Tough choices: facing the challenge of food scarcity

The signs of a new era in the world food economy are unmistakable. The old formula that was so spectacularly successful in expanding food production for nearly a half-century -- combining more and more fertilizer with higher-yielding varieties -- no longer is working very well, and there is no new formula to take its place. Recent declines in food produced from oceanic fisheries and croplands give some sense of what the future holds.

The issue is not whether grain production can be expanded. but whether it can be accomplished fast enough to keep up with the record growth in demand. There are many opportunities for increasing output, including substantial ones for productively using more fertilizer in countries such as India and Argentina. Nevertheless, restoring rapid, sustained growth in the grain harvest to the nearly three percent a year that prevailed from 1950 to 1990 will be difficult indeed.

Meanwhile, farmers face the uncertainties of climate change. If heat waves become progressively more intense. as climate models suggest, meeting future food needs could become even more difficult. Crop-withering heat waves of the sort experienced in 1995 in major food-producing regions -- such as the U.S. Corn Belt, the European Union. Ukraine, Russia. and Argentina -- could become routine. No one knows what the future will bring, but the rise in the Earth's temperature since 1979 suggests that the failure to check the increase in atmospheric levels of greenhouse gases could bring temperatures far higher than any since agriculture began.

On the demand side, the growth prospects are much more bullish. Not only is the world continuing to add nearly 90,000,000 people a year, but the unprecedented rise in incomes in Asia, where more than half of humanity lives, is fueling a record growth in demand. Just satisfying the rise in world population requires 28,000,000 additional tons of grain per year, or 78,000 tons per day.

As the growth in the oceanic fish catch halted and grain production slowed, the 1990s became the first decade in which both food sources were declining. The principal manifestations of this imbalance were the fall in world carryover stocks of grain and the return to use of idled cropland under commodity control programs.

During the first half of the decade, the production shortfall was offset by reducing stocks, but with carryover stocks in 1996 at 48 days of consumption -- little more than pipeline supplies -- the opportunity for further reductions is limited. Stock depletion may mark the transition from the old era of surpluses to the new one of scarcity. Future excesses of demand over supply can be eliminated only by rising prices, which is exactly what happened in late 1995 and 1996. The rise in grain prices that started in China in 1994 soon spread to the rest of the world, helping to double wheat and corn prices by the spring of 1996. Although these will decline somewhat in the immediate future, higher food prices are likely to become part of the economic landscape over the longer term.

The widening gap between the demand and the supply of grain can be seen in nearly all the more populous developing countries, In 1994, Worldwatch Institute projected the grain supply/demand balance to 2030 for 11 of the largest developing countries, home to about two-thirds of humanity. If their anticipated growth in population materializes by then, the need for imports everywhere except Brazil would increase far beyond the current level, even if there is no improvement in diets.

China, for example, which essentially was self-sufficient in 1990, would have to import some 215,000,000 tons of grain in 2030. India would need 45,000,000 tons of grain from abroad, not nearly as much as China because India is a semi-vegetarian society, requiring less grain for feed. These two and nine other developing countries -- Bangladesh, Brazil, Egypt, Ethiopia and Eritrea, Indonesia, Iran, Mexico, Nigeria, and Pakistan -- some of whose populations are projected to more than triple, would see their combined need for imported grain climb from 38,000,000 tons in 1990 to more than 400,000,000 tons in 2030.

ECOLOGY

All these nations face a scarcity of cropland. Many, including the most populous countries -- China, India, and Indonesia -- will lose this land as they industrialize. In some, future gains in food production will be constrained severely by water scarcity. Among them are Iran, Pakistan, and Mexico. For others, the sheer magnitude of projected population growth will overwhelm their agricultural systems. Nigeria, with a population that is projected to triple, is in this category.

Brazil is one of the countries with the largest potential for expanding production. Even with a hefty increase in grain output, though, it still will find itself scrambling to remain self-sufficient. Indeed, in recent years, Brazil has been losing the battle to be self-sufficient in grain, becoming the largest importer in the Western Hemisphere. Beyond this, it is projected to add nearly 100,000,000 people by 2030, reaching a total of 252,000,000, roughly the same size as the U.S. today. Feeding another 100,000,000 people while its population simultaneously moves up the food chain, consuming more livestock products, probably will take all the agricultural resources Brazil can mobilize.

