming areas.   Were the whole of EU agriculture to adopt the low input approach, then the annual European harvest would be reduced by an estimated 100 million tonnes of grain – or around 35 per cent of current production. This would in turn mean importing the output of the equivalent of 38 million hectares of land. Or put another way, the equivalent of  8.6 million  hectares of Brazilian  rain forest  or 17.7 million hectares of Indonesian rainforest. This, it is calculated in the Humbolt study, would equate to the loss of 6.8 billion tonnes of CO2 E sequestration.
Protagonists of the low input agriculture philosophy will of course criticise the veracity of the Humbolt work on the grounds that it is financed by the large agribusiness companies. It conclusions are however as convincing as the green view that a world food crisis can be avoided through reduced consumption in the developed world. While the green persuasion would like to see everybody in Europe, America and the rest of the developed world eating less and the increasingly prosperous developing country populations eschewing  the ‘western style’ diet, it’s just not going to happen. To meet the probable needed increase in food supply of between 70 and 100 per cent over the next fifty or so years, agricultural output will have to be substantially increased and most of it will have to come from increased productivity. This is the major conclusion of my recently published book. In practical terms this is likely to be achieved mainly by increased productivity – resulting in more output from a smaller area of land.

 

FLAWS IN BIOFUELS AND FOOD PRICE ARGUMENTS

Posted by Brian Gardner on 23/10/13
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The basis of the case against the use of food crops in the production of biofuels is that it raises food prices and leads to environmental degradation in crop exporting third countries. This is the justification for the European Commission’s proposal to limit food crop utilisation in the production of biofuels. The proposal is that such use should be limited to 5 per cent of the EU’s Renewable Energy Directive (RED) total – rather than the currently planned 8.5 per cent  target by 2020 in the existing legislation.
Claims that biofuel production raises food prices or leads to the destruction of natural habitats in food exporting countries are highly questionable. The major weakness in the arguments appears to be the relatively small proportion of the world cereal and oilseed production represented by biofuel use. Currently, less than 1 per cent of global farmed area is used for the production of biofuel feedstocks. If the EU’s current renewable energy policy were amended to include the 5 per cent ‘first generation feedstock’ (cereals and oilseeds) limit then, it is estimated  by the Commission’s own analysis,  cereal usage would fall by 10 per cent; if a subsidised RED programme were abandoned altogether then the usage in biofuel production would be halved.
However, the effect on cereal prices which would be slight, for the simple reason that only a very small proportion of EU cereal production is used in biofuel production. According to the Commission only 6 per cent of the EU wheat crop and 8 per cent of other cereal crops are converted to ethanol. The five per cent limit would result in only very marginal reduction in producers prices for grains:  -4 per cent for wheat and -3 per cent for maize. If there were no EU subsidised EU biofuels policy then cereal use would be halved, but EU cereal prices would be 7 per cent lower and the maize price 6 per cent lower. Such price reductions would have no impact on EU consumption; the impact on retail food prices would be infinitesimal.
More significant is the impact on the vegetable oils sector – both in the internal EU market and on the international market. If there is any significant ‘indirect land use change’  (ILUC) it will be here. The Commission’s estimate is that the 5 per cent usage limit would result in a 17 per cent drop in the EU rapeseed price; removal of the biofuels policy completely would result in a fall in price of close to 50 per cent. Most importantly, the world price of palm and other oils would fall by at least 15 per cent.  In fact, there would be a world surplus of vegetable oils which would depress the incomes of major developing country palm oil producers – Malaysia and Indonesia. While  only 17 per cent of world vegetable oil production is used to produce biofuels, the bulk of that use comes from these two countries.
The practical implication- rather than that of environmental policy theory – is the damage to the export industries of these two countries. There is no evidence to indicate that additional land will have been brought into production to meet this increased demand from Europe. It Is becoming increasingly clear that the Commission’s  5 per cent limit proposal is merely a piece of political window dressing designed to palliate the anti-biofuels lobby. What Euro-Parliamentarians should be doing is questioning the whole justification of the EU’s biofuels policy. Is it worth spending €8+ billion year for a renewable energy feedstock source which gives only marginal gains in GHG emission reduction? This money would be far better spent on subsidising so-called ‘second generation’ feedstock sources and biodigester plants which would not only give real gains in emission reduction, but also deal with real environmental problems created by excess sewage, food wastes and accumulation of other compostable rubbish.<23/10/2013>

 

 

 

NO MAN IS AN ISLAND …..

