A global perspective on food grain demand
October 01, 1997
by Teresa Acklin
A consultant examines predictions on future grain demand and the factors that will influence developments.
By Joseph Hulse
The World Food Summit sponsored by the Food and Agriculture Organization of the United Nations last November in Rome inspired an impressive number of soothsayers and futurologists to publish their predictions on world population growth, grain demand and subsequent political responses. But forecasts of future demand for food grains should be reviewed with skeptical caution because reliability of predictions is inversely related to the time period considered; supply/demand estimates to 2000 are likely to be more credible than those to 2020.
Even short term forecasts can prove false, as occurred during the 1973 World Food Congress, when massive imports into the then Soviet Union, together with serious droughts, caused stocks to fall and prices to rise dramatically. Mathematically ingenious econometric models find difficulty in allowing for sudden climatic catastrophes and for disturbances to production and price resulting from irrational political decisions.
Food grain demand and supply depend on many factors: demographics, socio-economics, production capacities, logistics and the political climate. Following is a review of predictions made by several agencies and a look at the uncertainties limiting the future of food grains.Population and Demographic
Several million years elapsed from the time the first of our primeval ancestors stood up on their hind legs until the population reached 1 billion people. The second billion appeared in less than 100 years. Demographers generally agree that the world's population will increase to between 7.5 billion and 8.5 billion over the next 25 years and that 90% of the increase will be in the developing regions of Africa, Asia and Latin America, where, by 2020, 83% of the planet's inhabitants will live.
Demographers working for U.N. agencies predict that between 1990 and 2020, populations in developed nations will increase by only 14%, whereas those of developing nations will grow by more than 60%. Asian and Latin American populations will each increase by approximately 50%, which translates into an additional 1.5 billion Asians and 230 million Latin Americans. By 2020, 1.5 billion people will live in China and 1.3 billion will live in India.
Predictions of the numbers that will exist sustainably after 2020 are widely divergent, and for most of us, more of academic than of practical interest.
The data indicate several widely variant assessments of how many people the world's essential resources can sustain. Disparities derive from different estimates of productive capacities and consumption patterns: whether most will aspire to the extravagant consumption standards of North Americans and Europeans, who consume far more resources than people content with a simpler vegetarian lifestyle.
In 1776, Adam Smith wrote that humans multiply in proportion to their means of subsistence. In 1797, Thomas Malthus stated that the world's population would soon grow beyond its means of subsistence. Although Malthus' predictions have not materialized exactly, close to 1 billion of the planet's poorest people today suffer severe chronic food deficiencies. Although the numbers of poor are greatest in Asia, it is among Africans that the future of food security appears most bleak.
A recent study of the biophysical limits of food production suggests that global application of highly intensive production systems could provide nine times the basic human needs for food and that ecoconservative systems could provide four times the basic needs. But it is improbable that either will be achieved.
Current political dispositions do not portend that the necessary investments in agriculture will be allocated, while history offers little hope that food and other essential resources will be equitably distributed, either within or among nations.
Rural-to-urban migrations appear inexorable and irreversible in all developing regions, where 17 cities currently contain populations greater than 10 million and another 350 have more than 1 million. More than two-thirds of Latin Americans live in dense urban conglomerates.
Ten years from now, close to 1 billion Chinese and 450 million Indians will live in large towns and cities. Although some food can be harvested from urban kitchen gardens and allotments, people in cities are mainly fed with food from rural farms.
The greater the distance in time and space between rural producers and urban consumers, the greater the probability of post-harvest spoilage. During summer months, grain losses between rural producers and the largest Chinese cities can be as high as 30%. In the densely populated region of the Yangtze Delta around Shanghai, it takes more than 12 hours to transport grains barely 200 kilometers.
National governments and international agencies give far too little attention to the complex logistics, transportation and infrastructures needed to deliver food economically and safely from rural producers to urban markets and consumers. Opportunities for rural employment offered by food processing industries located close to harvest areas also go unrealized.
Rural-to-urban migration adversely affects agricultural production by reducing the number of people who work on farms and by encroaching on agricultural land through the development of urban housing and industry. In response, food grain production must rise per unit of labor and per unit of land, both of which tend to encourage intensive systems of production that impose greater stress on natural ecologies and resources.