Among regions, the burgeoning deficit in Asia stands out. In 1950, Asia's net grain imports totaled 6,000,000 tons, far less than the 22,000,000 tons imported by Europe, the leading grain-deficit region at the time. By 1995, however, Asia's net imports had climbed over 90,000,000 tons, making it far and away the dominant importing region. By 2030, its import needs easily could exceed 300,000,000 tons. This is not surprising since the region contains more than half the world's people, is responsible for 60% of population increases, and has the fastest economic growth of any region in history.

On the other side of the global import/ export equation, North American grain exports between 1950 and 1995 climbed from 23,000,000 to 116,000,000 tons, with the U.S. accounting for 94,000,000 and Canada 22,000,000. There is reason to doubt whether the U.S. (projected to add 82,000,000 people), Canada, smaller exporters -- such as Australia, Argentina, South Africa, and Thailand -- and some potential new exporters in Eastern Europe, all small ones, can come close to matching the projected need for Asia, Africa, and the other importing regions at traditional prices by 2030. In contrast to projections by the United Nations Food and Agriculture Organization and the World Bank of declining grain prices, this analysis suggests that substantial price rises will be needed to balance demand and supply.

In Europe, the growth in population and the consumption of livestock products has come to a halt. With grain use stable or declining since 1980 and with production outpacing it since the early 1980s, Europe has developed an exportable surplus of grain rivaling that of Canada, the world's second ranking grain exporter after the U.S. It is the only geographic region where the demand for grain has leveled off, and has done so within the carrying capacity of the continent's land and water resources.

Of course, the demands for grain and its supply always balance in the marketplace, but at what cost? Moreover, what will be the economic and social effects of moving to that higher price level? Between early 1994 and mid 1996, the export price of wheat from the U.S. climbed from just over $4 a bushel to more than $7. No one knows for sure what the price is likely to be over the longer term, but all indications are that it is going to be much higher than what prevailed before this climb.

A new era

The world appears to be moving into a new era, one in which the problems governments face will be vastly different from those that preoccupy them today. Given the prospect of rising food prices and the wide disparities in income among countries, price rises that are merely inconvenient for some may become life-threatening for others.

If the prospective food price increases materialize, the terms of trade among geographic regions will be altered dramatically. Among the continents, the winners will be North America, Europe, and Australia, the regions with grain surpluses. The big winner in immediate economic terms will be North America, since the U.S. accounts for nearly half of world grain exports, and Canada produces another 10%. With population essentially stable throughout Europe and with limited prospects for further movement up the food chain, future growth in grain output in this region will convert largely into exportable surpluses. In addition to Western Europe, countries such as Poland, Romania, and Ukraine, where populations are stable, may have exportable surpluses of grain.

Asia, with an unprecedented rate of industrialization and dense population, will be the loser in the sense not only that its dependence on imported grain is rising at such a spectacular rate, but because the price mill be rising. Higher prices will mean steadily higher outlays for imported grain for both food and feed. Asia is becoming industrially strong, but agriculturally vulnerable.

Africa, of course, will be the big loser. Its demand for grain, driven by the fastest population growth of any continent in history, is projected to continue to outstrip the growth in production. This will leave the region heavily dependent on imports that may not be affordable.

In rural/urban terms, the countryside will be the winner; the cities, the losers. Indeed, emerging food scarcity may reverse the terms of trade between the countryside and the city. Land and water values seem certain to escalate. Since the beginning of the Industrial Revolution, cities -- with their control of capital and technology -- have had an advantage. In a world where capital, technology, and labor are relatively abundant and where land and water are scarce, a reversal in the terms of trade seems inevitable.

The new era brings with it a new political dynamic. In the past, as long as the pie was expanding rapidly, political leaders could urge patience, arguing that everyone's lot would improve soon. When the pie stops expanding -- not because of a temporary lag of technology or planning, but because collective consumption finally has run into some of the Earth's natural limits -- the political dynamic changes. How the pie is sliced takes on a new prominence.

The lagging production and falling grain stocks of recent years suggest that the politics of surplus, which dominated the last half-century, will be replaced by a politics of scarcity. Instead of a few exporting countries competing for markets that never were quite large enough, about 120 importing nations will compete for supplies that never seem adequate. Grain export subsidies may be replaced by export taxes or even outright embargoes to keep food prices at home down. Conflict among countries over access to fisheries will become commonplace. Struggles over the control of water will intensify among national governments, those in the upper and lower reaches of river watersheds, and cities and farmers.