For the benefit of a TV documentary, French journalist Benjamin Carle is attempting to live without the benefit of any product not made in France. It is his and the television company’s response to calls from French politicians to citizens of France to reject foreign made products and to buy only those made in France.
For Carle the effect of this stunt appears to have been pretty devastating. It began with removal men taking everything not nationally made from his Paris flat. He was left with little more than an armchair and his cat. As well as having to surrender such foreign made luxuries as Scotch whisky and all of the electrical appliances from the apartment, even his bicycle was taken away. But, significantly, what he did not have to give up were his clothes and nor would he have to eschew good food.  Two industries where France excels are quality textiles and food production – with little competition from imports. A supremacy built on quality – not restrictive trade practices, be it noted.
This exercise is likely to demonstrate most dramatically the complexity of the modern world’s economic structure. While the major objective of the ‘Monsieur Made-in-France ‘ stunt appears to be to demonstrate an undue dependence of French and other European consumers on the electrical and other industrial products of China and other low wage economies, it is likely to demonstrate more obviously the economic interdependence of nations. The demand from its large and prosperous domestic  economy means that Europe not only sucks in imports from the east, thus contributing mightily to the economic growth of that region, but also maintains European manufactures of cars and other consumer goods.
In the longer term, European demand for imports increases the incomes of workers and consumers in emerging economy  countries and results in their wages rising too.  Restricting imports or depressing demand for imported products will have the opposite effect; it would also depress demand for European  exports. But this does not only apply to industrial products; the wider campaign to buy food locally and cut down on imports currently fashionable among the European middle class, on the grounds of environmental efficiency , while unlikely significantly to reduce GHG emissions, would depress the production and incomes of southern European, African and Asian food producers. As exclusion of industrial imports by the most prosperous countries would be likely to depress the global economy, so  too would  the growth of agricultural eco-protectionism and the subsequent depression of imports threaten global food security. “No man is an island, entire of itself; every man is a piece of the continent, a part of the main….” John Donne Meditations 17. Devotions upon Emergent Occasions (1623).

 

 

 

 

SELF-SUFFICIENCY DOESN’T GUARANTEE FOOD SECURITY

Governments aiming to achieve greater food security are unlikely to achieve it through greater self-sufficiency in food production. In fact, pursuit of self-sufficiency is likely to be a major cause of global food insecurity.  The risks of food shortages are likely to be greater if barriers are raised against food imports and there is greater reliance on domestic production. In addition, such policies are likely to harm consumers and increase the taxation burden of agriculture policies. This view of the geopolitics of food is reinforced by the latest report from the Organisation for Economic Cooperation and Development (OECD) on the development of agriculture policies around the world.
The Organisation points out that:   “A narrow focus on self-sufficiency has high economic and social costs”. It says that any link between higher self-sufficiency and improved food security is hard to find.  Food security can be achieved much more effectively and with much less cost by other methods.  Poverty reduction and improved social security schemes, combined with  increased public and private investment in sustainable domestic production capacity are likely to be much more effective. Improved access to imports  and to the global food market, combined with  the maintenance of emergency food reserves, are also more likely  to improve food availability.
Restricting imports and fixing internal prices to encourage producers, on the other hand, is likely to have the effect of raising prices and cost to consumers and taxpayers – with no guarantee of increased supply. When harvests fail, as they too often do, due to factors outside government control, prices rise even further. Reduced demand for food imports decreases the world’s overall food production and export capacity. Unfortunately , the pursuit of such policies has recently been most prevalent in emerging economies where people can least afford high food prices.
Ironically, as developed countries like the European Union have been scaling down their support to agricultural production and liberalising their food trade policies, the developing  and emerging economy countries have been going in the opposite direction. The OECD ‘s figures show that as OECD country support levels have almost halved since the turn of the millennium, support levels have been rising in the less developed economy countries. State and consumer support to farmers in developed countries has fallen from over 40 per cent of farm income in the late 1990’s to around 20 per cent today. In important countries in the world food system such as Russia, China, Kazahkstan, Brazil and Indonesia, support and protection levels have been rising.  <24/09/2013>

