Tag Archives: food
OECD-FAO Agricultural Outlook 2013-2022: Higher Energy Inputs Mean Higher Agricultural Commodity Prices
June 11th, 2013 This post concerns a 120-page PDF report combining efforts from the OECD and the FAO, from which I’ve excerpted some key projections on food commodity prices and how they are expected to be impacted by rising input costs, especially crude oil and fertilizer costs. Note that I’ve zeroed in on these subjects by choice, as there are many other subjects covered in the report. I’ve highlighted a few sentences in red, but there are many additional nuggets in the paragraphs below, beginning with the report description and overview. OECD-FAO Agricultural Outlook 2013-2022: The nineteenth edition of the Agricultural Outlook, and the ninth prepared jointly with the Food and Agriculture Organization of the United Nations (FAO), provides projections to 2022 for major agricultural commodities, biofuels and fish. Notable in the 2013 report is the inclusion of cotton for the first time and a special feature on China. Higher costs and strong demand are expected to keep commodity prices well above historical averages with a high risk of price volatility given tight stocks, a changeable policy environment and increasing weather-related production risks. China is projected to maintain its self-sufficiency in certain key food commodities while increasing its trade and integration in world agricultural markets. Overview: Market tightening in recent years has been accompanied not only by an increase in the level of agricultural prices but also by a resurgence of commodity and food price volatility, reminiscent of the situation of the 1970s. In these circumstances, prolonged periods of low agricultural product prices driven by ever increasing productivity improvements in a context of low oil and energy prices seem now a feature of a bygone era. Instead, with energy prices high and rising and production growth declining across the board, strong demand for food, feed, fibre and industrial uses of agricultural products is leading to structurally higher prices and with significant upside price risks. The frequency of short term price surges and bouts of high volatility, accentuated in some cases by policy choices, have catapulted agriculture and its future prospects into renewed prominence. The factors external to agriculture that will shape global demand and supply for agricultural commodities include slowing population growth and changing population demographics, macroeconomic shocks and the speed of recovery to sustained global economic growth, the increasing co-movement of agriculture with energy and financial markets, and enhanced climatic uncertainties. Overall, the increasing scarcity of arable land, water constraints and rising input and energy costs in agriculture all serve to highlight the critical importance of achieving higher agricultural productivity in a more sustainable manner both at the farm level and upstream and downstream sectors of the food supply chain. As a result of rising energy, higher operational expenses, and rising input constraints of land and water necessary for expansion, global livestock inventories and livestock product supplies of meats and dairy products expand less rapidly over the projection period than in the past decade. Oil and energy prices are assumed to increase over the coming decade and to remain historically high reflecting steady global economic growth. By the end of the projection period in 2022, the price of crude oil is assumed to be around USD 145 per barrel, with an average growth over the period of 2.6% p.a. and slightly above that for consumer price inflation. High energy and oil prices will have effects on both demand and supply of agricultural products, through higher agricultural supply costs and increased demand for agricultural feedstocks used for biofuels production. With prices of fertilisers and other farm chemicals and machinery costs closely related to oil prices, any rise in oil prices is expected to quickly translate into increasing production costs. In addition, some inputs such as water are becoming increasing constrained in availability to agriculture and more costly to procure needed supplies. Higher energy and oil prices and rising costs of other inputs are factored into the commodity price projections through higher agricultural supply costs. Higher production and supply costs will reduce the profitability of capital and input intensive agriculture and this development can be expected to further slow the growth in production. At the same time it will likely encourage production growth in countries with less intensive farming practices due to higher net returns, such as pasture-based dairy and meat operations. An exception will be countries such as the United States and Brazil, in which exchange rate depreciation will help to offset some of these cost disadvantages to preserve the competitiveness of their agricultural production on world markets. Overall, the increasing scarcity of arable land, water constraints and rising input and energy costs in agriculture all serve to highlight the critical importance of achieving higher agricultural productivity in a more sustainable manner both at the farm level and upstream and downstream sectors of the food supply chain. This will be required to ensure the increasing food supplies needed by an expanding