Factors Determining Food Shortage in the Early 21st Century

Food For Freedom

Ideas for Surviving Food Shortages

Get Instant Access

The world grain stock/use ratios (ratio of stock volume against use volume), which are the criteria for global availability of grain, have shown a tendency to fall since 1987 (Fig. 1.1). According to USDA data, except for 1997/98 the world average stock/use ratio for all grain has been below 17% since 1994/95; this is considered by the FAO to be a dangerously low stock level. The ratio is at around the lowest level since the war, and is about the same as the level during the food crisis year of 1974. The stock/use ratios for rice and coarse grain have been lower than the average stock/use ratio for all grains since 1989/90, and they have been lower than 17% since 1993/94. The ratio for rice is projected to be at the extremely low level of little more than 11% in 1998/99.

Grain prices rose during the first half of the nineties. Mr. J. A. Sharples, a specialist on the world grain market In the United States Department of Agriculture, mentioned in the fourth issue of "Choices " magazine in 1995 that the stockpile of major grain exporting countries such as America and Canada, which have played the role of international grain reserve stockholders since the war, has decreased in stock down to only 1.4% of the low world grain stock. The world grain market has been in a serious shortage situation.

Although this reduction in grain stock/ use ratios and the increase in grain prices are partly caused by short term factors, such as reduced production of rice and coarse grain in the 1995 crop year in America, surplus investment funds flowing into the grain futures market, caused by a general slowdown in the economies of high income countries, and the increased price of feed grain, caused by an increase in the price of American beef due to mad cow disease in the UK. But, basically the ratios are affected by the long term factors, such as transformation in agricultural policies during the late eighties through to the nineties in both Europe and America, limitation in agricultural technology improvement, increasing scarcity in and degradation of natural resources such as soil and water, yield stagnation due to increase of cropping intensity in many developing countries, the world population explosion and the rapid increase in demand for feed grain, caused mainly by the high economic growth in Asia, most notably in China. In this paper, the effects of these long term factors affecting food supply and demand in the 21st century are first investigated. Then, a projection of world food demand and supply in the early 21st century is made and compared with other projections. Finally, implications of these analyses for agricultural research are presented.

Fig 1.1. Stock/use ratios of world major grains at the end of each crop year. Data source: USDA Database by internet and other USDA publications. est: estimates; proj: projected values.

crop year

Declining Trend in the World Grain Stock Ratio and Transformation of Agricultural Policies in Europe and America After the Last Half of the Eighties

The EC and the United States have been the major holders of international reserve stock in and exporters of agricultural commodities until recently. Since the last half of the eighties, the agricultural policies of these countries have changed from protectionist, surplus producing and export dumping policies to policies of reduced protection, curtailment of surpluses, correction of interregional income differences and environmental protection.

The EC earlier achieved increased agricultural production, improving its farm size structure and increasing the farm income level through variable import levies of the Common Agricultural Policy (CAP), export subsidies and domestic price support. Until the seventies, it has been a net importer of grain, at an average of approximately 30 million tons annually. It became self-sufficient in major agricultural products by the first half of the eighties, and in 1984 it became a net exporter. It exported more than 20 million tons annually by the end of the eighties, supported by the export subsidies of CAP. The surplus agricultural products stock in the EC reached enormous levels in the middle of the eight-ies.5 The financial burden for the price support and the export subsidies for the excess agricultural products reached an unbearable level. The transformation in the EC agricultural policy started with production control and decreasing the support price in 1982, and it was gradually strengthened afterward. Then it was expanded to environmental maintenance and reduction of interregional differences, whilst ensuring the objectives of improved productivity, stability of supply and farmers' livelihoods, and sound pricing of CAP, as stated in the Prospects of the Common Agricultural Policy (Green Paper) in 1985. A comprehensive financial reform plan (Delor package) in 1987 was also heading in this direction, and was agreed upon by the European Board of Directors in February 1988. The stabilizer and set aside were introduced in 1988. Finally, a significant agricultural reform in 1992 was agreed upon that has the objectives of large reductions in the support prices complemented by decoupled income subsidy, production control, protection for the medium and small scale farms (e. g., special assistance for agricultural management by youth), the preservation of the environment by the extensification policy (e. g., special action for the disadvantaged areas and environmental preservation areas). Then, these reforms were subsequently merged with the agreements of the Uruguay Round Talks of 1993, whose major characteristics were tariffication of the variable import levies, minimum access import, reduction of export subsidies and decrease of domestic protection.