DO EU SUBSIDIES INFLATE LAND PRICES?

Posted by Brian Gardner on 04/09/13
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Farm land prices throughout Europe  have increased massively in the last two decades. The most dramatic increase has been in the UK where the price of a hectare of farmland has increased threefold in the last ten years. Critics of the EU’s agricultural and rural policies tend to argue that the cause of this is basically the profitability of farming, heavily underpinned by the European Union’s  subsidy and trade protection system. They point to the frenetic escalation of land prices in central and eastern Europe as those regions came under the protective subsidy umbrella of the CAP in support of this argument. But how justified is the subsidy- land price link?
Classical economic theory has it that subsidising agricultural production automatically raises the price of the major production factor, the land. This in in turn raises the cost of production  and leads to more demands for increased subsidies or prices to compensate. Subsidies become capitalised in the value of land.
The phenomenal rise in UK farmland prices from £5760to £17,856 a hectare in the last ten years, according to the UK land agents’ professional body RICS Rural Land Market Survey, is probably an aberration arising from the pressure of other factors. Most importantly, the UK is small and overpopulated, plus now having a government determined to allow house and factory building wherever anyone likes and the increasing desire of the increasingly prosperous to own a chunk of a very fixed supply. Such factors however do not explain the rise in price of farmland in the rolling hectares of central Europe.
An alternative approach to the issue is suggested by some agricultural economists. They suggest that it is not the land that carries the capitalisation of the subsidy, but the entitlement of the farmer to the subsidy which has become an asset in its own right. This leaves the land decoupled from the impact of the subsidy  value.
Professor Alan Matthews of Trinity College, Dublin,  for example, argues that  “there is a market for entitlements [to subsidy] which is quite separate to the market for land. In the EU Single Payment Scheme a farmer must possess an entitlement in order to qualify for the payment. …These entitlements can be sold with and without land and they can also be leased out with land”. Other economists argue that generally the number of entitlements to subsidy exceed the number of hectares available to which they can be applied and this therefore increases the demand for land. This must increase its price.
Divorced from the factors which inflate land prices in the UK, as would be the case with most agricultural land in central and eastern Europe, it is probable that the payment of EU subsidies is a major factor inflating prices and thus raising the basic cost of agricultural production. In Romania prices have risen 1,800 per cent since 2002, in Poland by 800 per cent and in Hungary by close to 400 per cent in the same period. Removal of the subsidies would take time to have an effect and thus leave European farmers disadvantaged in the world market. This illustrates why once an agriculture industry becomes hooked on subsidies it takes a long and painful time to break the habit.<04/09/2013>

 

 

 