global population and to reduce upside price pressures over the longer term. Slower output growth is expected to be a feature of agricultural production in both the developed and developing countries’ agriculture sectors in the coming decade. Developed and the large emerging economies in particular are projected to enter a period of lower yield and production growth for most crops. This will also apply to livestock sectors of meats and dairy, but with the downward adjustments perhaps less pronounced in some cases than for crops. For livestock production, these developments reflect a combination of moderately rising feed costs, higher energy costs and a growing scarcity of inputs such as water and suitable land. However, the projected growth in global agricultural production will still be sufficient to outpace the increase in global population with output per person estimated at 0.5% p.a. Short term supply response to changing prices has been faster in the past in the developed countries with their highly capital and input intensive farming practices and capacity to adjust variable input usage rapidly. Nonetheless, agricultural production over the longer term is projected to continue to grow more rapidly in the developing countries and this will further increase their share of global agricultural output to 2022. China: Budgetary transfers for producers have been growing constantly since the end of the 1990s and are provided mostly through direct payments for grain producers, payments compensating increase in prices of agricultural inputs, in particular fertilisers and fuels, payments enhancing use of improved seeds and through subsidies for purchases of agricultural machinery. A positive feature of these transfers is that to an increasing extent they are provided through direct payments at a flat rate per unit of land which is effective in supporting farmers’ income and have limited influence on production and trade. Ethanol production is expected to increase 67% over the next ten years with biodiesel increasing even faster but from a smaller base. By 2022, biofuel production is projected to consume a significant amount of the total world production of sugar cane (28%), vegetable oils (15%) and coarse grains (12%). There is much more of interest in the report. Continue reading
Special UN Report: Biofuels Impact Food Prices and Availability
A new report from the High Level Panel of Experts on Food Security and Nutrition (HLPE) out of Rome, for the United Nations, implicates biofuels as a cause of high food prices. The June 2013 report, released today, is titled, “Biofuels and food security” (PDF) . This comprehensive document includes many interesting graphics and it attempts to cover all aspects of biofuels production. Every-so-often I catch a headline or tweet from biofuels interest groups or lobbyists who periodically promote the story that biofuels do not contribute to high food prices. This document clearly states that they do. While the ripple effect of the production and consumption of biofuels is far-reaching and can even account for some increased income for small-shareholder farmers, they are being promoted especially by corporate agricultural interests. Just this week DuPont received much feel-good publicity in promoting their food, agriculture and alternative energy “innovation center” in Johnston, Iowa, where their Pioneer Hi-Bred business unit is located. What was (at least part of) the hoopla really about? Making cellulosic ethanol out of corn stover. Taxpayers are on the hook for funding second generation biofuels, by the way, and cellulosic ethanol from corn stover qualifies. Follow the money. Currently, in the EU, biofuels policies are being rewritten, and the biofuels industry there, just like it does here, is lobbying hard against new proposals before the Parliament and Council to limit the use of food crops for biofuels. Here are a few chosen, key statements from the United Nation’s report: 1. In the last few years (since 2004) of short-term commodity food price increase, biofuels did play an important role. 2. All crops compete for the same land or water, labour, capital, inputs and investment and there are no current magic non-food crops that can ensure more harmonious biofuel production on marginal lands. Therefore, non-food/feedcrops should be assessed with the same rigour as food/feedcrops for their direct and indirect food security impacts. 3. In the case of the US, the impact on food security is essentially through the global transmission of prices. 4. (O)n the technological frontier for biofuels, few … countries have the resources to move forward to second-generation biofuels, given the often proprietary nature of this technology, the elevated capital investments required, and the high demands that second-generation technologies make on infrastructure, logistics and human capital. 5. (I)ndustrial advances can take place more quickly than agronomic advances needed to lower feedstock costs of both conventional and advanced biofuels. 6. Given the increasing price of fossil fuels and more efficient production, biofuels, or at least some of them, will be competitive even without public support. Increasingly it will be the market rather than policies that will drive the development of the sector. 