Prospects for aggregate agriculture and major commodity groups

This chapter deals with the trends and future outlook of world food and agriculture in terms of the main commodity sectors. A brief introduction to the subject is given first, presenting trends and prospects for total agriculture (the aggregates of all crops and livestock products).

3.1 Aggregate agriculture: Historical trends and prospects

The historical evidence suggests that the growth of the productive potential of global agriculture has so far been more than sufficient to meet the growth of effective demand. This is what the long-term term decline in the real price of food suggests (Figure 3.1, see also World Bank, 2000a). In practice, world agriculture has been operating in a demand-constrained environment. This situation has coexisted with hundreds of millions of the world population not having enough food to eat. This situation of un-met demand¹ coexisting with actual or potential plenty is not, of course, specific to food and agriculture. It is found in other sectors as well, such as housing, sanitation and the health services.

Figure 3.1
World market prices, 1960-2001 (constant 1990 US$)

Limits on the demand side at the global level reflected three main factors: (i) the slowdown in population growth from the late 1960s onwards (see Chapter 2); (ii) the fact that a growing share of the world population has been attaining fairly high levels of per capita food consumption, beyond which the scope for further increases is rather limited (Table 2.2); and (iii) the fact that those who did not have enough to eat were too poor to afford more food and cause it to be produced, or did not have the resources and other means to produce it themselves.

The first two factors will continue to operate in the future. Their influence will be expressed as lower growth rates than in the past of demand and, at the global level, also of production. The third factor will also continue to play a role, given that the overall economic outlook indicates that poverty will continue to be widespread in the future (see Chapter 2, Section 2.2.2). It follows that for a rather significant part of world population the potential demand for food will not be expressed fully as effective demand. Thus, the past trends of decelerating growth of demand will likely continue and perhaps intensify.

However, on the production side, there is no assurance that the past experience, when the world's production potential was more than sufficient to meet the growth of demand, will continue, even when demand growth will be much lower than in the past. The natural resources per head of the growing population (e.g. land or water resources per person) will certainly continue to decline and the yield growth potential is more limited than in the past. It remains to be seen whether advances in technology and related factors (e.g. investment, education, institutions and improved farm management) that underpinned the past growth of production will continue to more than make up for the declining resources per person. The future may be different if we are now nearer critical thresholds, e.g. yield ceilings imposed by plant physiology or availability of water resources for maintaining and/or expanding irrigation. On the positive side, there are those who think that biotechnology has the potential of helping to overcome constraints to further increases in production (Chapters 4 and 11, see also Evenson, 2002).

We present in this section a brief overview of what we can expect in terms of increases of aggregate demand for, and production of, agricultural products. The figures we use refer to the aggregate volume of demand and production of the crop and livestock sectors. They are obtained by multiplying physical quantities of demand or production times price for each commodity and summing up over all commodities (each commodity is valued at the same average international price² in all countries in all years). The resulting time series is an index of volume changes over time of aggregate demand and production. The movements in this aggregate indicator are rarely sufficient for us to analyse and understand the forces that shape the evolution of agricultural variables in their different dimensions. The commodities included (see list in Appendix 1) are very diverse from the standpoint of what determines their production, demand and trade. For this reason, the subsequent sections of this chapter analyse and present the historical experience and prospects of world agriculture in terms of the main commodity sectors. Sections 3.2-3.5 deal with the basic food commodities: cereals, livestock products, oilcrops and the roots, tubers and plantains group. Section 3.6 covers more summarily a selection of the main export commodities of the developing countries: sugar, bananas, coffee, cocoa and natural rubber. The commodities dealt with in sections 3.2-3.6 account for 79 percent of the world's aggregate agricultural output.