MORE FOOD MILES NONSENSE

The idiocies of the food miles thesis, the idea that every nation should seek self-sufficiency in food production to save the planet from global warming have received a further boost from the UK’s National Farmers Union. In what must rank as one of its most misguided publicity stunts, the Union is urging the British people to buy and eat more home grown food. Nothing wrong with that you may say. A perfectly reasonable suggestion, designed  to promote the interests of its members, one might think.
But launching its Buy British Charter with the sensational claim that if the nation were solely dependent on domestic food production, it would have run out of food on August 14 is not reasonable – it is just plain stupid. Did NFU chairman Peter Kendall expect to be taken seriously when, launching this campaign, he said: “To think that today’s date would signal the time when our domestic food supply runs out is frankly alarming”? No its not. Anyone who does ‘think’ knows full well that every developed country needs a mixture of home grown and imported food, not only to provide the widest possible consumer choice but also to give people the economic benefit of comparative advantages of trade.
Agricultural autarchy is not only nonsensical in the context of one nation’s food supply, but highly dangerous in terms of global food security. Because in the modern world countries buy food commodities from and sell them to each other , agricultural production is distributed all round the globe. Even in the worst weather-caused harvest shortfalls, reductions in one region are compensated by increases in others. Only when governments meddle with markets, as happened in 2007-08, does the world food ‘system’ break down.
The NFU campaign is of course designed to benefit  from the ‘food miles’ liturgy, so beloved of the green lobby and now part of the liberal conventional wisdom. This assumes that buying local will automatically reduce the distance involved and therefore GHG emissions from transporting food. Despite the fact that full life cycle analysis indicates that many imported food products – Spanish tomatoes and New Zealand  butter are prime examples – too often  have a smaller ‘green footprint’ than the same products grown in the UK, the ‘local is best’ doctrine persists.
Critics could well point out that given the UKs’ position as a major trading nation, the NFU should be well pleased that national food self-sufficiency is as high as its current 60 per cent. This is probably the highest it has been since the repeal of the Corn Laws in the mid 19th century. Were it not for the high levels of protection provided by the EU’s common agricultural policy, Britain’s high cost producers would have a very much smaller share of the national food market. <28/08/2013>

LAND GRAB CLAIMS EXAGGERATED?

Posted by Brian Gardner on 08/08/13
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Much has been made of the apparent  acquisition of large areas of land mainly in Africa, but also in  Asia and South America by rich, but land-poor countries as well as international investors, in order to grow food and biofuel crops. According to the headlines, vast tracts of land have been gobbled up at peppercorn  prices to boost the food and fuel supplies of China, India and the oil kingdoms of the Middle East. According to development NGOs, tens of millions of hectares  of land have been grabbed in this way with scant regard to the rights and needs of indigenous populations.
The reality of this process is likely to be  much less startling. Many of the schemes have faltered, the most successful agricultural development schemes are turning out to be those where the local population is most involved and the actual area involved in these foreign land purchases is proving to be much less than claimed by most of the aid and development  organisations.  Estimates, and they can only be estimates, of the amount of land involved vary between 20 and 70 million hectares. While this is only, at most, about 1 per cent of the world’s cultivated land area, the proportion involved in Africa is proportionately more – possibly as much as 5 per cent  of sub Saharan Africa’s possibly cultivated land.
Probably the most accurate estimate is likely to be the Land Portal’s Land Matrix database, which  differentiates between intended, concluded and failed deals. Most importantly, it indicates the implementation status of each deal, including it only if a project actually becomes operational.  This improvement in accuracy of reporting and analysis explains the significant difference between earlier over-estimates of total large scale land acquisitions, of 83.2 million ha involving 1,217 land deals, and the latest mid-July 2013 updated estimates of  33.7 million hectares for 798 concluded land deals. And this figure is for worldwide transactions – including Europe and Australasia.
But what is the significance of this phenomenon – particularly for the countries where it is taking place? Africa, it has been estimated, has 90 per cent of the world’s under-used land. This suggests a global competitive advantage in production of commodities which the world is going to need on an increasing scale. Nowhere else on earth is in greater need of agricultural development. Current food crop yields in Sub Saharan Africa are currently only 20 per cent of what they could be if efficient methods were to be applied.
There is no doubt however that some of these deals have resulted in a raw deal for local people – but this should not mean that African countries should eschew foreign financed land deals altogether. If land deals are implemented properly, they can bring many benefits  – including increased food production, access to improved agricultural technical skills and development of infrastructure and  rural communities.
However increased output is to be achieved, there is no doubt that Africa has the greatest scope for the expansion  of agricultural production. The continent has almost half of the world’s usable but uncultivated land, some 202 million hectares, that could be brought into production. Other developing countries are also gaining from the international exchange of landholding and food production. An outstanding example is Bangladesh which has a large population and limited agricultural resources. Bangladeshi developers are planning to produce rice in east Africa. They believe that producing rice in Uganda and Kenya would make 10-30per cent of the crop available to the local market, while exporting the bulk to increase food security for Bangladesh. <08/08/2013>

 

END OF THE BAD OLD ‘CAP’ ?

