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Food Security in an Era of Globalization
David Roland-Holst
Department of Agricultural and Resource Economics
College of Natural ResourcesUC Berkeley
11 July 2008
Roland-Holst 2
Outline
1. Motivation2. Food and Poverty3. Three Drivers of Food Markets4. How We Got Here5. What’s Energy Got to Do With It?6. Quo Vadis?
11 July 2008
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1. Motivation
• Food markets are experiencing the greatest turmoil since WWII, while global food trade has increased over 400%
• Staple food prices have risen more than 60 percent in the last year, yet major producers are closing the door to exports.
• Grains account for over half of all calories consumed by the poor in Asia and Africa.
• Riots have already broken out in a dozen countries.
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2. The Poor are More Vulnerable to Food Prices
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50%
of W
orld
Pop
ulat
ion
80%
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Food Prices May Stabilize, but at High Levels
11 July 2008Source: OECD
Roland-Holst 6
Rural Urban RivalryIncome Effects of a 10 Food Price Increase, by Quintile
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Many countries view the urban poor as more dangerous politically, and their responses (price and export controls) reflect this.
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North-South Relations and the Cheap Food Consensus
• Higher income economies have long subsidized their own agricultural activities with the combined intent of supporting food security and powerful rural populations.
• In the South, many economic development policies have been built on bedrock of food security and low urban wages, especially for politically sensitive urban poor populations.
• The result has been a de facto global consensus, supporting two generations of monotone decline in food prices.
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3. Three Drivers of Commodity Markets
1. Emergent Real Demand2. Financial Demand3. Supply Response
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Real Demand: BRICs and G6 GDP (USD Billion)
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One Large BRIC in the Wall
• China has 20 percent of the world’s population, but only 7 percent of its arable land
• Because of rising incomes, food consumption is accelerating in resource intensity
• The inevitable result is increased global food absorption
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Arable Land is Scarce…
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and shrinking.
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China’s Population is Moving(Rural and Urban, millions)
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Half a billion people are moving from the food supply side to the demand side.
Source: CASS.
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While income and inequalityare both rising,
Source: CASS.
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Diets are Changing
kcal/person/day Percent of caloric intake
Resource intensity
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How Big?Asia Pork and Poultry ProductionMillion metric tons
Source: USDA.
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All Asia Pork and Poultry
Million metric tons
Source: USDA.
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China’s Soy Tsunami
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4. Supply: How we got hereTotal World Grain and Oilseeds
80
100
120
140
160
180
200
1975 1980 1985 1990 1995 2000 2005 2010 2015
Production Yield Area Harv Percap Use Population
Index: 1975 = 100
Peak
Peak
Source: USDA.
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Margin Changes from Commodity Price Increases in Russia (2007/2008)
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Prices from the US Perspective
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Prices from a Global Perspective
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Cereal Demand and Inventories
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Speculative Pressure: Cereal Stock Ratios and Prices
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Speculators are Not the Only Ones to Blame
11 July 2008Source: Brahmbhatt M and L Christiaensen (2008)
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5. What’s Energy Got to Do with It?
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Energy has two critical links to food:1. It is primary input to food production
and distribution2. With the advent of biofuel, two
essential commodities have become substitutes in production.
Food is essential for survival, yet energy is essential for prosperity.
Roland-Holst 2715 May 2007
Energy Price Vulnerability in California Agriculture
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Biofuel Displacement: Calorie availability changes in 2020 compared to baseline (%)
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Travelling Together
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Source: World Bank, DECPG
Higher food prices can make consumers hungry, but
higher prices of any necessity make them poorer.
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Essential Food
•18 May 2008
Food income shares for 114 countries.50
% o
f Wor
ld P
opul
atio
n
80%
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Essential Energy
•18 May 2008
50%
of W
orld
Pop
ulat
ion
80%
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The Primary Driver: Affluence
Industrial Post -Industrial
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China Again…
Sources: National Bureau of Statistics, 2005 Energy Statistical Yearbook
Per Capita Residential Electricity Use, Rural and Urban China, 1992-2005
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China’s Electricity Plans
15 May 2007
• 1.8TW by 2020• Between now and 2020,
more new capacity will be added than the entire installed capacity of the EU
• 87% coal-fired• 50 year useful life
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Demographics and Vehicle Demand
3 July 2008 Roland-Holst 35
The US and Japan have over 750 cars per capita.
The figure for China is 18.
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Another Chinese Tsunami…
China Net Oil Trade
Source: IEA.
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What is to be done?
The world must produce more food, but how?Challenges:• Government Intervention
– Export restrictions– Biofuel
• Global warming– Water and soil capacity may decline in
equatorial areas where most of the poor live– Lowland agriculture may be inundated, salinated– Environmental damage may result from
expanded acreage and agrochemical use
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Preferred Policy Responses(Source: FAO Survey of 77 National Governments)
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Policy Preferences by Region
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Quo vadis?
Innovation, biological if necessary:• Conflict over technology or resources?• Northern taste versus South necessity?• A multinational food auction would
leave many people hungry and angry.Governments of the South know this, spo
expect them to take the lead in agbiotech.
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Roland-Holst 4111 July 2008
Thank You
