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Changing roles of agriculture and food sector in Asia
Shenggen FanDirector General
International Food Policy Research Institute
Asian Development BankJune 28, 2011
Shenggen Fan, June 2011
Key messages
Food security in Asia is under stress
Agriculture needs to be adapted to dynamic changes and emerging trends
Policies and investments must be redesigned to promote agricultural growth for broader development outcome
Regional coordination is crucial to achieve goals efficiently and effectively
Shenggen Fan, June 2011
13 countries in Asia have serious/alarming levels of hunger (2010 GHI)
GHI components:• Proportion of undernourished• Prevalence of underweight in
children• Under-five mortality rate
Source: von Grebmer et al. 2010
Shenggen Fan, June 2011
Significant variability in hunger within countries
India State Hunger Index, 2008
State-level hunger in India
• 4 states: “serious”
• 12 states: “alarming”
• 1 state: “extremely alarming”
Source: IFPRI 2009
Shenggen Fan, June 2011
Food Insecurity: “Missing middle” in Asia
Share of Asia’s undernourished population, 2007
Source: World Bank 2010
Rest of Asia14%
India43%
Indonesia5%
Pakistan8%
Philippines 2%
Thailand2%
Vietnam2%
China24%
Large percentage of Asia’s undernourished are in middle income countries
Shenggen Fan, June 2011
Food security is under stress from a complex web of factors
Population growth and urbanization
Land and water constraints
Climate change
High and volatile food prices
Rising energy prices/biofuel expansion
Shenggen Fan, June 2011
Population and demographic trends
1970
1976
1982
1988
1994
2000
2006
2012
2018
2024
2030
2036
2042
2048
0
1000000
2000000
3000000
4000000
5000000
Rural
Urban
Nu
mb
er
of
pe
op
le (
bil
lio
n)
Urban pop-ulation pro-
jected to exceed ru-
ralin 2028
Developing South and East Asia’s rural and urban population
Larger and more urban population = increased demand for more and better food
Source: World Bank 2011
Shenggen Fan, June 2011
Global and domestic food price hikes and volatility
Source: Data from FAO 2011
Global hikes since June 2010• Maize: 105%• Wheat: 88%
0
200
400
600
800
Maize
Wheat
Rice
US
$/m
etric
ton
May-09 Nov-09 May-10 Nov-10 May-116000
8000
10000
Rice
Ru
pia
h/K
g
Retail prices in Indonesia, national average
GLOBAL DOMESTIC
May-09 Nov-09 May-10 Nov-10 May-114000
6000
8000
10000Rice (20% broken milled)
Do
ng
/Kg
Retail prices in Dong Thap, Vietnam
Shenggen Fan, June 2011
Land and water constraints are high
Source: Bai et al. 2007 (LADA, FAO/ISRIC)
Land degradation, 1981-2003
Areas of physical and economic water scarcity, 2007
Source: IWMI 2007
Shenggen Fan, June 2011
Climate change will affect agriculture and food security
Lower agricultural yields, production, and land availability due to• Higher temps. and changes in precipitation patterns
• Sea-level rise
• Extreme events: soil erosion, droughts, floods, landslides, etc.
Forest fires in Indonesia Salt water intrusion in Vietnam Floods in Pakistan
Higher food prices
Shenggen Fan, May 2011
ASIA
Crop Change in Production (%)
Rice
Irrigated -10.47
Rainfed 0.66
Maize
Irrigated -5.54
Rainfed 1.71
Wheat
Irrigated -13.50
Rainfed -1.91
Soybeans
Irrigated -6.73
Rainfed 8.58
Climate change impact: Crop yields, 2050
Source: IFPRI 2011.
Shenggen Fan, May 2011
Climate change impact: Crop yields, 2050
Source: IFPRI 2011
Variation in impact across crops, countries, and regions
Rainfed Wheat Rainfed Rice
Shenggen Fan, May 2011
Climate change impact: Agric. land
With 1 meter rise
(‘000 ha)
With 3 meter rise
(‘000 ha)
Myanmar 295 1,214
Thailand 199 796
Cambodia 35 118
Vietnam 2,513 4,281
Source: Nelson 2010
30 percent of Vietnam’s rice growing area
Shenggen Fan, June 2011
Strong link between oil and food prices influences food security
Rising oil prices cause food prices to increase, rather than the reverse (Heady and Fan 2010)
Rising oil prices make biofuels more profitable, rather than agricultural production more expensive (Abbott, Hurt, and Tyner 2008)
Source: IMF 2011
Note: Oil = Average crude oil price of U.K. Brent, Dubai, and West Texas Intermediate
Apr-0
5
Apr-0
6
Apr-0
7
Apr-0
8
Apr-0
9
Apr-1
0
Apr-1
10
50
100
150
200
250Food Oil
2005
= 1
00
Rise in oil prices particularly severe for Asian countries as many are net oil importers
Shenggen Fan, June 2011
Increased demand for biofuel feedstock crops Increased competition for resources
Biofuel expansion
Increased biofuel production due to rising oil costs, etc.