The end of what might be described as the bad old common agricultural policy based on expensively rigged markets was recently  marked by what should be the final removal of export subsidies on agricultural commodities. For over fifty years these subsidies have been a major mechanism for maintaining high farm prices in the European Union. At their height in the 1970s and 1980s they were swallowing as much as half of the annual CAP budget.  Even in the 1990s these subsidies, designed to dump EU surpluses of wheat, butter, beef, other meats and even wine on international markets, were costing the European taxpayer over €10 billion a year.
So-called export ‘refunds’ on egg and pig meat products – the last remaining refunds payable – have now been reduced to zero. The subsidies  were somewhat euphemistically called ‘refunds’ because they refunded to food traders the usually massive difference between the high EU price guarantee to farmers and the much lower world price, thus allowing them to compete on world markets.. The need for them has now evaporated, not because of any radical policy change,  but for the simple reason that the world price of food has in recent years risen so much that the price gap between markets inside and outside the EU has practically disappeared. The facility to revive them in case of ‘market crises’  has however been preserved in the current reform package which comes into force after 2014.
But don’t worry, farmers are still being heavily supported by the European taxpayer. They will still be drawing €50 billion a year from public funds in direct income subsidies under the post 2014 CAP. These are subsidies which are paid to land holders  just for being a farmer – no matter how much or how little they produce. Each hectare farmed attracts an EU ‘single farm payment’ of an average €320.
Needless to say, they still want more. Interviewed in the London  Guardian this week the leader of the UK Farmers Union Peter Kendall complained that the prospect of possible harmful climate change impact and the consequent global market volatility justifies the establishment of new farm market supports. Or at least that can be the only conclusion from his statement that farmers need the certainty of a supported market to maintain production. Bearing in mind that Mr Kendall draws €162,000 in EU subsidies before he even sets his hand to the plough, one would have thought that such a sum should be a good enough guarantee to  bolster his income against ‘market volatility’.  <29/07/2013>

 

WHY AFRICA DOESN’T NEED EU ANTI-ILUC LEGISLATION

Posted by Brian Gardner on 23/07/13
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The European Parliament’s somewhat frenzied concern about the possible indirect land use change (ILUC) resulting from EU biofuel policies is a splendid example of the phenomenon of unintended consequences. While acting on the basis of some pretty questionable science, the MEPs are constructing a new form of protectionism  which is likely to damage the interests of those who can afford  it least. While easing their eco-consciences they are likely seriously to damage the wellbeing of many people in Africa. The ILUC  preoccupation has been the major driving force behind the European Commission’s proposal to limit the use of crop-based biofuel to 5 per cent of the EU’s renewable energy quotient (or 5.5 per cent in the Parliament’s view). The Parliament is now pursuing further limitations on biofuel s which it believes will limit ILUC.
The European Commission’s  and MEP’s main preoccupations driving this legislative activity are alleged reduction in the planet’s carbon sequestration capacity through reduction  of forest and wilderness resulting from increased crop productiion and concern to limit the amount of food grains and oilseeds used to make bioethanol and biodiesel – on the emotive assumption  that this involves putting ‘food into fuel tanks’. MEPs pushing for these further biofuel limitations believe that if the EU imports vegetable oils to make biodiesel this will automatically mean the destruction of forests and wild places in Africa and South America. The scientific basis for these assumptions is pretty tenuous. And as far as Africa is concerned, this putative legislation is likely to be positively harmful.
Sub Saharan Africa has nearly two thirds of the world’s unused or under-used agricultural land. As well as having the lowest average per capita income on the planet, it also has the greatest number of under-nourished and starving people. The single most obvious solution to these problems is the development of agriculture. This is  currently the region’s major potential source of  economic growth as well as the way out of poverty and food shortage. The export of agricultural commodities is a growing economic driver. Money earned in the international market stimulates not only expansion of commercial agriculture, but also has the potential to increase domestic food supply and food security.
Also currently, world prices for palm oil and other vegetable oils are at a low ebb, with a dismal effect on African and Asian incomes; further restrictions on European use can only make matters worse. The Parliament’s  draft proposal, seeks to exclude the use of any biofuel feedstock produced from land converted since 2008. This would have no impact on land use in Europe, but  could prevent crop producers – small ‘out-growers’ as well as larger commercial farmers -  in Sub Saharan Africa from supplying Europe’s biofuels market. All of any increased supply would be likely to come from land already in production  – with little or no effect on the continent’s –or the planet’s – carbon sequestration capacity.<23/07/2013>

