June 24, 2010
Recent publication of projections of world food production by the OECD and FAO gave rise to a spate of predictable doom-laden headlines. Unsurprisingly, the tenuous lkinkage between biofuels and hunger figured large in most – as in: “EU biofuels target could starve millions of people”. Closer reading of the following stories however revealed that this linkage came not from the OECD or FAO, but from the usual NGO sources who seldom miss an opportunity to blame the food and agricultural policies of the developed world for the undoubted food supply problems of the least developed world.
In fact closer reading of the OECD/FAO report indicates a hopeful rather than depressing outlook on the future for improved food supplies for the world’s most needy. Clearly, food prices are going to rise, a fact obvious to most agriculturists and food policy makers. This is confirmed by OECD in its comparison of current and projected prices for the next ten years , compared with the ten years up to 2006. The main reason for this is the relentless rise in the oil price – from which come all the major variable inputs of modern agriculture.
Many would argue that food production can only rise sufficient to meet the needs of increasing population and improving diets if real prices rise. In fact, far from being doomful, the OECD’s prognostications are optimistic on improvement in food supplies where they are needed most.
A key passage of the report reads:”There remains in place a dynamic and highly predictable element at the heart of world agricultural markets. This is the inexorable shift under way at the core of agriculture towards an increasing role, and rising importance, of the developing and emerging economies in world agricultural production, consumption and trade”. In other words, not only will higher prices stimulate greater production world wide, but most importantly,stimulate agricultural expansion where the food is needed most.
Initially, increased economic growth boosts food demand from the large numbers of people swarming into the cities of the developing world. In the short term, this increased demand will be met by imports (to the benefit of European and other developed country farmers). But in the longer term, it will have the important effect, the OECD stresses, of stimulating increased domestic production capacity. Higher prices will encourage the investment of either domestic savings or foreign funds – probably both – in agricultural production.
These countries are rebounding strongly from recession and with population growth rates that remain more than double those of the OECD area, “will represent the major growth markets that will drive world agriculture forward over the next and comingdecades”. As for biofuels, it is estimated that by 2019 around 12% of world maize and other coarse grain production and less than 5% of wheat will be used for ethanol production. These quantities are easily absorbed by bringing back into production land idled in the EU, the United States and the ex Soviet Union countries during the depressed commodity price period of the 1990s.Brian Gardner