40
80
120
160
World Ethanol ProductionBn L
Increased global food prices Biofuels account for 30% of
increase in weighted average grain prices, 2000-2007 (Rosegrant 2008)
Source: OECD-FAO 2011
Calorie availability changes in 2020 compared to baseline (%)
Source: IFPRI IMPACT 2008
Shenggen Fan, May 2011
Changing Role of Agriculture
Shenggen Fan, June 2011
Agricultural GDP declining but employment remains important
1960
1970
1980
1990
2000
2009
0
25
50 East Asia & Pacific (developing only)
South Asia
Agricultural GDP as share of total GDP, %
Source: FAO 2011
Number of economically active people in developing South and East Asia,
millions
About 70% of poor in Asia live in rural areas and depend on agriculture for their livelihood (IFAD 2010)
0
1000000
2000000 Non-Agriculture
Agriculture
Source: World Bank 2011
Shenggen Fan, June 2011
Smallholder agriculture will continue
Source: Hazell 2011; Headey, Bezemer and Hazell 2010
Estimated 87% of world’s 500 million small farms (<2 ha) are in Asia (Thapa and Gaiha 2011)
China and India home to 193 mil. and 93 mil. small farms, respectively
Declining trends in farm size:
Census year Avg. Farm Size (Ha)
Number of Small Farms
(million)India 1971 2.3 49
2005/2006 1.2 108
Nepal 1992 1 2.42002 0.8 3.1
Pakistan 1971/73 5.3 1.12000 3.1 3.8
Shenggen Fan, June 2011
Growth in Crop Yields Declining
0
10,000
20,000
30,000
40,000
50,000 Maize
Rice, paddy
Wheat
Crop yield, hg/ha (millions) Growth in crop yield, %
Recent yield growth of staple crops in Asia has either modestly increased or been on the decline
Source: FAO 2011
1960s 1970s 1980s 1990s 2000s0
2
4
6Maize
Rice, paddy
Wheat
Shenggen Fan, June 2011
Consumption and production is more diversified
Vegetables
Fruit
Meat
Milk
Eggs
Staple Crops
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5Source: FAO 2011
Veg-etables
Fruit
Meat
Milk
Eggs
Staple crops
-1 0 1 2 3 4 5 6
Production
Annual Growth, 1990-2009 (%)
Consumption
Annual Growth, 1990-2007 (%)
Shenggen Fan, June 2011
Large Gender Equality in Agriculture
• Women make up large share of ag. workforce but have less access to resources and services
• Closing gender gap in agriculture (FAO 2011): Increases ag. production by 2.5–4% Reduces number of undernourished people
by 12–17%
Shenggen Fan, June 2011
Conflict and Agriculture
• Conflicts are directly/indirectly related to agriculture:
Poverty and underemployment of young menInequalities in land, water, and other natural
resources
• Recent uprisings in Arab region driven partially by food insecurity and high unemployment (Breisinger et al. 2011)
Shenggen Fan, June 2011
Actions needed to enhance Asia’s food security
Short term
1 Invest in productive social safety nets
2 Support transparent, fair, and open trade
3 Set up regional strategic grain reserves
4 Prevent biofuel expansion
Long term
5 Promote smallholder productivity
Shenggen Fan, June 2011
Better-targeted and more productive social protection policies need to:• Secure basic livelihoods• Protect poor people from risk and vulnerability
Bangladesh Vulnerable Group Development Program
Combines income-generating and food security interventions
Increased per capita food consumption by 45-66 kcal per taka transfer (Ahmed et al. 2009)
1. Invest in productive social safety nets
Programs depend on needs, capacities, and resources
Shenggen Fan, June 2011
2. Support transparent, fair, and open trade
Eliminate harmful trade restrictions and prevent new ones to:• increase market efficiency• reduce price fluctuations
Potential costs of failed Doha Round could be high (Bouet and Laborde 2009): 11.5% loss of developing country exports US$353 billion loss in world welfare
Quick completion of the Doha Round is crucial
Shenggen Fan, June 2011
3. Establish regional strategic grain reserves
Create regional emergency reserve with grain donations from large food exporters• Located in these countries, and also in poor food
importing countries, e.g. Bangladesh
Some regional initiatives are emerging e.g. • Asean+3 Emergency Rice Reserve• SADC Regional Food Reserve Facility
Can address food crises, but need to • lower operating costs • overcome moral hazard and other challenges
Shenggen Fan, June 2011
4. Prevent biofuel expansion
Halt expansion of biofuels from food crops to end competition between biofuel and food crop production• Develop biofuel technologies that
Convert crop residue into biofuels Enable use of land not suitable for food crops
• Curtail biofuel subsidies
Flexible mandates and biofuel call options• Divert agricultural products from biofuels to human
consumption during food crises
Shenggen Fan, June 2011
5. Improve smallholder productivity
Invest in smallholder-friendly ag. R&D and infrastructure• Access to technology, high-quality seeds, and fertilizer• Rural infrastructure
Link smallholders to markets, esp. high-value• Increase vertical and horizontal coordination• Strengthen private sector participation
Reform laws and reduce corruption Promote public-private partnerships
» Indian Rural Business Hubs → public-private-panchayat (village council) partnership
Shenggen Fan, June 2011
5. Improve smallholder productivity Link smallholder production w/ health and
nutrition outcomes• Develop more nutritious varieties of staple food crops• Improve safety regulations and postharvest handling
Use agriculture to resolve conflicts: e.g. Pakistan, Afghanistan and Addressing Gender Gaps
Invest in climate change mitigation & adaptation• Win-win-win: agricultural investments should provide
mitigation, adaptation, and productivity benefits for smallholders
Shenggen Fan, June 2011
Establish regional framework for knowledge sharing
Current cooperation within Asia is weak• Need appropriate mechanisms based on countries’
capacities• Other regions have surpassed Asia
RESAKSS (Regional Strategic Analysis And Knowledge Support System)
Africa-wide network established to provide analysis, data, and tools
Promotes evidence-based decisionmaking