Κosτas κaranτininis [email protected] food crises food price volatility food...
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κosτas κaranτ[email protected]
Food crisesFood price volatility
Food security
kostas karantininisuniversity of copenhagen, denmark
&swedish university
of agricultural sciences slu, sweden
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Unequal loss
60%:•Bangladesh•China•DRCongo,•Ethiopia•India•Indonesia•Pakistanover 40%•China•India
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Cargill’s profits according to Cargill• “Cargill posted a third consecutive strong quarter in a year in which the dimensions of change in global agriculture are striking,”
said Greg Page, Cargill chairman and chief executive officer. “Demand for food in developing economies and for energy worldwide is boosting demand for agricultural goods, at the same time that investment monies have streamed into commodity markets. Relative to demand, world grain stocks today are at their lowest levels in 35 years. Prices are setting new
highs and markets are extraordinarily volatile. In this environment, Cargill’s team has done an exceptional job measuring and assessing price risk, and managing the large volume of grains, oilseeds and other commodities moving through our supply chains for customers globally.”
• Page said Cargill’s global assets, market insight, diversification and risk management skills have served the company well. “Our business model gives us the wherewithal to remain customer focused in a very challenging operating environment.”
• Cargill, News, 3rd Q, 2008
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a malthusian nightmare ?
• By 2050 the world’s population is expected to have reached about 9 billion people and the
• demand for food to have increased by between 70 and 100% (FAO)
• How?
• Increase land under the plow• Increase productivity
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Table 1—Examples of media reports on overseas land investments to secure food supplies, 2006–09Grabbing more landCountry investor
Country target
Plot size (hectares)
Current status
Source
Bahrain Philippines 10,000 Deal signed Bahrain News Agency, February 2009
China (with private entities)
Philippines 1,240,000 Deal blocked The Inquirer, January 2009
Jordan Sudan 25,000 Deal signed Jordan Times, November 2008
Libya Ukraine 250,000 Deal signed The Guardian, November 2008
Qatar Kenya 40,000 Deal signed Daily Nation, January 2009
Saudi Arabia
Tanzania 500,000 Requested Reuters Africa, April 2009
S Korea (with private entities)
Sudan 690,000 Deal signed Korea Times, 2008/09
United Arab Emirates (with private entities)
Pakistan 324,000 Under implementation
The Economist, May 2008
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Technology and the small-holder
• 450m smallholders in developing countries• Productivity per hour:
• Kenya: 1kg grain/hour• USA: 1000kg/hour
• Why don’t they adopt new technologies? (Suri, Econometrica, 2011)
• adjust for farmer heterogeneity• They adopt hybrids when they have net
benefits – not just higher prices• costs, infrastructure, etc
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Starved for science
Paalberg (2008): Let them plant GMOs1) Underinvestment in agricultural science in
Sub Saharan Africa;2) Many African policy makers and NGOs have
not supported science based agricultural development;
3) There has been an excessive regulation of bio-technology in almost all African countries;
4) This overregulation discourages donors from helping scientists obtain drought resistant cultivars for Africa.
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Mitigating price spikes
• International commodity agreements to price bands (ceiling and floor)
• Virtual buffer stock:• anticipated by traders• very expensive
• Open trade• experience 2008/09: trade is not open
• National buffer stocks• not prices• guarantee enough calorie intake to all at below salary• stock size: infrastructure, food security, capital cost