For a smaller work force to raise production progressively, large sustained investments must be made in agricultural research and development, in training and extension facilities and in reliable post-production systems of preservation, processing, distribution and marketing.
Among Asian and Latin American nations, gross domestic product per capita has increased remarkably in the past decade, resulting in rising disposable incomes among many urban families. As people progress from poverty to prosperity and disposable incomes rise, food consumption patterns change: simple porridge cooked from hand-pounded cereals and pulses give way to bread baked from commercially milled wheat. Direct consumption of rice, maize and sorghum is replaced by meat, milk and eggs from livestock fed on coarse grains.
Lester Brown of the World Watch Institute predicts that, with gross domestic product rising at more than 9% per year and an urban population of approximately 1 billion, 25 years from now China will need to import at least 300 million tonnes of food grains, an amount that exceeds total world grain exports in 1995.
The International Food Policy Research Institute (I.F.P.R.I.) and others variously forecast China's food grain deficit in 2020 at between 22 million and 60 million tonnes, the latter being twice the quantity imported by all Asia-Pacific countries in 1990.Cereal Production, Consumption
Data from the F.A.O. illustrate the remarkable growth in production resulting in large measure from 25 years of international investment in research on food grains. Between 1965 and 1995, India tripled its food grain production to 192 million tonnes from 60 million tonnes, a per capita increase of 145 to 175 kilograms per year. India would have to plant an additional 60 million hectares of cereals to achieve current production if its farmers used the production technologies of the 1960s.
The data show that increases realized from the 1960s to the mid-1980s are now easing, both in terms of total production and per capita availability. Between 1960 and 1980, cereal production per capita rose by 21%; between 1990 and 2010, given current resource allocations, an increase of only 5% is envisaged. The annual increase of total production has fallen from 4% per year in the 1960s and early 1970s to a current figure of 2% per year.
The data taken from F.A.O. publications illustrate declining self-sufficiency, particularly in sub-Saharan Africa, where many nations, particularly those with high incurred debt, cannot afford to pay world market prices for the cereals they need to import.
Although wheat is the most important cereal in international cereal trade, rice is the staple grain for 3 billion Asians. Among all developing regions, the proportion of wheat is expected to increase as urban populations with rising disposable incomes eat more bread. Consumption of coarse grains will also rise with increasing demand for meat, milk and eggs.
Sorghum types high in diastatic activity are finding more profitable markets among African brewers and maltsters than those sorghums generally considered “food types.” This indicates that plant breeders must be as much concerned with functional quality as with yield potential.
An I.F.P.R.I. study forecast probable increases in cereal production and net trade under two different assumptions: low investment in agricultural research and development and conversely, high investment with more rapid growth. The study indicated that with low investment, developing countries could import up to 220 million tonnes of grain, compared with 190 million under the higher investment assumption and 90 million in 1990. Other studies forecast that if current rates of crop yield improvement were maintained, grain imports into developing countries by 2020 would rise to more than 240 million tonnes.
A study by the U.S. Department of Agriculture suggested that because of rising demand for livestock feed, international trade in coarse grains would increase by at least 60% over the next 25 years. The study also indicated that U.S. exports of food grains would grow to 120 million tonnes in 2020 from 90 million tonnes in 1990.
If Lester Brown's pessimistic predictions become fact, grain exports from North America and Europe into Asia will be significantly greater than these forecasts.
For wheat alone, the predicted trends are similar. Because of rising urban demand, wheat consumption is expected to increase faster than other cereals use. Imports into developing regions are variously forecast, with some predicting growth at 60% and others predicting a doubling between 1990 and 2020.
I.F.P.R.I. forecasts for wheat imports into Latin America are lower than those of other forecasters who expect wheat imports from the United States and Canada to rise progressively. India is expected to remain self-sufficient until 2010, but may become an importer by 2020, depending on future agricultural policy and investment.
The United States, Canada, European Union, Australia and Argentina will continue as the principal exporters, with Argentina dominating in Latin America. As demand for wheat bread increases, wheat breeders and producers will need to devote as much attention to milling and baking quality as to yield.Grain Stocks and Prices
While strategic reserve stocks provide for unanticipated shortages resulting from poor harvests and other emergencies, they also may stabilize prices and supply.