The overall picture for total agriculture is presented in Table 3.1. At the world level, the growth of demand for all crop and livestock products is projected to be lower than in the past, 1.6 percent p.a. in the period 1997/99-2015 compared with 2.1 percent p.a. in the preceding 20 years 1979-99. The difference between the past and future growth rates of demand is nearly equal to the difference in the population growth rates. However, the past growth rates of demand had been depressed because of the collapse of production and consumption in the transition economies. We would have expected that the cessation of declines and eventual turnaround of demand in these countries (turning from negative to positive, Table 3.1) would have largely cancelled the effect of lower population growth rate at the global level, at least for the first subperiod of the projections. In practice, it is mainly the slowdown in the growth of demand in the developing countries, and in particular in China, that accounts for a large part of the global deceleration. Why this should be so is shown in the more detailed regional numbers of Table 3.1. They show that deceleration in the developing countries outside China (from 3.0 percent p.a. in 1979-99 to 2.4 percent p.a. in 1997/99-2015) is only a little more than the deceleration in their population growth (from 2.2 percent to 1.7 percent, respectively), an expected outcome given the operation of the factors mentioned earlier. However, a better idea about the roles of the above-mentioned factors making for deceleration (lower population growth and approaching saturation levels) can be had from the data and projections presented in Table 3.2. In it the developing countries are grouped into two sets: those that start in 1997/99 with fairly high per capita food consumption (over 2700 kcal/person/day) and, therefore, face less scope than before for increasing consumption, and all the rest, that is those with 1997/99 kcal under 2700.

China carries a large weight in the former group, so its example can be used to illustrate why a drastic deceleration is foreseen for the developing countries. China has already attained a fairly high level of per capita food consumption of the main commodities, a total of 3040 kcal/person/day in 1997/99. In the projections, it increases further to 3300 kcal by 2030. This is nearly the level of the industrial countries. Going from 3040 to 3300 kcal in 32 years is a growth rate of only 0.3 percent p.a. In contrast, in the preceding three decades the average growth rate of per capita kcal was 1.6 percent p.a. Therefore, the higher level from which China now starts imposes a limit on how fast per capita consumption may grow in the future. In addition, China's population growth in the past was 1.5 percent p.a., but in the projection period it will be only 0.5 percent p.a. These numbers vividly demonstrate the effect of slower population growth and near-saturation levels of per capita food consumption in depressing the aggregate growth of demand for food. This deceleration happened in the historical period in countries transiting from low to high per capita consumption and to low demographic growth. For example, the aggregate food demand growth rate of Japan was 4.7 percent p.a. in the 1960s and fell progressively to 2.2 percent in the 1970s, to 2.0 percent in the 1980s and to 0.8 percent in the 1990s.

When such deceleration occurs in China and in a few other large developing countries, the whole aggregate of the developing countries, and indeed the world, will be affected downwards. There are several other developing countries in situations roughly similar to those of China, i.e. they have fairly high levels of per capita consumption and are experiencing a significant slowdown in their population growth. As noted, the first group shown in Table 3.2 comprises the developing countries starting with over 2 700 kcal/person/day in 1997/99. There are 29 of them (including China) but they account for a half of the population of the developing countries, since the group includes many of the largest developing countries in terms of population.³ They account for an even larger share of aggregate consumption of the developing countries, 66 percent in 1997/99. As in the case of China, this group of countries has much more limited scope than in the past for increasing per capita consumption, given that the group's average already stands at 3030 kcal/person/day. We project this average to grow to 3275 kcal/person/day by 2030. In parallel, the growth rate of their population is projected to be much slower than in the past, 0.9 percent p.a. compared with 1.8 percent p.a. in the preceding three decades. The net effect of these demand-limiting factors is that the group's aggregate demand is projected to decelerate drastically, from 4.2 percent per year between 1969 and 1999, to 1.9 percent p.a. in the period to 2015 and to 1.5 percent p.a. in the following 15 years to 2030.⁴

In contrast, the growth of demand in the other developing countries, those with under 2700 kcal/ person/day in 1997/99, is projected to decelerate less than their population: the growth rate of their demand falls from 2.9 percent p.a. in the preceding three decades to 2.5 percent p.a. in the period to 2030, while their population growth rate falls from 2.3 percent p.a. to 1.6 percent p.a. This group of countries includes India with its nearly one billion population out of the group's 2.2 billion. The prospect that India will not move much towards meat consumption (see Section 3.3 below) contributes to limit the growth rate of total demand for both food and feed. In the past, the aggregate demand of the developing countries was greatly influenced by the rapid growth of apparent meat consumption in China (see, however, Section 3.3 below for possible overestimation of meat production and consumption in China). The prospect that China's influence will be much weaker in the future and that it will not be replaced by a similar boom in other large countries, is one of the major factors making for the projected deceleration in the aggregate demand of the developing countries.

