Long-term Global Agricultural Output Supply-Demand Balance and Real Farm and Food Prices

Authors: Tweeten, Luther G. and Thompson, Stanley R. Published in Farm Policy Journal, February 2009, Volume 6, Number 1, pp 1-16.

Abstract: Global food demand is estimated from population projections of the United Nations and food supply is projected from Food and Agriculture Organization yield data to quantify the global food supply-demand balance for 2025 and 2050. The eight food categories examined account for 95 percent of global food consumption. Results indicate that the historic era of secularly falling real food prices is over. The real price of corn, for example, is not expected to fall over the next four decades at the annual rate of 1.3 percent that it fell annually from 1960 to 2006. The analysis foresees future real food prices fluctuating around a flat or rising trend. Slowed national economic growth from flat or rising real food prices may be little more than an irritant for consumers in affluent countries, but will entail severe hardship for consumers in the many countries currently troubled by poverty and hunger. Opportunities exist to expand food output by adding cropland in Brazil and irrigation in Africa, for example, but in the long term such developments will be offset by cropland removed from production by urban and industrial development, soil degradation, and the like. Although cropland can be expanded through higher real farm and food prices, higher yields rather than added cropland offer the most attractive opportunities for farm output expansion at low cost to consumers and the environment. The slowing rate of increase in crop and livestock yields corresponds with a slowing rate of increase in public and in private agricultural research and development spending. The world will not have the luxury of curtailing spending on agricultural technology and rejecting promising technologies such as genetically modified organisms (GMOs) if is to keep real food costs from rising. Productive new cropland, irrigation, genetically modified varieties, and other technologies will be hard pressed indeed to match the massive historic gains from hybrid varieties, irrigation, synthetic fertilizers, and mechanization. On the demand side, subsidies to expand demand for farming resources such as biofuels will need revisiting if rising food costs are to be contained. 

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Saturday, January 1, 2011