7. Biofuel development has both global and local effects, positive and negative, short and long term. Many of these effects take the form of increased competition, for food, for land, for water. There are links between biofuels and food security. Therefore biofuel policies have to integrate food security as a major concern. Included was a good summary of how corn ethanol in the U.S. has impacted other commodities: The US has historically been both the world’s leading producer and exporter of corn, responsible for as much as 50 percent of world trade. The share of US corn production directed to ethanol increased in one decade from less than 10 percent to over 40 percent in the 2010/11 crop year, and remained at that high level in 2011/2012. Not only did the US exports and share in international corn trade decline as a result, but a significant part of the expansion of corn production in the US came at the expense of other major global crops, including soybeans. This was seen to have two effects: an increase in the price of corn and of its close substitutes like wheat on world markets, and a stimulation of food and feed production in other regions of the world, at the same time as major quantities of corn were subtracted from the feed market. This next chart shows us how policy of individual nations affects trade and consumption of biofuels. I also wanted to include the chart from the report with EROI (net energy return on investments) values from various feedstocks, but when I looked at their numbers, they looked quite “off” to me, so I am not including it here. Unfortunately, EROI numbers, while important, fluctuate wildly and are difficult to obtain and keep current, I suppose. The report lists the environmental sustainability concerns of biofuels, one of my own major concerns, below. 1. Lifecycle GHG emmisions. 2. Soil quality. 3. Harvest levels of wood resources. 4. Emissions of non-GHG air pollutants, including air toxics. 5. Water use and efficiency. 6. Water quality. 7. Biological diversity in the landscape. 8. Land use and land-use change related to bioenergy feedstock production. Certainly, here in the U.S., we have seen large negative impacts on all of the items on this list, making a project such as corn ethanol production insanely unsustainable and destructive to our environment in its current policy form. …………………………………………………………………….. NOTE: A special thanks to ActionAid for alerting me to this report. Continue reading
FAO: Wood, The Leading Source For Renewable Energy In Europe
July 18, 2013 • Source: FAO According to a report issued by FAO (Food and Agricultural Organization) of the United Nations, the overall wood energy accounts for 3.4% of the total primary energy supply and 38.9% of the renewable energy supply in 27 UNECE (United Nations Economic Commission for Europe) member countries in 2011, confirming its role as the leading source of renewable energy. The report says that between 2009 and 2011, the amount of wood used for energy purposes within this group of countries grew annually by 4.8%. The role of wood in total primary energy supply increased slightly from 4.3% to 5.4% while the share of wood energy among renewable energy sources increased from 46.1% to 48.7%. The main sources of wood energy were as follows: Co-products and residues from forest-based industries, including processed wood fuels with improved energy content such as wood pellets, briquettes and charcoal (also called indirect sources) contributed 57%. Woody biomass from forests and other wooded land (also known as direct sources) such as logging residues, thinnings and clearings, which represented 34.1% of consumption. Recovered waste wood (mainly waste from construction, but also packaging and old furniture), which accounted for 3.7% of the supply. However, the proportion of these sources varies among countries. For instance, Albania, Armenia, Bosnia and Herzegovina, France, Italy, Serbia and Slovenia rely heavily on direct supplies of wood fibres. But Austria, Canada, Finland, Ireland, Luxembourg, the Netherlands, Sweden and the United States rely mainly on wood supply from indirect sources. Canada, Finland, Norway, Sweden and the United States have large shares of energy generated from black liquor, reflecting the relative importance of the pulp and paper industries in the forest sector. Waste wood is reported as a significant source of wood energy in Germany, the Netherlands and the United Kingdom, where it is mainly consumed in power applications and waste to energy plants. In general, however, data on recovered wood are difficult to obtain and often not discernible from overall waste statistics. Some 48% of the wood energy supply is consumed by the industrial sector. The forest products industry typically consumes energy generated from the solid and liquid co-products of its manufacturing processes. Countries with major forest industries, such as Finland, Sweden and the United States, have therefore a higher level of industrial consumption. Residential use, mainly dependent on direct supplies of firewood, accounted for 34.4% of the wood energy supply. Albania, Armenia, Bosnia and Herzegovina, Romania, Serbia, Slovenia and Ukraine report this category as their primary use. But consumption of wood energy use by private households is often higher than official records indicate. The power and heat sector represents 15% of wood energy use. This sector is the largest consumer of wood energy in Denmark, the Netherlands and the United Kingdom. Continue reading
