SINGAPORE, Nov 14 — The days of inexpensive food are coming to an end. Because of rising populations, incomes and urbanisation, food demand is expected to grow, and the composition of that demand will change towards higher value and more resource-intensive items, such as meat products. Meanwhile, supply will be constrained by a shortage of land, decelerating yield growth, competition from biofuels, water scarcity and climate change.
To keep prices from soaring out of control and to reverse the rise in global hunger, governments and businesses worldwide will have to find innovative and sustainable ways to boost agricultural output. It is possible to get an idea of what’s on the horizon by looking at the trend in food prices over the past decade. Prices are up almost 80 per cent since their lows in mid-2002.
The United Nations estimates global population is likely to grow by around 35 per cent from the current 6.8 billion by 2050. That means that a 70 per cent increase in food production from 2005-07 levels would be required.
Rapid urbanisation in developing countries is likely to cause changes in diet and drive an increase in food demand. By 2050, more than 70 per cent of the world’s population is expected to live in towns and cities, boosting consumption of meat, fruits, vegetables and processed food products.
Land is likely to be one of the biggest constraints in the expansion of output. While there is sufficient land available for an increase in arable acreage, competing land uses, particularly from urbanisation and industrialisation, will likely bid up rents and thus commodity prices. The available land is also unevenly distributed and concentrated in Latin America and sub-Saharan Africa.
The UN assumes that a substantial increase in yields — in excess of 77 per cent — by 2050, the same increase seen since 1961, may be achievable. But this will require significant investment in the agricultural sector.
Then there are the issues of water scarcity and climate change. The agriculture sector is highly water intensive, but water is an extremely limited resource in many places. Pollution, aquifer depletion and climate change add to the problem. The weather continues to be the most important determinant of agricultural output. Weather patterns are already changing, with more rainfall predicted in the northern and southern latitudes and less in the sub-tropics, heightening the risk of droughts and floods. Extreme weather events might rise substantially and longstanding weather patterns like monsoon seasons may change.
In recent years, biofuels have become a significant element of demand for agricultural commodities such as corn, sugar and palm oil. There are two implications.
First, the expansion of biofuels, unless they are developed using non-food feedstock, will lead to greater competition for arable land, thus increasing costs and prices for food production. Second, agricultural prices, particularly for biofuel feedstock, will likely become more correlated with energy prices and reflect the same levels of volatility.
The impact of speculation on commodity markets is a hotly debated issue, but extended regulation is unlikely to deter such investments and agricultural markets will be increasingly affected by investor sentiment and trends.
Overall, our latest study on the outlook for food concluded that “feeding the world” at a global level is achievable, but at higher cost and thus higher prices. Regional variations in food availability will widen, leading to more cross-border trade and investment in the agricultural sector, such as those by China in Africa.
While higher prices have positive implications for farm income, they will hinder the drive to improve food security for the poor. The risks to low-income groups will present significant challenges to policymakers.
The UN’s World Food Programme estimates that the number of undernourished people in the world will reach a record one billion this year. Meanwhile food aid is at a 20-year low. The stark numbers should serve as a call for governments and businesses to take concerted action.
Asia’s huge populations and its rapid economic growth rates make the region by far the most influential in determining global food demand.
Asia is also the world’s biggest supplier of food. But there are limited possibilities for dramatic increases in supply, given that land is scarce in Asia. — Straits Times
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