At the world level, production equals consumption, so the preceding discussion about global demand growth prospects applies also to that of global production. For the individual countries and country groups, however, the two growth rates differ depending on movements in their net agricultural trade positions. In general, the growth rates of production in the developing regions have been below those of demand. As a result their agricultural imports have been growing faster than their exports, leading to gradual erosion of their traditional surplus in agricultural trade (crop and livestock products, primary and processed). The trend has been for this surplus to diminish and to turn into a net deficit in most years in the 1990s (Figure 3.2). In the last 15 years, the net balance reached a peak of US$16 billion surplus in 1986 and a trough of US$6 billion deficit ten years later, before some recovery in the subsequent years. The net deficit was still US$5.9 billion in 2000, the latest year for which we have data. This prospect had been foreshadowed in our earlier projections to 2010 from base year 1988/90 (Alexandratos, 1995, p. 121, see also Chapter 9).

Figure 3.2
Developing countries, net agricultural trade balances, 1984-2000

Behind these trends in the value of the net trade balance of agriculture have been movements in both quantities and prices of the traded commodities and the policies that influenced them. Several factors, often widely differing among commodities, played a role in these developments. For example, the drastic decline in the developing countries' traditional net trade surplus in sugar is in part a result of the fact that several developing countries became major importers of sugar. In parallel, the reduction also reflects the effects of the heavy domestic support and trade protection in major sugar importing countries such as the United States and Japan, or in former net importing countries, such as the EU, which became a significant net exporter as a result of these policies (see Section 3.6 below and Figure 3.16). The emergence of several developing countries as major importers has also helped to cause the rapid declines in the net trade surplus of the developing countries as a whole in the oilcrops complex (vegetable oils, oilseeds and cakes/meals, see Section 3.4). In the case of the«non-competing» exportables of the developing countries, such as coffee, it has been the slow growth of demand in the main consuming and importing countries (the industrial ones) - in combination with falling prices - that kept the trade balance from growing.

The evolution of the overall net agricultural trade balance of the developing countries as a whole does not by itself denote overall improvement or deterioration from a developmental standpoint. The aggregate of the developing countries is a composite of very widely differing country and commodity situations. For some countries, a declining agricultural trade balance (or a growing deficit) is an indicator of progress towards improved welfare. This is the case of countries such as the Republic of Korea, in which the growing agricultural deficit has gone hand in hand with high rates of overall development and growing food consumption. The declining overall balance also reflects the rapid growth in such things as China's growing imports of vegetable oils (a positive development overall as they contribute to improve food consumption and are paid for by growing industrial export earnings); or cotton imports into several developing countries, which sustain their growing exports of textiles. However, a declining agricultural balance is a negative developmental outcome in countries that still depend heavily on export earnings from agriculture and/or have to divert scarce foreign exchange resources to pay for growing food imports (eventually building up unsustainable foreign debt). It is an even more negative indicator when such food imports are not associated with rising food consumption per capita and improved food security, but are necessary just to sustain minimum levels of food consumption - which is not an uncommon occurrence.

The projections indicate a continuing deepening of the net trade deficit of the developing countries. Their net imports of the main commodities in which they are deficit, mainly cereals and livestock products, will continue to rise fairly rapidly. In parallel, their net trade surplus in traditional exports (e.g. tropical beverages and bananas) will either rise less rapidly than their net imports of cereals and livestock or outright decline (e.g. vegetable oils and sugar). The particulars relating to future trade outcomes for these commodities are discussed in the following sections of this chapter. Trade policy issues are discussed in Chapter 9.

Concerning production, evaluation country by country and commodity by commodity suggests that the resource potential and productivity gains required to achieve the aggregate production growth rates shown in Tables 3.1 and 3.2 (and in the commodity sections of this chapter) are by and large feasible. This is based on the assumption that policies will favour rather than discriminate against agriculture. More information on the agronomic dimensions of this proposition is presented in Chapter 4. It is just worth mentioning here that the bulk of the increases in production will come, as they did in the past, from increases in yield and more intensive use of land.

This may sound odd in the light of the widely held view that the potential for further growth of yields is now much more limited than it was in the historical period, which included the heyday of the spread of the green revolution. The two propositions (that yield growth potential is less than in the past and that yield growth will continue to be the mainstay of the production increases) are not necessarily contradictory. What makes them compatible with each other is that in future slower growth in production is needed than in the past. The issue is not really whether the yield growth rates will be slower than in the past. They will. Rather the issue is if such slower growth is sufficient to deliver the required additional production. Naturally, even this slower yield growth may not happen unless we make it happen. This requires continued support to agricultural research and policies and other conditions (education, credit, infrastructure, etc.) to make it profitable and possible for farmers to exploit the yield growth potential.