 

CHINA’S PROSPERITY WILL PUT STRAIN ON WORLD FOOD SUPPLY

The increasing prosperity of the world’s largest concentration of people – China – is likely to put increasing pressure on the world’s food supply. With a population of more than 1.3 million, an annual economic growth rate of c. 7.5 per cent, and a growing middle class, China is going to increase substantially its demand for meat, dairy products and what are generally considered to be higher quality foods. With limited agricultural land and other food growing resources, the country is likely to be increasingly dependent  on imports.
Conscious of the country’s future food needs, the Government in Beijing is taking important steps to increases its food security. Improved grain production and stockholding , as well as farm product supply,  are listed in most recent official documents as the government’s main priorities. The government has recently restated its intention to continue to support domestic farm prices by increasing state stockpiles and to stimulate agricultural production. The Government  intends to  speed up the transfer of rural land from the state to the private sector in order to improve efficiency and develop large-scale commercial farming. In its ‘number one document’ for 2013, setting the agenda for agricultural reform, the government says it will focus on modernising agriculture and  grant more subsidies to large-scale landowners, family farms and rural co-operatives.
A subsidy of 2.58 billion yuan (€323 million) is to be initiated to cut lending rates for projects aimed at boosting farm production and farmers’ income. An additional 100 million yuan will be provided for food safety risk surveillance. But given its agricultural limitations, the country has to seek external sources of food supply. To further increase its future food security China is increasingly involved in acquiring access to food producing land in Africa. The Sudanese Government recently signed an agricultural co-operation agreement with Beijing that gives Chinese companies options to operate in the agrifood sector in Sudan.
The recent OECD-FAO Agricultural Outlook for the period up to 2022 projects that China’s consumption growth will slightly outpace production by around 0.3% per annum, similar to the trend of the past decade. Combined with upgrading of the average diet this will lead to a further opening of China’s  food market to imports, it says. It confirms that consumption growth will be stimulated by economic growth and rising incomes and a population shift from rural to urban areas. China’s rural population has declined from 844 million in 1992 to 695m in 2012 with the UN projecting a further decline of 100m people by 2030.
The future food demand expectation for China alone would appear to challenge many of the current  estimates and assumptions about the world  food supply and demand situation by the end of this century. While the FAO has most recently suggested that its estimate of the need for a 70 per cent increase in food production by 2050 needs qualification, this could be a serious under-estimate. What has to be bore in mind is that the FAO figure is an extrapolation of current trends. It does not appear to take account of the rising dietary expectations of the richer emerging economies. Nor does it allow for the fact that in the hungriest parts of the world –such as many Sub Saharan Africa countries – there could be a considerable improvement in incomes and therefore daily food intake levels. Calculations which take these factors into account are likely to conclude that the eventual demand increase will be much larger.

 

 

 

 

 

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Commentary on European developments from the perspective of long term professional interest in European and international agriculture and food policy, nurtured over three decades spent in Brussels observing and analysing the development of the CAP. more.



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