Annual grain export from the United States has continued to increase, reflecting strengthened U.S. agricultural protection and increased agricultural production following the world food crisis in 1974, from 40 million tons in the sixties to a peak of 112.7 million tons in 1981. However, grain exports fell sharply during the first half of eighties, reflecting excessive domestic protectionism, a strong dollar and the rapid increase of grain exports from the EC. The total U.S. grain stock increased significantly, from 50 million tons in the mid-seventies to 200 million tons by 1986. Stocks of other agricultural products also increased.6 The financial expenditure increased rapidly to an excessive level, in order to protect domestic agriculture and to subsidize export of the surplus agricultural products. To cope with these problems, the 1985 Agricultural Law introduced the 50/92 policy in order to reduce planted area of grain for the first time: reductions in the target price and in the farm support price (loan rate); the Conservation Reserve Program (CRP), which took a total of 18 million hectares of high erosion risk areas out of production through the grant of an annual average rent of $121/ hectare to the owners; and new subsidy of marketing loans, which decreased the grain export price to the international price level. These measures, except marketing loans, were production restriction policies. These policies were further strengthened in the 1990 Agriculture Law by the expansion of flexible planting and by fixing the program yield. These measures to reduce agricultural protection, surplus and financial expenditures were finally absorbed into the agreements reached in the Uruguay Round agricultural trade agreement in 1993.

Thus agricultural policies of the EU and the United States have been greatly transformed from those of the mid-eighties, high protection, surplus accumulation and heavy export subsidy, to those of lower protection, less surplus, less export subsidy and more concern for environment and less advantaged areas. This transformation is clearly reflected in the long term reversal in the trend of net food (excluding fish, hereafter simply called food)7 export quantity between the developed countries and the developing countries of the world since the last half of the eighties, as shown in Figure 1.2.

Before 1985, the EU and the United States dominated food exports among all developed countries. During the same period, the EU and the United States had continued to increase their food exports, while the developing countries deceased their food import. The developed countries had been net importers of food during the sixties and early seventies, and they become net exporters beginning in 1977; then they increased their net export quantity rapidly during the late seventies. On the other hand, the developing countries changed from being net exporting regions of food to net importers in 1977, as shown in the figure, and their net import quantity increased rapidly. This change in the food trade balance between developed and developing regions is caused by the fall in food prices in developing countries, resulting from dumping exports of surplus agricultural products by the EU and the United States and by the policy of agricultural exploitation in the developing countries themselves. The change is unjust because rich industrialized countries dumped their surplus food to suppress food production and agricultural income in the poor agricultural developing countries, and the developing countries exploited their own poor farmers. This change is also not desirable from the viewpoint of the theory of comparative cost.

A reversal of this change started in 1985, as shown in Fig. 1.2. This reversal was brought about by transformation of the agricultural policies of the EU and the US, in order to reduce the excessive financial burden from domestic agricultural protection and export subsidy for huge agricultural surpluses, to preserve the environment and to correct interregional differences in the EU and the United States, as mentioned above.8 Net food exports from developed countries decreased considerably in 1985 and 86, and declined rapidly from the late eighties.

The transformation had reduced the grain stock of the EU and the US and thus the world grain stock, and raised world grain prices until recently, as previously described. This transformation will be maintained into the 21st century, since the reductions in agricultural protection in the transformation were integrated into the Uruguay Round trade agreement in 1993 and they will be executed and intensified under the World Trade Organization (WTO) system, which is the international organization for freer trade. Decoupled direct farm payment and liberalization in the kind and acreage of grain to be planted by American farmers, with abolition of the target price in the 1996 Agricultural Law of the United States, will continue. Further decrease of agricultural protection in the CAP of the EU in the near future, as expressed in the EU's Agenda 2000, will be executed, since without it agricultural surplus will be accumulated as more middle and east European countries will be included in the EU in the near future. Thus, the EU and the US will not hold large agricultural surplus in the 21st century as they did before. Low global grain stocks, and thus high and unstable grain prices, will be the usual condition in the early 21st century. Thus the world's 1.1 billion poor and 800 million starving, the majority of which is concentrated in Asia,8 will face the high probability of serious food crises, as they consume grain as their main energy source. 9

Was this article helpful?

0 0
Organic Gardeners Composting

Organic Gardeners Composting

Have you always wanted to grow your own vegetables but didn't know what to do? Here are the best tips on how to become a true and envied organic gardner.

Get My Free Ebook

Post a comment