At the global level sufficient production potential can be developed for meeting the expected increases in effective demand in the course of the next three decades. But this is not to say that all people will be food-secure in the future. Far from it, as Chapter 2 has shown. The interaction between food security and food production potential is very much a local problem in poor and agriculturally dependent societies. Many situations exist where production potential is limited (e.g. in the semi-arid areas, given existing and accessible technology and infrastructure) and a good part of the population depends on such poor agricultural resources for food and more general livelihood. Unless local agriculture is developed and/or other income earning opportunities open up, the food insecurity determined by limited local production potential will persist, even in the middle of potential plenty at the world level. The need to develop local agriculture in such situations as the condition sine qua non for improved food security cannot be overemphasized.

3.2 Cereals

3.2.1 Past and present

Cereals continue to be overwhelmingly the major source of food supplies for direct human consumption. In addition, some 660 million tonnes, or 35 percent of world consumption, are being used as animal feed. Therefore, the growth of aggregate demand for cereals for all uses is a good (though far from perfect) proxy for monitoring trends in world food supplies.

Demand: general historical experience.
Historically, the growth rate of global demand for cereals (for all uses) has been in long-term decline. This is clearly seen in Tables 3.3 and 3.4 which show the historical developments in all major cereal sector variables for the world and the standard regions used in this report. To gain a better understanding of the main factors that led to the deceleration, we must distinguish between different country groups and historical periods. This is done in Figure 3.3 which plots the growth rates of aggregate demand for successive (moving) 15-year periods of different country groups over the time span 1961-99. The world growth rate declined progressively from 3.1 percent in the first 15-year period (1961-76) to 1.1 percent p.a. in the last 15-year period ending in 1999. We should not be surprised if our projections were to show further declines in the growth rates of world aggregate cereals demand (hence of global production) in the future.

Figure 3.3
Fifteen-year growth rates of aggregate cereal consumption

The deceleration in population growth certainly played a role in this slowdown, as has the fact that a growing proportion of the world population has been gradually attaining levels of per capita food consumption that leave less scope than in the past for further increases. However, these two factors explain only part of the decline, given that there are still grossly unsatisfied nutritional needs affecting large parts of the world population. Other factors must be taken into account if we are to draw valid lessons from the historical experience for exploring the future. The forces that made for this decline may be summarized as follows:

• In developing countries, the past high growth rate was fuelled up to about the mid-1980s by the rapid growth in production and consumption of China, and of consumption in the developing oil-exporting countries.⁵ In this group of countries, the rapid growth of demand was supported by quantum jumps in net cereal imports (see below). Growth of demand became much weaker in subsequent periods. This reflected partly the achievement of mid- to high per capita consumption levels in several countries, and partly changes in economic conditions, mainly the drastic slowdown in the growth of incomes and export earnings from oil. In contrast, the growth of aggregate demand in the remaining developing countries (which, among themselves, account for 30 percent of world consumption) slowed by much less - from a peak of 3.0 percent p.a. in 1966-81 (when population growth was 2.4 percent) to 2.3 percent in the latest 15-year period 1985-99 (population growth 2.1 percent).
• The collapse of feed use of cereals in the transition economies in the 1990s following the contraction of their livestock sectors (total use declined from 317 million tonnes in 1989/91 to 197 million tonnes in 1997/99) was a major factor in bringing down the growth of world demand in the 1990s.
• A third major factor was, up to the early 1990s, the decline in cereals used for animal feed (and their replacement by largely imported cereal substitutes - oilmeals, cassava, etc.) in the EU, following the high internal prices of the Common Agricultural Policy (CAP). This trend was reversed from 1993 onwards following the McSharry reform of the CAP.

