Four Hot Spots for Future Global Food Supply and Demand

Background paper for presentation at the 1998 Charles A. Black Award Banquet sponsored by the Council for Agricultural Science and Technology (CAST), Arlington, Virginia, March 20, 1998
by Per Pinstrup-Andersen, Director General,

International Food Policy Research Institute Washington, DC

IFPRI projections suggest that the global economic demand for food will be matched by global supply at constant or slightly falling real prices during the next 20 years. However, as discussed elsewhere,1 long-term projections are subject to many uncertainties. Developments in four countries and regions–China, India, Eastern Europe, and the former Soviet Union, and Sub-Saharan Africa–are particularly important for the future global food situation.2

Concerns About Feeding China

With one-fifth of the world’s population and one of the fastest-growing and most rapidly transforming economies in the world, China has the potential to significantly affect global food security. Concerns about how China will meet its food requirements escalated recently when China shifted from being a minor net exporter of cereals in 1992-94 to a substantial net importer in 1995. China has since returned to past levels of virtual self-sufficiency in grain, with small net cereal imports of 2-4 million tons annually. The concerns arising from China’s shift to being a net cereal importer in 1995 seem misplaced given that China has been a net importer in 13 of the 18 years since 1980.

Views on the size and dominance of China’s food economy in the 21st century vary widely, with some forecasting that China will be a major cereal exporter and others cautioning that China might become a major cereal importer, if not the world’s largest importer. IFPRI projections indicate that, in the baseline scenario, total cereal demand in China will increase by 42 percent, to 490 million tons, between 1993 and 2020, and cereal production by 31 percent, to 449 million tons. At 41 million tons, China’s net cereal imports in 2020 would represent 18 percent of the developing world’s projected net cereal imports. While sizable, China’s projected imports are unlikely to pose an intolerable burden on the global food situation. For meat, China’s production is projected to almost keep up with increases in demand. A predicted increase in demand of 132 percent between 1993 and 2020 would result in net imports of only 0.3 million tons–3 percent of the developing world’s projected net imports in 2020.

Alternative simulations suggest that only with extraordinarily rapid income growth, severe resource degradation, and failure to invest in agriculture would China’s net cereal imports increase substantially and have a significant effect on world cereal prices. For instance, should there be no increase in government investment in the agriculture sector in China, cereal import would be 85 million tons in 2020, more than double the volume forecast in the baseline scenario. World cereal prices would increase by 10 percent. However, should China increase its government investment in agriculture by 5 percent annually in real terms, China would become a net exporter of as much as 31 million tons of cereals in 2020, easing pressure on world markets and causing prices to decline by 11 percent.

In conclusion, China is already a significant player in world food markets and is likely to become increasingly important. However, it does not represent a major threat to world food markets.

Rapid Growth and Structural Changes in Indian Diets

With a population of 930 million in 1995, India is the second most populous country in the world after China. Like China during the late 1970s and early 1980s, India is in the midst of major economic reform. If it succeeds, incomes in India will rise much faster than they have in recent decades, with profound effects on food demand and food security. As incomes increase, the question is whether Indians will greatly increase their consumption of livestock products, or will they remain more or less vegetarian, as India’s history and cultural traditions would suggest. Views are mixed. In IFPRI’s baseline scenario, demand for livestock products is projected to increase by 4.6 million tons between 1993 and 2020 to 8.5 million tons (the corresponding increase in meat demand in China is 51 million tons to 89 million tons in 2020). Given the extremely low initial levels of livestock consumption in India, rapid growth in absolute demand for livestock would require a dramatic change in eating patterns. In a scenario modeling the effect of such a change in Indian diets, India’s demand for meat products is forecast to increase almost 10-fold from 3.8 million tons in 1993 to 36.4 million tons in 2020. This increase in demand would have to be met through trade, as meat production is not projected to increase beyond the 8.5 million tons shown in the baseline scenario for 2020. India’s projected net meat imports of 28 million tons under this scenario are a far cry from the less than 0.5 million tons forecast in the baseline scenario. This increase in Indian net imports would increase world meat prices by 21 percent in 2020 relative to the baseline scenario and by 13 percent relative to 1993. If India attempts to meet potentially large increases in livestock demand through domestic livestock production rather than imports, thereby raising demand for feed grain, implications for global livestock and cereal trade and prices would be dramatically different from those predicted by the scenario that relies primarily on livestock imports to meet demand.

The Transition in Eastern Europe and the Former Soviet Union

The fall of the Berlin Wall and the associated political changes in Eastern Europe and the former Soviet Union brought great promise for rapid economic growth in that part of the world. Many projected that food production in a number of countries affected, including Ukraine and the Russian Federation, would expand rapidly and significantly, causing Eastern Europe and the former Soviet Union to switch quickly from being net importers of grain to being significant net exporters. Although net grain imports by the former Soviet Union have fallen dramatically, this optimistic scenario has not materialized. There is still a great deal of uncertainty regarding future food production and demand in those countries.

