globalizing food markets: food security and environmental effects in latin america insa niemeyer...
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Globalizing food markets: Food Security and
Environmental Effects in Latin America
Insa NiemeyerCEIGRAM, FMB Water Observatory,
May 12th 2011
Contents1. Statement of the Problem: General Trends
2. The Gains from Trade: a Theoretical Perspective
a. Effects on Food Security
b. Environmental Implications
3. Hypothesis
4. Methods: Data from 5 Latin American Countries
5. Preliminary Results
6. Next Steps
Statement of the Problem
ChallengeRapid
demographic changes
How can we feed the world in a
sustainble manner?
Impact on global food
demandUrbanization
Unevenly distributed natural
resources• land• water
Food supply
Climate change• effects on yields• higher year tor
year volatility
Bio fuel demand
Diatary changes
Statement of the Problem
virtual water trade = solution of sustainability prospects?
Altered product quality
standards
Current development on global food markets
Implications on water and land
resources
Blue water
Green water
Increasing global farm
trade
Globalising world:
• Trade liberalization by WTO
• Bilateral FTA
Supermarket buying power
global commodity chains
Impacts on food availability
(quantity) and access (prices)
LUC
Food trade = increasing or decreasing food security?
The Gains from Trade: A theoretical perspectivea) Effects of trade relevant to food security
The effects of international trade are shown as:
the difference between the domestic price of a good without trade and the world
price of a good,
the difference between total supply quantities without trade and world trade.
Theory of comparative advantages
Pa
Pw
Qdomestic
supply Qdomestic
demand
Qa
Price
supply
demand
welfare gain
Food importer
Pa
Pw
Qdomestic
demand Qdomestic
supply
Qa
Price
supply
demand
welfare gain
export volumeimport volume
Food exporter
Quantity Quantity
The Gains from Trade: A theoretical perspective a) Effects of trade relevant to food security
EXPORTERS: domestic producers win, domestic consumers lose
IMPORTERS: domestic producers lose, domestic consumers win
Trade raises the economic well-being of importing and exporting nations
Winners and losers of international trade:
Implications for food security
IMPORTER: reduced food prices > if food cheaper in real terms depends on
income change
Specialization on non-food industry > promotes economic
development > poverty reduction
EXPORTER: food prices higher > if food more expensive in real terms depends on
income change
Trade with food commodities > promotes economic development
> poverty reduction
The Gains from Trade: A theoretical perspective b) Environmental implications
Basic trade theory does not consider environmental effects:
IMPORTER: s = marginal cost curve > if no environmental externalities included
se = marginal cost curve + environmental externatlities
Production substituted by imports > reduces environmental costs
by area ABCD > additional welfare gain for importing nations!
EXPORTER: Welfare loss through environmental damage reduced by area ABCD
> still gain from trade?
Pa
Pw
Qdomestic
supply Pdomestic
demand
Qa
Price
S
B
Food importer
Pa
Pw
Qdomestic
demand Pdomestic
supply
Pa
Price
S
D
Food exporterSe
Se
D
D
C
A
A
C
B
D
The Gains from Trade: A theoretical perspective b) Environmental implications
Open trade may provoke negative and positive effects on the
environment+ PROS + - CONTRAS -
More efficient use of natural resources “Race to the bottom” > reduction of environmental standards in order to gain competitive advantage
Optimal global resource allocation Increased scale of production > increases pressure on the environment
Spread of environmentally friendly technologies
Increased value of farmland > uncompetitive small-scale farmers migrate to sensitive ecosystems
Environmental Kuznets Curve
Hypothesis
Environment
Globalising food markets adds environmental
pressure on exporting nations and releases
pressure on importing nations
Food security
Globalisation of food markets helps achieving
food security for both importing as well as
exporting nations
MethodsCountries: Argentina, Brazil, Chile, Mexico and Peru
Dynamics of trade (1996-2008, source: own elaboration, data from FAO (2011):
1. Most relevant crops > 80% imports, exports, production, area harvested
2. Trade intensity (in thousand tons and value)
3. Tradable, import-competing and non-tradable crops
Environmental effects in importing and exporting nations
1. Green, blue and grey water footprint over time
2. Yield increase vs. agricultural land expansion, rate of technology (number of tractors)
3. Specialization (water intensive/water extensive products)
Shannon-Wiener Index: Hs = magnitude of specialization in the production of certain crops
s = magnitude of different crop categories
pi = relative abundance of crop i
Food security in importing and exporting nations
1. Domestic food supply over time: (production + imports – exports)
2. Consumer prices indices / income indices
3. GINI-index
4. International food price volatility, prices transmission analysis
Access to food
Availability of food
Preliminary ResultsTrade dynamics
Total Latin American exports (left) and imports (right) of all crops (in thousand tons)
Trade dynamics of Soybean and maize exports in Brazil (in thousand tons)
Trade dynamis of Peruvian imports (left) and exports (right) (in thousand tons)
Source: own elaboration, data from FAO (2011)
Coffee: main importers constant: Europe, USA and Japan
Maize: bulk of exports:1996-2000 shift from MENA to LAC, 2000-
2008 shift to Europe
Soybeans: bulk of exports: 1996-2000 EU and Japan with a minor
role China, 2000-2008 EU and China main importers, Iran and
Thailand enter market
EXAMPLE: PERU
EXAMPLE: BRAZIL
Preliminary Results Environmental Effects
Argentine green, blue and grey virtual water imports (left) and exports (right) of all most relevant crops (in km 3)
Argentine green virtual water imports (left) and blue virtual water imports (right) (in km3)
Argentine green virtual water exports (left) and blue virtual water exports (right) (km3)
Source: own elaboration, data from Mekonnen, M.M. and Hoekstra, A.Y. (2010) The green, blue and grey water footprint of crops and derived crop products, Value of Water Research Report Series No.47, UNESCO-IHE, Delft, the Netherlands. http://www.waterfootprint.org/Reports/Report47-WaterFootprintCrops-Vol1.pdf
EXAMPLE:
ARGENTINA
Preliminary Results Environmental Effects
Argentine’s production quantity (left) (in thousand tons), change of relative share of production (middle) (in%) and LUC (right) (in thousand ha)
Source: own elaboration, data from FAO (2011)
Dynamics of area harvested of most important crops in Argentina (left), total area harvested (middle) (in thousand ha), and change of relative share of area harvested (right) (in%)
Trend to specialize in the
production of Soybeans in
Argentina
Slight increase of agricultural area
and decrease in forest area
Preliminary Results Food Security
Argentine’s per capita GDP over time (left) (in USD), change of producer price index (right) (in %, base 2008)
Source: own elaboration, data from FAO (2011), Instituto Nacional de Estadística y Censos http://www.indec.gov.ar/principal.asp?id_tema=748 (2011)
Dynamics of domestic supply quantity in Argentina (left), food supply quantity (middle) (in thousand tons) and calory supply (kcal/cap/day)
Preliminary Results Food Security
Argentine’s GINI-Index to measure income inequality
Source:World own elaboration, data from Bank (pink sheet) http://blogs.worldbank.org/prospects/world-bank-publishes-latest-commodity-prices-october-2010 (2011), World Bank Development Indicators: http://search.worldbank.org/data?qterm=GINI%20index&language=EN&format=html
Development of world commodity prices (annual averages in nominal USD)
Next steps
Development of a more precise theoretical framework
Theory of environmental impacts of trade
Theory of impacts of trade on food security
Empirical analysis with data from 5 focal countries
select more indicators suitable to answer the questions
Statistical/econometric tests with the the data
Thank you for your attention!
Email:[email protected]