Effective use of emergency reserve stocks requires an early warning system so that reserves are delivered where and when they are needed. Consequently, reserve stocks are best held by nations or regions where periodic shortages are most likely to occur. In fact, most are held in elevators and silos of the major producers and exporters.
The F.A.O. considers 17% of total global consumption as the minimum internationally safe level of reserve food grain stocks. In 1996, at 13% of total consumption, grain stocks were at a seriously all-time low level. But it seems improbable that the main producers will be persuaded to maintain reserve stocks at the levels F.A.O. deem desirable.
Between 1970 and 1994, international wheat prices fluctuated widely, the highest price being more than 50% higher than the lowest. The high prices in 1975 resulted from a combination of adverse weather and massive grain imports by the Soviet Union.
Despite such periodic fluctuations in constant dollars, the international price of wheat has steadily fallen over the past 100 years, the price in 1990 being half the price in 1890.
The I.F.P.R.I.'s model predicts a steady decline in food grain prices over the next 25 years. But the International Grains Council forecasts price volatility over the next five years with subsequent price escalation as purchasing power rises faster than production.
Half the world's cereal harvest currently goes into human food, more than one-third to animal feed and the remainder mostly into starch and starch derivatives. Rising demand for livestock products will shift the ratio of food-to-feed during the next decade and beyond.
In India, generally regarded as a nation of vegetarians, consumption of livestock products during the past 20 years has risen by more than 10% per year. It is conservatively expected that the demand for animal feeds in developing regions will double during the next 20 years. Among Asian nations, consumption of poultry is forecast to rise fivefold, hogs threefold and milk threefold.
The rate of growth in demand for feeds may level off if and when genetic improvements produce breeds that utilize feeds more efficiently. Feed efficiency among farm animals in Asia and Africa is substantially lower than in North America and Europe.
The foregoing gives only a sample of the many diverse, often contradictory, forecasts of future production, supply, demand and consumption of food grains. In many predictions, no clear distinction exists between what economist Adam Smith described as “effectual” and “absolute” demand, that is, respectively, demand by those who can pay the full market price and those who need the product but cannot pay the full price.
By 2020, the World Bank predicts, 300 million Africans will live below the poverty line and the poorest African nations will suffer a food grain deficit of approximately 50 million tonnes, which would be a deficit of more than three times the 14 million tonnes of food grains provided as food aid throughout the world in 1993. At that time, 41% of the aid went to Eastern Europe and countries of the former Soviet Union.
The quantities of food grains provided as food aid are falling and show little sign of recovery. By what means the poorest and most deficient nations are to gain access to the food grains they need is far from clear.
After seven years of negotiations, the General Agreement on Tariffs and Trade concluded the Uruguay Round on multilateral trade with an agreement to be implemented by the new World Trade Organization. The agreement purports to provide for reform and liberalization of international trade in agriculture.
To what extent and how quickly governments will enact and enforce reforms to remove restrictive barriers to trade, and just what will be the short- and long-term effects on food grain trade and prices remain highly uncertain. The I.F.P.R.I. model forecasts that full adoption of the GATT proposals would lead to only a modest rise in prices, but others are less sanguine.
Ideally, more liberal trade should serve to stabilize supply and prices. How the economies of the poorest developing countries will be affected is far from clear. It seems not improbable in the early stages that experienced international grain traders will derive greater benefit than most developing nations or the former Soviet Union countries as they pursue a transition to freer market economies.
Of dominant and highly uncertain influence will be the state of food grain production and demand in China and Eastern Europe, depending upon whether their politicians assign adequate priority to agriculture or choose to neglect agriculture in favor of industrial technologies. If the former Soviet Union countries are to realize their evident potential to produce a surplus of food grains, their national agricultural and economic policies must change substantially.
The only truly reliable forecast is that, out of the plethora of diverse predictions concerning future food grain production, prices and trade, many will be wrong. But, by 2020 most of those who made the false forecasts conveniently will not be around to explain why.
Joseph H. Hulse is president of Siemen-Hulse International Development Associates, Inc. This article is based on his presentation at the PANamericano '97 conference in Mexico City in March. The event was sponsored by World Grain's sister publications, Milling & Baking News and PANamericano.Urban expansion percent of population