Governments of grain-exporting countries, sensitive to the speed with which the vagaries of a global market can generate food scarcities and inflation at home, will be tempted to impose export embargoes. In 1995, Vietnam imposed a partial embargo on rice. Because grain prices in neighboring China had risen well above the world market level, large amounts of rice from Vietnam were crossing the border. With prices climbing by up to 70% in northern Vietnam, making it difficult to control inflation, the government restricted exports while waiting for the new harvest. Since Vietnam is the third largest rice exporter (after Thailand and the U.S.), this raised the world rice price. Meanwhile, some lower-income inland provinces in China have banned grain shipments to the more prosperous coastal provinces in an effort to stem price rises.

As world grain prices escalated in the late summer and fall of 1995, leaders within Europe became concerned that this would translate into higher food prices. In December, 1995, the European Union imposed a wheat export tax of $32 a ton in an effort to halt the increase in bread prices. In January, 1996, ;i similar step was taken for barley, the principal feed grain, to control prices of livestock products. In effect, a two-tiered grain price system was created -- a lower price within Europe and a higher one outside it, where the world's low-income populations live. With the stroke of a pen, the European Union's agricultural policy effectively nullified the positive effects of its international food assistance programs.

The prospect of chronic world food scarcity raises new questions about the morality of restricting or banning food exports. The international community once wrestled with the question of whether there are any conditions under which exporting countries are justified in subsidizing exports. Now it must decide whether there are any circumstances under which a government is justified in restricting exports in order to quell domestic food price rises, even though this will lead to more rapid price rises in the rest of the world. The agricultural part of the General Agreement on Tariffs and Trade negotiations focused on ensuring the exporting countries' access to markets. The challenge is to devise a set of trade institutions and rules that will ensure importing countries' access to supplies.

In the late 1990s, the number of grain-importing countries will dwarf that of exporters. Just a handful of countries consistently export grain on a meaningful scale -- Argentina, Australia, Canada, France, Thailand, and the U.S. Current world grain exports add up to roughly 200,000,000 tons per year, of which the U.S. accounts for close to half, controlling a larger share of world grain exports than the Saudis do of oil. This puts great power in the hands of one government, raising the possibility that food could be used for political purposes.

Seafood shortages

The politics of scarcity is not confined to grain alone. Now that the demand for seafood exceeds the sustainable yield of fisheries, those managing this resource must determine what the sustainable yield of a fishery is, negotiate the distribution of that catch among competing interests, and enforce adherence to any quotas established. Where fisheries are shared among countries, as is often the case, the process becomes infinitely more complex.

With seafood, the politics of scarcity can be seen in the increasingly frequent clashes over access to fisheries. These include cod wars between Norwegian and Icelandic ships; between Canada and Spain over turbot off Canada's eastern coast; between China and the Marshall Islands in Micronesia; between Argentina and Taiwan over Falkland Island fisheries; and between Indonesia and the Philippines in the Celebes. The pervasiveness of these conflicts is evident in a Greenpeace statement released at the UN-sponsored conference on regulating fishing on the high seas in July, 1995: "Tuna wars in the northeast Atlantic, crab wars in the North Pacific, squid wars in the southwest Atlantic, salmon wars in the North Pacific, and pollack wars in the Sea of Okhotsk are all warning signs that fish stocks are in serious trouble."

Conflicts over water are becoming commonplace. India and Bangladesh can not agree on the allocation of Ganges River waters. The U.S. and Mexico compete for the waters of the Rio Grande. Egypt and the Sudan, which earlier had agreed to distribute the waters of the Nile between them, are engaged in new negotiations that include Ethiopia and other countries in the upper Nile watershed. Israel, Jordan, and Palestinian representatives are trying to implement agreements allocating water from the Jordan River and other shared water resources.

To the north, Turkey is pre-empting the waters of both the Tigris and the Euphrates rivers at the expense of downstream countries, Syria and Iraq. The central Asian nations that use water from the Amu Dar'ya and Syr Dar'ya must decide whether they want to save the Aral Sea and, if so, how to allocate the water of the rivers in such a way that enough is left to sustain the Aral. As the value of land and water climbs in the years ahead, as seems likely, the competition over these finite resources is certain to intensify.

