Risks and Opportunities in the Global Agriculture and Food System: Policy and Research Implications Joachim von Braun Director General International Food Policy Research Institute SLU-CGIAR Workshop Uppsala, September 23-24, 2008

Joachim von Braun, IFPRI, September 2008 Outline 1.Challenges and risks 2.Responses to address risks and tap opportunities 3.Expansion of R&D and the CGIAR

Joachim von Braun, IFPRI, September 2008 New challenges © 2007 CitizenReporter.org Subsidized Subsidized biofuels Rising food and energy prices Climate change and pests, diseases and food safety

Joachim von Braun, IFPRI, September 2008 Number of food protests by type and income group [As of Aug. 2008] Source: Protests – news reports; Income group classification – World Bank 2007.

Joachim von Braun, IFPRI, September 2008 Impacts of high prices on the poorest The consequences of rising prices for the poorest and hungry are driven by initial conditions and by adjustments in labor, finance, and goods markets… Level of inequality below the poverty line (up)Level of inequality below the poverty line (up) Level of diet (low) and nutritional deficiencies (high)Level of diet (low) and nutritional deficiencies (high) Wage rate adjustments among unskilled labor to changing prices (slow)Wage rate adjustments among unskilled labor to changing prices (slow) Capability to respond to market opportunities (small)Capability to respond to market opportunities (small) A 50% increase in food prices in Bangladesh = 25% more prevalence of micronutrient deficiency in women and children

Joachim von Braun, IFPRI, September 2008 Beneath the $1 a day poverty line (2004) Poor ($.75 cents – $1) 485 million people Medial poor ($.50 cents – $.75 cents) 323 million people Ultra poor (less than $.50 cents) 162 million people Source: Ahmed et al

Joachim von Braun, IFPRI, September 2008 The growing number of the poorest in SSA Living below US$.50/day ( ) Source: Ahmed et al

Joachim von Braun, IFPRI, September 2008 New hunger estimates for 2007 (FAO) Undernourished people in 2007 increased by 75 million, over and above (to 923 million in 2007)Undernourished people in 2007 increased by 75 million, over and above (to 923 million in 2007) Asia / Pacific 41 millionAsia / Pacific 41 million Latin America / Caribbean 6 millionLatin America / Caribbean 6 million Near East / North Africa 4 millionNear East / North Africa 4 million Sub-Saharan Africa 24 millionSub-Saharan Africa 24 million Source: FAO Sept 2008

Joachim von Braun, IFPRI, September 2008 Sources and features of price change 1.Energy and biofuels 2.Income and population growth 3.Slow agricultural supply response 4.Market,trade, and speculation 5.Climate change

Joachim von Braun, IFPRI, September 2008 Biofuels: Fundamental change in world food price determination Energy prices now affect not just agric. input prices, but also output prices strongly via biofuel-land competitionEnergy prices now affect not just agric. input prices, but also output prices strongly via biofuel-land competition IMPACT Model: Increased biofuel demand in contributed to 30% of weighted average increase of grain prices Environmental sustainability of biofuels depends on feedstock choice; policies adopted; technologies employed etc.

Joachim von Braun, IFPRI, September 2008 Rising consumption Income growth ( per annum)Income growth ( per annum) - 9% in Asia, 6% in Africa - 2% in industrialized countries Slow down in economic growth reduces this effect nowSlow down in economic growth reduces this effect now Future grain consumption is driven by income growth, population growth, and feed for meat and dairy production, biofuels Sources: FAO 2003 and 2008; IMF 2008.

Joachim von Braun, IFPRI, September 2008 Source: World Development Report Declining productivity growth

Joachim von Braun, IFPRI, September 2008 Monthly traded volumes of futures contracts, Chicago, Jan May 2008

Joachim von Braun, IFPRI, September 2008 Ad hoc trade measures add up to policy failures Ad hoc trade measures add up to policy failures Export bans/restrictions:Export bans/restrictions: - Reduce global market size, increase volatility, and harm import-dependent trading partners Categories of speculators:Categories of speculators: - Governments, farmers, households, small traders - Commercial traders - Non-commercial traders In Q1 of 2008 futures & options up by 32%

Joachim von Braun, IFPRI, September 2008 Climate change risks for production (% change) World –0.6 to –0.9 Developed countries 2.7 to to 9.0 Developing countries –3.3 to –7.2 South Asia –18.2 to –22.1 Sub-Saharan Africa –3.9 to –7.5 Latin America 5.2 to to 12.5 Source: Adapted from Tubiello and Fischer 2007 Source: Adapted from Tubiello and Fischer Expected impact on cereal production This will have further price increasing effects

Joachim von Braun, IFPRI, September 2008 Outline 1.Challenges and risks 2.Responses to address risks and tap opportunities 3.Expansion of R&D and the CGIAR