Evolution of demand: commodities and categories of use.
For rice, the characteristic feature of the historical evolution is that per capita consumption (for all uses, but overwhelmingly for direct food, although in some countries rice is also used as animal feed) has tended to level off (see Figure 3.4). This trend has been most evident in several countries of East Asia. Given their large weight in world rice consumption, developments in this region influence the totals for the world and the developing countries in a decisive way. Thus, the levelling off of average consumption in the developing countries since about the mid-1980s reflects essentially small declines in East Asia's per capita food consumption of rice (from 109 to 106 kg), although the average of South Asia kept increasing (from 75 to 79 kg, see Table 3.3, memo item 2). Absolute declines in per capita rice consumption because of diet diversification in Asia are not yet widespread, but the patterns established by the more advanced rice-eating countries (e.g. Japan, the Republic of Korea and Taiwan Province of China) have started appearing, although in much attenuated form, in other developing countries, e.g. China and Thailand. Despite these trends in per capita consumption, the aggregate world demand for rice grew faster than that of both wheat and coarse grains. This reflects essentially the fact that rice is used predominantly for food in the most populous region, Asia, while a good part of coarse grains, but also increasingly of wheat, are used for animal feed. Feed use suffered a severe setback in the last ten years or so because of the above factors (transition economies, the EU) and, to a lesser extent, other factors having to do with structural change in the livestock economy (shift of meat production from beef to poultry and pork, see Section 3.3).

Figure 3.4
Per capita consumption (all uses) of individual cereals

The per capita consumption of wheat kept increasing in the developing countries albeit at a decelerating rate. In the industrial countries, a growing share of total wheat use went to animal feed (37 percent currently, 45 percent in the EU). Growing imports made possible the increases in consumption in the majority of developing countries. This is not evident from a first glance at the totals of the developing countries: their aggregate wheat consumption grew by 185 million tonnes and net imports by only 24 million tonnes between 1974/76 and 1997/99. However, the large weight in these aggregates of India, China, Pakistan and a few other countries (Argentina, Saudi Arabia, the Syrian Arab Republic, Turkey and Bangladesh), which increased production to match, or more than match, the growth of consumption masks the growing dependence of the great majority of the developing countries on wheat imports. In practice, the rest of the developing countries increased consumption by 54 million tonnes and net imports by 39 million tonnes. Figure 3.5 shows some major countries, other than the above-mentioned ones, which increased consumption by over 500 thousand tonnes. They include countries that are major producers themselves (Egypt, the Islamic Republic of Iran, countries of North Africa, Mexico and Brazil) as well as those that are minor or non-producers of wheat - Indonesia, the Philippines, Colombia and the Republic of Korea. In addition, numerous smaller countries in the tropics depend entirely on imports for their consumption of wheat.

Figure 3.5
Increases in wheat consumption (all uses) and in net imports, 1974/76 to 1997/99,
developing countries with over 500 thousand tonnes increase in consumption

Apparent consumption of coarse grains grew fairly fast, although the above factors made for significant declines in feed use in certain parts of the world and led to a decline in per capita use in the world as a whole (Figure 3.4). The driving force has been use for animal feed in the developing countries, particularly in the last ten years, with China being a major contributor to such developments. The increase in world consumption between 1984/86 and 1997/99 was 100 million tonnes. This was made up of a 131 million tonnes increase in the developing countries (out of which 77 million tonnes for feed - 43 of which in China); declines of 64 million tonnes in the transition economies; and an increase of 33 million tonnes in the industrial countries. Overall, the pattern of the world coarse grains economy has undergone drastic structural change in the location of consumption. The major export markets shifted increasingly to the developing countries: increases in net coarse grains imports of the developing countries outside China supplied some 30 percent of the increase in their consumption.

Figure 3.6
Food and non-food use of coarse grains, developing regions and
selected countries, average 1997/99

Coarse grains as food About three-fifths of world consumption of coarse grains is used for animal feed, hence the term«feedgrains» often used to refer to them. However, in many countries (mainly in sub-Saharan Africa and Latin America) they play a very important role in the total supplies of food for direct human consumption. Indeed in several countries food consumption of cereals is synonymous with coarse grains. A sample is given in Figure 3.6. The majority of these countries face food security problems, which underlines the importance of coarse grains in food security. At the global level, about a quarter of aggregate consumption of coarse grains is devoted to food,⁶ but the share rises to 80 percent in sub-Saharan Africa. Here maize, millet, sorghum and other coarse grains (e.g. tef in Ethiopia) account for 3 out of every 4 kg of cereals consumed as food. Coarse grains are also used predominantly as food in South Asia (84 percent of aggregate consumption of coarse grains is for food), but there they account for only a minor part of cereal food consumption (1 out of every 7.5 kg). This share is rapidly declining (coarse grains represented 1 out of 4 kg in the mid-1970s), following the strong bias of cereal policies in the region, favouring rice and wheat.

