| || |
| ||Personal accounts || |
| || |
Food Security: Emerging Risk for the 21st Century and Main Theme of the World Economic Forum
A World Economic Forum Report in collaboration with Citigroup, Marsh & McLennan Companies (MMC), Swiss Re, Wharton School Risk Center, Zurich Financial Services
Klaus Schwab, economist and organizer of the Davos forum, may prefer to avoid "excessive pessimism," but it was nonetheless against a backdrop of international financial crisis, skyrocketing prices around the world for energy and agricultural raw materials and climate change that the 38th World Economic Forum took place in Davos.
The question of global food security was at the head of the list of topics addressed from January 23 to 27 by the 2,500 participants. The "Global Risks 2008 »1 study recently carried out by the World Economic Forum in cooperation with major firms from the financial and insurance industries – including Citigroup, Marsh & McLennan Companies, Swiss Re, Wharton School Risk Center and Zurich Financial Services – served as a basis for the debates.
The report, reproduced in part here, includes the input of some 100 political, economic and academic experts, and deserves credit for drawing the attention of government decision-makers to the threats springing up around food security.
Specifically, the report emphasizes that with such high and volatile prices, such low inventories and so much uncertainty over the structural and cyclical forces that drive agricultural markets, the global food balance is fragile for all countries, no matter their level of development.
While the concerns raised in the report are already tangible, they are likely to increase as we realize that prices for agricultural raw materials remain highly volatile. It is thus more essential than ever to develop regulatory tools for combating the most dangerous effect generated by volatile agricultural prices: food insecurity. This is a main objective of WOAgri's actions and the instruments it is implementing, such as the WOAgri model.
Food security: the emerging risk of the 21st century?
In 2007, prices for many staple foods reached record levels. The price of corn in late 2007 was 50% higher than 12 months previously. The price of wheat was double. Global food reserves are at their lowest in 25 years and, as a result, world food supply is vulnerable to an international crisis or natural disaster.
Food security has emerged as a major risk, marked by both local and global consequences, trade-offs between different mitigation priorities and a disproportionate impact on poorer communities.
Embedded in a web of other global risks, there is considerable uncertainty as to whether food insecurity in 2007 is the result of short-term conditions which have existed in various times throughout history, or whether a more fundamental change is taking place, with a range of underlying trends bringing food from the sidelines to the centre of the global risk discussion in years to come.
What is food security?
According to the Food and Agriculture Organization (FAO), food security is achieved when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life. Food security, similar to energy security, is not only about avoiding physical disruptions to supply, but also about ensuring supply at a price which allows economic activity and wellbeing to flourish.
Impacts are global and varied
In the past, food security generally concerned the least developed countries, particularly those in conflict and those facing uncertain weather patterns. But, more recently, concerns about sustainable food security have spread to developed countries which have not generally considered themselves exposed to food insecurity. For example, the United Kingdom has historically relied on the depth of international markets to ensure food supplies at a reasonable price, but this model may be put under stress in the future.
In 2007, food and drink prices rose at their fastest rate in 14 years, at 4.7%. In the US, food prices were up 4.4% year-over-year at the end of 2007 –double the rate of non-food, non-energy inflation – partially due to increased acreage devoted to corn to make ethanol.
China and India are also exposed to pressures on global food security, and their domestic experiences may have global economic consequences. In China, average incomes have barely risen while food prices have soared: by 17.6% overall, 70% for pork products, 30% for vegetables and 34% for cooking oil. Combined with the sharply rising dollar price of oil, high food prices in China could increase global inflation.
Beyond the potential economic consequences of rising food prices is the well-established relationship between food prices and political stability. In 2007, surging prices of basic foods caused domestic unrest in a number of different countries. In March, thousands of Mexicans demonstrated against the four-fold increase in the price of flat corn. In September, Italians organized a one-day strike against rising pasta prices. In October, in West Bengal (India), food riots erupted as a result of disputes over food rationing.