Joachim von Braun, IFPRI, September 2008 IFPRI’s proposed policy actions Emergency package: for immediate food assistance and availability needsEmergency package: for immediate food assistance and availability needs [Implement immediately] [Implement immediately] Resilience package: to meet ongoing and future challenges in the food systemResilience package: to meet ongoing and future challenges in the food system [Phase in now for future impact]

Joachim von Braun, IFPRI, September 2008 Policy actions: Emergency package 1. Expand emergency and humanitarian assistance - international (price indexed) and national 2. Eliminate agricultural export restrictions - reduces price levels by up to 30% 3. Fast-impact production programs in key areas - Poorest 50% of farmers in Africa - partly publicly funded = US$2.3 billion per annum 4. Change grain and oil seeds bio-fuel policies - reduces maize price 20%, wheat 10%

Joachim von Braun, IFPRI, September 2008 Policy actions: Resilience package 5. Calm markets with: - market-oriented regulation of speculation - establish global (virtual) grain bank 6. Invest in social protection - focus on child nutrition, women, and poorest 7. Investments for sustained agric. growth - global incremental public agric. investment for MDG1 = US$14 billion, Africa: US$4-5 billion per annum; with R&D in agriculture 8. Multi-lateral trade regime (WTO+) - strengthen rule based trade

Joachim von Braun, IFPRI, September 2008 Outline 1.Challenges and risks 2.Responses to address risks and tap opportunities 3.Expansion of R&D and the CGIAR

Joachim von Braun, IFPRI, September 2008 Scaling up investments in R&D – key element of response to risks and opportunities On what andOn what and Where should it be focused?Where should it be focused? By how much should investment be accelerated?By how much should investment be accelerated? What can be expected from it?What can be expected from it?

Joachim von Braun, IFPRI, September 2008 Preview of a paper from CGIAR / IFPRI, Sept 2008 Approaches 1. Modeling the growth, poverty reduction and price effects of increased international agricultural R&D spending 2. Concepts for “best bet” programs at scale: the Centers’ ideas

Joachim von Braun, IFPRI, September 2008 Impact of doubling agric. R&D investment on growth and poverty ( incl. CGIAR.5 to $1.0 Bil. ) R&D allocation (mil $)  in # of poor (mil.) Agr. output growth (% pts.) SSA S Asia9082, SE Asia1,9565, L America9571, TOTAL4,9759, Source: von Braun, Fan, Rosegrant, Meinzen-Dick, Pratt, 2008

Joachim von Braun, IFPRI, September 2008 Where the poor and ultra poor are (2004) $0.75 and <$1: 485 mln <$0.50: 162 mln $0.50 and <$0.75: 323 mln Source: Ahmed et al

Joachim von Braun, IFPRI, September 2008 Impact of R&D expansion on long-run prices Agric. R&D expansion : global cereal prices -60% by 2025, compared to baseline Source: IFPRI IMPACT Model

Joachim von Braun, IFPRI, September “Best bets” for research investments Food for People 1.Revitalizing yield growth in the intensive cereal systems of Asia ($150 mil., more than 3 billion people reached) 2.Productive and resilient small-scale fisheries ($73.5 mil., 32 mil. people reached) 3.Controlling Wheat Rust ($37.5 mil., 2.9 bil. people reached) 4.Vaccine for East Coast Fever in cattle ($10.5 mil., 32 mil. people reached) 5.Drought-tolerant maize for Africa ($150 mil., 320 mil. people reached) 6.Scaling up biofortification ($112.5 mil., 672 mil. people reached)

Joachim von Braun, IFPRI, September 2008 “Best bets” for research investments Environment for People 7. Including poor forest people in mitigation ($45 mil., 48 mil. people reached) 8. Climate change and adaptation research ($127.5 mil., 1.2 bil. people reached) 9. Sustainable ground water use ($36 mil., 261 mil. people reached) 10. combining organic and inorganic nutrients for increased crop productivity (US$55 million; people reached: 400 million)

Joachim von Braun, IFPRI, September 2008 “Best bets” for research investments Innovation for People 11. Enhanced germplasm exchange ($9 mil., global impact) 12. Improved market information and value chains ($10.5 mil., 45 mil. people reached) 13. Including women in extension and innovation ($30 mil., 200 mil. people reached) 14. Improving agriculture-health benefits for the poor ($75 mil., global)

Joachim von Braun, IFPRI, September 2008 The food crisis tradeoffs and effects: R&D is key to get out of this dilemma + Mass protests in almost 60 countries + The poorest suffer most and do so silently + Inflation and macro-economic imbalances + Environmental sustainability consequences Political security risks Energy security risks Food security risks