Imports and exports At the global level, production equals (roughly) consumption. Therefore what was said earlier concerning the factors that made for a steady decline in the growth rates of world cereal consumption, applies also to production.

However, this is not the case at the level of individual countries and country groups. Tables 3.3 and 3.4 show the extent to which production and consumption growth rates diverged from each other in the different regions, and how such divergences are associated with changes in net trade positions and self-sufficiency rates. In general, in the developing countries demand grew faster than production, so net imports increased from 39 million tonnes in the mid-1970s to 103 million tonnes in 1997/99 (Figure 3.7). Aggregate self-sufficiency (percentage of consumption covered by production) in these countries declined from 96 to 91 percent. If we exclude the three major developing cereal exporters (Argentina, Thailand and Viet Nam) net imports of the other developing countries increased from 51 million tonnes to 134 million tonnes and self-sufficiency fell from 93 to 88 percent.

Figure 3.7
Net cereal imports, developing countries: comparisons of old projections with actual outcomes

As noted, in the early period (the 1970s up to the mid-1980s) import growth was fuelled by the oil-exporting countries, particularly those of the Near East/North Africa region, and a few of the rapidly industrializing countries in East Asia (the Republic of Korea, Taiwan Province of China and Malaysia) and some in Latin America (Brazil, Mexico and Venezuela). In addition, the early period saw quantum jumps in the net imports of the former Soviet Union and Japan. In the subsequent years to the mid-1990s, net imports of oil exporters grew very little, reflecting, inter alia, the collapse of imports of Iraq, and the turnaround from net importer to net exporter status of the Syrian Arab Republic (all cereals) and Saudi Arabia (wheat). However, growth of net imports of the oil exporters resumed in the second half of the 1990s. The second major factor making for quasi stagnant world cereal trade in much of the 1990s has been the virtual disappearance of the transition economies as major net importers (and their transformation into small net exporters in some years), while the net imports of Japan stagnated, a development clearly associated with Japan's rapid growth of meat imports which substituted for imports of grains for feed (see Section 3.3).

However, other countries continued to expand net imports (the Republic of Korea, Taiwan Province of China, Malaysia and Brazil) and new ones were added to the list of growing net importers (the Philippines, Colombia, Peru and Chile). China must also be added to this list, as it became, albeit temporarily, a big importer in the mid-1990s (net imports of 20 million tonnes in 1995). However, such status of China did not last and the country turned into a small net exporter from 1997 onwards. Its net imports in the last quarter century are plotted in Figure 3.8. Taking smoothed three-year moving averages, its net trade status moved in the range from net imports of 14 million tonnes (early 1980s) to net exports of nearly 5 million tonnes in the three-year average 1997/99. This evidence does not point to China becoming a permanent large net importer in the future as some studies had indicated (with the knock-on effects on world market prices that would reduce the import capacity of the poor food-deficit countries) (Brown, 1995; for critique see Alexandratos, 1996, 1997). More important for world markets have been the large fluctuations in China's net trade status.

Figure 3.8
China's net trade of cereals

Another remarkable development has been the fact that South Asia has not moved in the direction of becoming the large importer that some commentators thought back in the 1960s it would have needed to become to feed its growing population. In the mid-1960s, the region was a net importer of 10 million tonnes of cereals. This represented a crucial 11 percent of its food consumption of cereals which was very low (146 kg per capita), given that consumption of all food provided only 2 000 kcal/person/day. Thirty-three years on, the region's population had doubled, per capita food consumption had increased to 163 kg and net imports had fallen to only 3.4 million tonnes. This was a result of the miracle of the green revolution but also, on the negative side, a result of the persistence of poverty that prevented demand from growing faster than it did. Finally, sub-Saharan Africa's net imports remained at very low levels, the result of both poverty (lack of effective demand) and import capacity limitations.