In some countries, particularly where the success of government has been historically linked to administrative control of basic supplies, governments have intervened to limit the political consequences of rising food prices. The Russian government acted to control prices of staple foods ahead of the December 2007 parliamentary elections. In Egypt, which experienced political upheaval in the wake of price increases of bread in 1977, subsidies to bread producers have been increased to mitigate the impact of rising global wheat prices. In China, soybean import duties have been reduced, subsidies to farmers have been boosted to encourage agricultural production – particularly of pork and milk – and plans are to provide support for low-income urban residents against food price increases.
The drivers: population, biofuels and climate change
Global population and changes in lifestyle
The United Nations has predicted the global population will rise above 9 billion by 2050, placing additional pressure on the global food supply. But these pressures are sharply accentuated by an increasing demand in developing countries for protein-rich foods which require more grain (and water) to produce, and by the increasing constraint of available agricultural land. Annual per capita consumption of meat in China has increased from 10 kilograms in 1950 to 40 today. Over the same time period, the availability of arable farmland per head of global population has declined from one acre to half that. Many experts believe that for these reasons increases in the price of food are likely to be sustained.
Food or fuel: how biofuel production may impact food security
The use of crops to manufacture biofuels is increasing globally – often with support of governments aiming to reduce carbon emissions or to reduce dependence on imported sources of energy. Biofuels are on course to consume up to 30% of the US corn crop by 2010.
Over the long term, the growing importance of biofuels has prompted fears that the dynamics of the energy economy will be introduced into global food markets, dramatically increasing price volatility, particularly of staple foods. But, even over the short term, the use of crops for biofuels raises a number of complex trade-offs common to the management of many global risks.
The first of these concerns global equity: any shift from food production to biofuel production has different consequences for different communities. Crop exporters may benefit, as may communities where food expenditure is a minor part of overall expenditure. But others may suffer, from crop importers − including agricultural communities which import grain as feed for animals – to poorer communities where food purchased on the open market is a major component of overall expenditure.
The second concerns the trade-off between global efficiency and perceptions of energy security: while global efficiency would best be served by a market determined allocation of crop resources globally to food and biofuels based on price and relative environmental efficiency, concerns over energy security may undermine the attractiveness of global collaboration. Not all techniques for manufacturing biofuels are equally efficient in terms of reducing aggregate carbon emissions. It is often a perceived national security imperative, rather than a global imperative to reduce carbon emissions, which is driving the frameworks in which biofuels are being produced.
Climate change alone is forecast to increase the number of undernourished people globally by between 40 million and 170 million in 2100, according to forecasts by the Intergovernmental Panel on Climate Change (IPCC). Climate change may affect agricultural production by increasing the severity of weather events, by increasing the volatility of weather and by shifting rainfall patterns. Changing rainfall patterns could mean that in just over a decade, rain dependent areas of South Asia and Africa could be producing half their current agricultural yield.
The result: uncertainty
The consequences of all these trends for perpetuating the escalation of food prices are difficult to predict. Some experts expect higher food prices to be sustained. Others believe that markets will gradually readjust to shortages as higher prices make it profitable again to grow crops for food. Policy-makers may have to return to thinking about food as a strategic asset and begin to modify food policies. Given the amount of uncertainty, the resilience of the world’s food system will be severely tested in the next few years.
© 2008 World Economic Forum
All rights reserved.
WOAgri fully shares this strategic concern on the subject of food security and believes that agriculture also plays a determining role in reconciling the main issues brought out by the World Economic Forum, from environmental protection (and specifically the fight against climate change) to economic growth and development.
Nonetheless, one basic question remains: how can we take food security into account in political decisions at an international level by moving beyond an approach of mere economic efficiency? This is the question of how to regulate international agricultural markets, and is the most important question for the future of humanity.
It was in main part to begin answering this question that WOAgri designed the WOAgri economic model, which will be completed within the next several days and will, by demonstrating that agricultural markets do not regulate themselves, emphasize the need to implement global agricultural governance.
1 The report can be viewed at the following address: http://www.weforum.org/pdf/globalrisk/report2008.pdf