Impacts of the Global Economic and Financial Crisis on Food Security

William H. MeyersProfessor of Agricultural Economics

and Co-Director, FAPRIand Co-Director, FAPRIUniversity of Missouri

Social Impact of the Economic Crisis in Eastern Europe, Central Asia and Turkey

Almaty, Kazakhstan7-8 December 2009

Comparison of real GDP growth rates in

selected regions

Outline

� Food price surge and (partial) retreat� Where from and where to?

� Macroeconomic crisis and (slow) recovery

� How is food security jeopardized?

� Challenges and opportunities� Challenges and opportunities

� Policy priorities� Short term

� Long term

“Where from” story

� Gradual declining in stocks set the stage

� Declining real prices, aided by OECD subsidies

� Slowing production growth

� Area declining� Area declining

� Yield growth slowing

� Consumption growth also slowing but not as much

� Then the perfect storm

World Crop Productivity and Consumption

by decade

1960-1970 1970-1980 1980-1990 1990-00 2000-07

Grains

Yields 2.7 1.9 2.1 1.23 1.56

Area 0.5 0.9 -0.5 -0.41 0.47

Production 3.3 2.8 1.6 0.82 2.03Production 3.3 2.8 1.6 0.82 2.03

Consumption 3.3 2.6 1.7 0.94 1.70

Grains and Oilseeds

Area 1.6 1.3 -0.03 0.18 0.79

Production 4.0 3.0 2.0 1.29 2.32

Consumption 4.1 2.9 2.0 1.31 2.05

Source: USDA PSD

Exponential Growth Rates for YieldsPrevious 10 years

Declining assistance to agriculture

Why did prices rise, then decline?Can it ALL happen again?

Why prices rose

� Reduced grain production

in Europe, Australia

� Economic growth in Asia

Why prices fell

� Sharp increase in global

grain production in 2008

� Financial crisis and world � Economic growth in Asia

and elsewhere

� Weaker dollar

� Higher petroleum prices

� Rapid biofuel expansion

� Policy interventions

� Speculation rose

� Financial crisis and world

economic slowdown

� Stronger dollar

� Lower petroleum prices

� Slower biofuel growth

� Many interventions stop

� Speculation declined

“Where to” story

� Good weather and yields in 08/09, but costs and poor weather dampen 09/10 growth, except oilseeds

� Price surge has abated, BUT not everywhere

� Trade “safeguard” interventions mostly gone � Trade “safeguard” interventions mostly gone

� Biofuel growth slowed, but policies remain

� Strong influence of petroleum price continues

Bread prices in Dushanbe and Bishkek, June

2009

Unknowns and uncertainties

� Major uncertainties in food market

� Oil price

� US dollar

� The global financial crisis and � The global financial crisis and impacts on demand growth

� trade financing

� Weather

Comparison of real GDP growth rates in this

region, 2009 and 2010

Comparison of real GDP growth rates in

selected regions, 2009

Comparison of real GDP growth rates in

selected regions, 2010

Value of exports and imports for net fuel

exporters and net fuel importers

Remittances as a share of GDP in 2007

How is food security jeopardized?

� Reduction in the quantity and/or quality of food purchases

� High food pricesHigh food prices

� Loss of employment or reduction of wages

and income

� Market disruption or policy reaction that

impairs availability

How is food security jeopardized?

� Reduction in food production

� High prices of feed and other inputs

� Lack of credit access

� Reduction in the quantity and/or quality of Reduction in the quantity and/or quality of food aid

� High food prices

� Decline of government/international donor

financial resources

� Macro instability, market disruption or policy

reaction that impairs availability

Growth of net exports from the region

A more uncertain future

1. Road to economic recovery?

2. Timing and size of oil price volatility?

3. Will biofuel policies change?

4. Will other policies be unstable?

Will DDA be completed in near term?5. Will DDA be completed in near term?

6. Climate change and policy impacts?

7. Wider range of possible outcomes

8. Complicated decision making and planning

9. Larger impacts on low income consumers

Challenge and Opportunity

1. Challenge - how to provide safety net measures

for the most vulnerable populations

2. Opportunity - higher prices can increase

availability and access

3. National and international policy actions 3. National and international policy actions

needed

� Short run

� Long run

Policy priorities

� Short run

� Twin track approach

� Expand food assistance and early warning and rapid

response capacities

� Target food production programs with inputs, credit � Target food production programs with inputs, credit

and extension education packages

� Accelerate local adaptation and dispersion of

currently existing technology

� Complete the Doha Round of trade negotiations

and Restore trust in the international trading

system with improved multilateral or plurilateral

rules and agreements

Policy priorities

� Long run (but start yesterday)

� Investment (not land grabs) in agric. development AND R&D for production and post harvest

� Improve market functioning to facilitate price transmission and integration with global markets

Risk management tools for farmers� Risk management tools for farmers

� Enhance rural development and rural infrastructure investments

� Invest in social protection or safety net measures to protect vulnerable populations

Thank you!

CONTACT INFORMATION:EMAIL: MEYERSW@MISSOURI.EDUWEB: WWW.FAPRI.MISSOURI.EDU