Many of the countries of Eastern Europe and the former Soviet Union have tremendous agricultural potential that is as yet underutilized. Appropriate changes in institutions and policies (including property rights), increased market and trade liberalization, and investment in rural infrastructure could result in rapid production increases, but such changes have been extremely slow. For example, grain production in Ukraine has decreased sharply since the beginning of the transition process from an annual average of 47.4 million tons during 1986-90 to 36.4 million tons during 1991-96. The decline continues, and grain production fell to about 27 million tons in 1996. Appropriate institutions and policies could turn Ukraine’s large grain production potential into major exportable surpluses. European Union (EU) membership by some of the countries of Eastern Europe could accelerate agricultural transformation in these countries with resulting expansions in food production.

IFPRI’s baseline scenario projects that Eastern Europe and the former Soviet Union will become major net exporters of cereal by 2020, on the order of about 33 million tons. However, if incomes in Eastern Europe and the former Soviet Union grow faster than the baseline projection and crop productivity increases at a slower pace than forecast, these regions could remain net importers. For example, with an increase in income growth of 30 percent and a drop in production growth of two-thirds, crop production would increase by only 12 percent between 1993 and 2020 to 278 million tons while demand would increase to 304 million tons, resulting in net cereal imports of 26 million tons in 2020 a very different outcome. Slow crop production in Eastern Europe and the former Soviet Union could cause world cereal prices to be higher in 2020 relative to the baseline scenario. Changes in cereal production and demand in Eastern Europe and the former Soviet Union can have significant effects on the world food situation, but it would take very large declines in productivity growth in this region to dramatically drive up cereal prices.

Malthus’s Shadow Waning in Sub-Saharan Africa

Thomas Malthus’s basic argument was that the world’s natural resources could not assure expansions in food supply that would match population growth. Region after region has disproved his prediction, but in Sub-Saharan Africa the population growth rate has exceeded the rate of growth in food production since the early 1970s and the gap is widening, resulting in declining per capita food production. This is exactly the gap predicted by Malthus. However, several recent developments suggest that Malthus’s shadow over Sub-Saharan Africa could finally be waning.

First, Malthus’s predictions grossly underestimated the potential of productivity-increasing technology. Where such technology has been effectively developed and utilized, such as in Asia, food production has expanded much faster than population. In Sub-Saharan Africa, the potential of appropriate productivity-increasing technology has yet to be realized. Maize yields for Africa and Asia were virtually the same in 1961, but since then they have tripled in Asia and quintupled in China while they have remained stagnant at around 1 ton per hectare in Africa. However, there are encouraging signs that productivity-increasing technology is beginning to accelerate yield growth of African food crops. For example, the introduction of improved maize varieties has resulted in productivity increases in West and Central Africa at rates as high as 4 percent per year during the period 1983-92. Some countries have experienced particularly high rates of growth in maize production during this period, including Burkina Faso (17.1 percent), Ghana (8.3 percent), and Mali (7.5 percent), albeit starting from low levels.

Second, Sub-Saharan Africa is experiencing economic recovery. After a number of years of low or negative growth, gross domestic product (GDP) increased by 4.2 percent in 1995 and 4.8 percent in 1996 and again in 1997. With population growing by about 3 percent per year, GDP per capita will have increased for three consecutive years for the first time in many years. The economic recovery is widely shared, with 20 countries achieving a GDP growth rate of 5 percent or higher in 1996. Spurred partially by favorable weather, agricultural growth is a key contributor to the overall economic recovery. Cereal production in Southern Africa, for instance, is estimated to have increased by 68 percent in 1996.

However, the economic recovery in Sub-Saharan Africa is fragile. Some of the factors that contributed to the recovery are short-term in nature and cannot be expected to persist; these include the higher commodity prices during 1994 and 1995 and the favorable weather conditions in 1996 that enabled recovery from the effects of drought in 1994. Other factors, such as policy reforms, an improved macroeconomic environment, and social and political stability, can have a more lasting effect on economic growth if properly nurtured. Moreover, economic growth rates will have to be substantially higher if they are to make a dent in Sub-Saharan Africa’s poverty; per capita incomes have fallen so much that even if economic growth were to continue at the current pace (about 5 percent per year), it would still take at least a decade to recover to the levels prevailing in 1980.

Concluding Comments

The future global food situation looks promising. However, policies pursued by China, India, and Eastern Europe and the former Soviet Union will greatly influence future food supply, demand, and prices at the global level. Similarly, developments in Sub-Saharan Africa will be extremely important for future food security in that region and could significantly influence the global situation as well.

Developing countries as a group will more than double net imports of grain between now and 2020. Policies in traditional exporting countries such as the United States will play an important role in meeting these import demands.

1. Per Pinstrup-Andersen and Rajul Pandya-Lorch, “Major Uncertainties and Risks Affecting Long-Term Food Supply and Demand,” in The Future of Food: Long-Term Prospects for the Agro-Food Sector. Paris, France: Organisation for Economic Cooperation and Development (OECD), 1998, pp. 53-70.

2. This paper draws from Per Pinstrup-Andersen, Rajul Pandya-Lorch, and Mark W. Rosegrant, “The World Food Situation: Recent Developments, Emerging Issues, and Long-Term Prospects,” 2020 Vision Food Policy Report. Washington, D.C., International Food Policy Research Institute, 1997.