By and large, the traditional cereal exporters (North America, Australia, Argentina, Uruguay, Thailand and, in more recent years, also the EU and Viet Nam) coped quite well with spurts in import demand. As shown in Table 3.8, they export currently (average 1997/99) 176 million tonnes of cereals net annually. This is matched by the 135 million tonnes net imports of the developing countries other than Argentina, Uruguay, Thailand and Viet Nam, and 33 million tonnes of the net importing industrial countries (Japan, non-EU western Europe and Israel. A discrepancy of some 9 million tonnes at world level in the trade statistics remains unaccounted for.) This is about double their net exports of the mid-1970s and three times those of the mid-1960s. The data are given in Table 3.8. About a half of the total increment in these net exports in the period from the mid-1970s to 1997/99 was contributed by the EU. It is a very significant development for the world food system that this region turned from a net importer of 21 million tonnes in the mid-1970s to a net exporter. The transformation had been completed by the early 1980s. The EU's net exports reached a peak of 38 million tonnes in 1992 and it was exporting a net 24 million tonnes in 1997/99. In practice, the other traditional exporters have had to increase their net export surplus rather modestly, from 110 million tonnes in the mid-1970s to 151 million tonnes in 1997/99.

We do not have a counterfactual scenario to answer the question how the different variables of the world food system would have actually fared if the EU had not followed a policy of heavy support and protection of its agriculture (in particular prices, production, consumption and trade in the different countries and particularly the per person food availability of the poor countries and those that became heavy importers). This policy led to the region's import substitution and then subsidized exports.⁷ The resulting lower world market prices (compared with what they would have been otherwise) are thought to have adversely affected the food security of the developing countries because of the negative effects on the incentives to their producers. However, the structurally import-dependent countries have a clear interest that world market prices should be lower rather than higher. Disincentives to own producers could have been counteracted by appropriate policies, at least in principle, although admittedly a very difficult task in practice (how does one keep domestic prices higher than import prices when a good part of the consumers are in the low-income, food-insecure category?). In looking at the impacts on food security, we should also consider the possible positive effects on the consumption of the poor of the lower import prices and increased availability of food aid. In the end, such policies of the EU resulted in the emergence of an additional major source of cereal export surpluses to the world markets and diversified the sources from which the importing countries could provision themselves. This is a structural change which is probably here to stay, even under the more liberal trade policy reforms of recent years and perhaps further reforms to come (see below).

It is worth noting that (for very different reasons) we are currently witnessing a similar transformation of the group of the transition economies from large net importer to a small one, and, as projected in this study, to a sizeable net exporter in the longer-term future. This group had emerged as a major net importer up to the late-1980s, but the drastic decline in its demand for cereals (no doubt aided by rapidly rising meat imports in the former Soviet Union) has by now led to drastic declines in net imports and occasional net exports, no matter that production also declined drastically.

continued

¹ The terms«demand» and«consumption» are used interchangeably. Both terms comprise all forms of use, i.e. food, feed, seed and industrial use as well as losses and waste (other than household waste). Demand for as well as supply from stocks, are disregarded. Given the 30-year time horizon of the study, a separate treatment of stock changes would unnecessarily complicate the analysis.
² International dollar prices, averages for 1989/91, used for constructing the production index numbers in FAOSTAT.
³ China, Indonesia, Brazil, Mexico, Nigeria, Egypt, the Islamic Republic of Iran and Turkey.
⁴ Note that in China's projected 3 300 kcal/person/day in 2030 are included per capita annual meat consumption of 69 kg and 380 kg of cereals (for all uses). To have less deceleration than foreseen here in the growth of aggregate demand would require that these projected levels be even higher (see following commodity sections).
⁵ Countries with over 50 percent of their total merchandise exports coming from export of fuels in the 1980s (data from World Bank, 2001b). In this category belong the countries of the region Near East/North Africa (except Morocco, Tunisia, Afghanistan, Jordan, Lebanon, Turkey and Yemen) plus Angola, the Congo, Gabon, Nigeria, Bolivia, Ecuador, Mexico, Trinidad and Tobago, Venezuela and Indonesia.
⁶ Food consumption of coarse grains includes the quantities used to produce beverages (mainly beer) as well as other derived food products, e.g. corn syrup, widely used as a sweetener substitute for sugar.
⁷ In retrospect, it seems remarkable that this transformation of western Europe with the aid of heavy subsidies took place without significant trade conflict in its heyday. It is probably explained by the rapid expansion of the demand for cereal imports in that period (oil boom, transition economies becoming large importers), which provided sufficient market outlets for all. Conflict did appear with a vengeance after the mid-1980s when markets stopped expanding. It led to the Agreement on Agriculture under the Uruguay Round which imposed limits on the use of trade-distorting support and protection policies and export subsidies (see Chapter 9).