Increasingly, the constraints the world is facing are environmental, not economic. Historically, the size of the fish catch largely was determined by the investment in trawlers, but today, the sustainable yield of fisheries is the controlling factor. Until recently, the amount of water pumped was determined by the number of wells drilled, but now it is the sustainable yield of the aquifer. More and more frequently, it is not the amount of fertilizer a farmer can afford, but the amount of nutrients plants can absorb that dictates grain production levels.

At a time of growing scarcity and high grain prices, the need for international food assistance is rising, but many aid donor countries, including the U.S., have slashed food assistance budgets during the 1990s. These cuts, combined with higher procurement prices for grain, reduced food aid from its historical high of 15,200,000 tons of grain in Fiscal Year 1993 to 7,600,000 in 1996. When the problem facing exporting countries was surpluses, it was easy to justify generous budgets for food assistance because they simultaneously reduced surpluses and alleviated hunger. When the allocations of grain for food assistance begin to compete with domestic consumers and drive prices up, as seems likely, it will be far more difficult to be unselfish.

For the 120 or so countries that import grain, the years ahead are fraught with risk. Apart from the over-all scarcity and higher prices that will result if import needs continue to outpace export supplies, higher prices induce export restrictions by the exporting countries, which exacerbates the scarcity. With the recent imposition of restrictions on rice exports by Vietnam and wheat and feed grain by the European Union, there is no reason to assume that other restrictions will not follow.

In a world of scarcity, the risk of export restrictions, including outright embargoes, is all too real. What if the U.S. were to follow Europe and restrict exports of grain, or even ban them, as it did with soybeans in 1973? How much would food prices have to rise in the U.S. before consumers would begin to press for export limits or an export embargo? At what point on the food price index would rising prices lead American consumers to resist sharing U.S. grain with China's increasingly affluent 1,200,000,000 consumers?

Beyond this, the importing nations are at risk because of heavy dependence on a single geographic region and climate change. For 120 countries to be dependent for the bulk of their grain imports on two nations that are affected by the same climate cycle further heightens the risk of import dependence. If the U.S. experiences severe heat and drought in the wheat-growing Great Plains, Canada often does as well.

With the expansion of irrigation in both China and India over the last few decades, harvest levels fluctuate relatively little from year to year. hi the U.S., however, which has a largely rain-fed grain culture, year-to-year swings easily can increase or decrease the grain harvest by one-fifth, making it the principal source of variations in world output. Over the last decade, the U.S. corn crop, which normally accounts for one-eighth of the world grain harvest, has ranged from a low of 125,000,000 tons in 1988 to a high of 257,000,000 in 1994. A year-to-year drop of one-third in the American corn harvest is not unusual. Annual changes in the U.S. grain harvest can increase or decrease world output by as much as five percent.

For the planet as a whole, the 1995 grain harvest dropped some 60,000,000 tons below the initial estimate, largely because of crop-withering heat waves in the temperate countries of the Northern Hemisphere during the summer growing season. With atmospheric carbon dioxide levels rising steadily, forecasting longer-term climate patterns is becoming more difficult.

The only safe policy for grain-importing countries is to avoid becoming heavily dependent on imports. The volatility of national politics in exporting countries and the growing uncertainty about future climate patterns combine to argue for a strenuous effort to try to stabilize population within a nation's food carrying capacity. For low-income, grain-importing countries, the threat of higher prices is not something to be taken lightly.

Grain export restrictions over the last two years in Vietnam and the European Union are a reminder that, in times of scarcity, access to supplies can not be taken for granted. The record grain prices set in the spring of 1996 serve as a warning that affluent industrial societies will not hesitate to bid grain prices up to at least twice their historical level to satisfy their needs for food and feed, regardless of how it affects the rest of the world.

The politics of surplus that dominated the last half-century in agricultural trade relations was troublesome and a thorn in the relationship among exporting countries as they tried to outdo each other with export subsidies, both direct and indirect. The politics of scarcity is more than troublesome, though. It is dangerous. Export embargoes or restrictions at a time of acute scarcity can threaten lives and topple governments. In addition to the sensitive issue of international access to grain supplies, access to fisheries and water resources will escalate the politics of scarcity further, putting. new pressures on governments and international institutions.

COPYRIGHT 1997 Society for the Advancement of Education
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