Food supply not keeping pace with demand
- By Gerard Lyons
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China Daily, October 14, 2011
It is only in recent years, as prices have risen and prospects for emerging economies have improved, that the need and the potential to boost supply has grown in prominence. Admittedly it is not just about food. Supply of energy and metals has also attracted attention. There is now a desire from the private sector to invest more in commodity producing countries. There are many winners in this. Just look at the increased interest and investment in sub-Saharan Africa in recent years.
No one should under estimate how much needs to be done. For instance, global cereal production may need to rise by 40 percent by 2050. That is a big increase, particularly as the use of biofuels has the potential of worsening the demand-supply balance. Excluding biofuels, much of the increase in cereals demand will be for animal feed to support the growing consumption of livestock products.
Finally, there is the importance of technology. The world needs a second "Green Revolution", similar to the one that led to the advances in crop production seen in the 1960s. There needs to be another leap in technology to boost crop yields and output.
The significance of this should not be overlooked. For example, in recent years, corn and rice yields have slowed sharply. In the future, perhaps as much as four-fifths of the increased output may come from intensification of cropping rather than from increases in arable land.
No one really knows how much needs to be invested, but it is huge. The UN believes $10 trillion will need to be invested in agricultural infrastructure, and research and development by 2050 to ensure sufficient food supplies. It may turn out to be much more than this, as there are so many complexities. One is the need to ensure more efficient use of water. Technology can certainly make progress here. Just take Australia's increased water efficiency for irrigation. Other economies with a water shortage are making progress. Singapore is just one example. Some water-deficient countries are seeking to import crops that need large amounts of water. The Middle East is one such region.
Agriculture consumes around 70 percent of all fresh water available globally, and 82 percent in low and middle-income countries. While water use has increased sharply, its efficiency has barely improved.
Across some countries, where subsistence some net food-importing countries, such as the Philippines, Burkina Faso and Senegal farmers hope to gain, there is concern about the future of genetically modified foods. Yet, across, GM crops are seen as an important part of reducing import needs and boosting crop yields. It is a complex area meriting further research and investment.
Overall, global demand for food will continue to rise. With World Food Day focusing attention on the need for stable food prices, this should turn attention to the need to invest in new supply and to search for technological advances.
The winners from the current shift in the balance of power affecting the world economy will be those countries that have the cash, the creativity or the commodities. Food producers should be at the forefront of the winners from commodity rich countries.
The author is chief economist at Standard Chartered Bank.
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