Chapter 3:World Food and Agriculture: A 20-Year Perspective

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3.1 Introduction
3.2 Population growth and the overall economic growth outlook
3.3 Agriculture: prospective developments in aggregate production and demand
3.4 Prospective developments in food and nutrition
3.5 The developing countries: prospects by major commodity groups
3.6 The developed countries: prospective developments in brief
3.7 Possible developments in the agricultural trade balance of the developing countries
3.8 Issues of food-population balance beyond the year 2010

3.1 Introduction

This chapter presents the likely developments in world food and agriculture over the period to 2010, in varying degrees of detail concerning commodities and country groups. As noted in the Foreword, this study attempts to sketch out the prospective developments and give an idea of the future as it is likely to be rather than as it ought to he from a normative perspective. For example, the conclusion that undernutrition is likely to persist results from this approach to looking into the future. Therefore, the prospective developments presented here are not goals of an FAO strategy.

Highlights of the projection methodology

All the analyses and projections were carried out for a large number of commodities or commodity groups (52 crop and livestock products for food demand analysis, 32 for demand-supply analysis and 40 for production analysis) and for practically all countries individually (see list of countries and commodities in Appendix 1). This great detail makes it possible to draw on specialized knowledge of the different contributors to the study pertaining to individual countries and commodities. It also generates the results in a form which can be used to address issues at very diverse levels, ranging from statements on total agriculture and main regions to those on single commodities and alternative, and often overlapping, country groups. It is also imposed by the interdisciplinary nature of the study, which requires dialogue and consultation at meaningful levels of detail, as well as by the need to account for nearly the totality of use of land and respect relevant constraints. A good deal of the total work for the study is absorbed by the need to create a consistent data-set for the historical period (1961 to 1990) and to supplement it with often not readily available data for the base year, the three year average 1988/90. This is particularly true for the data on crop production patterns and existing stocks of land with agricultural potential, both by agroecological zone and for each developing country.

The overall approach is to start with projections of demand using Engel demand functions and exogenous assumptions of population and GDP growth. Subsequently, the entry point for the projections of production is to start with provisional targets for production for each commodity and country derived from simple rules about future self-sufficiency and trade levels. There follow several rounds of iterations and adjustments in consultation with specialists on the different countries and disciplines, with particular reference to what are considered to be "feasible" levels of land use, yields and trade. Accounting consistency controls at the commodity, land resources (developing countries only), country and world levels have to be respected throughout. In addition, but only for the cereals, livestock and oilseeds sectors, a formal flex price model was used (the FAO World Food Model, FAO, 1993) to provide starting levels for the iterations and to keep track of the implications for all variables of the changes in any one variable introduced in the successive rounds of inspection and adjustment. The model is composed of single country modules and world market feedbacks leading to national and world market clearing through price adjustments.

It is emphasized that the results of the model projections (whether the single Engel demand functions or the flex-price model) were subjected to many rounds of iterative adjustments by specialists on countries and many disciplines, particularly during the phase of analysing the scope for production growth and trade. Specialist input on some commodities was also obtained from collaborative work with outside (non-FAO) sources, e.g.: the International Sugar Organization, for sugar; the Economic and Social Institute, Amsterdam, for rubber; the International Cotton Advisory Committee, for cotton; the World Bank, for jute, and for the projections of the developed countries, with the Center for Agricultural and Rural Development, Iowa State University, and the Institut fur Agrarpolitik, University of Bonn. The end-product may be described as a set of projections which meet conditions of accounting consistency and reflect to a large extent constraints and views expressed by the specialists in the different disciplines and countries. A description and evaluation of the methodology is given in Appendix 2.

It is clear from the preceding discussion that the projections presented here are definitely not "trend extrapolations", whether the term is used to denote the derivation of a future value of any variable by simple application of its historical growth rate to the base year value (exponential trend) or the less crude notion of using time as the single explanatory variable in functional forms other than exponential, e.g. Iinear, semi-log, sigmoid, etc. For one thing, projecting all interlinked variables on the basis of estimated functions of time is a practical impossibility; for another, projecting any single variable at its historical growth rate (which could be negative, zero or very high) often leads to absurd results. Therefore, the term "trend" or "trend extrapolation" is not appropriate for describing these projections.

3.2 Population growth and the overall economic growth outlook

Population

The world population is projected to grow to 7.2 billion by year 2010, up from 5.3 billion in 1990, an increase of 1.9 billion or 36 percent in 20 years (Table 3.1). This is a higher absolute increment than that of the preceding 20 years (1.6 billion) but a lower one in percentage terms. The growth rate of world population peaked at about 2.1 percent p.a. in 1965-70 and then declined progressively to the current level of 1.7 percent p.a. Further declines in the growth rate are foreseen for the future so that by the final five-year period of the study's horizon (2005-10) growth will have fallen to 1.3 percent p.a. and on to 1.0 percent p.a. by 2020-25. But the absolute yearly increments will continue to be large and growing. They are at present larger than at any time in the past but are about to peak at around 94 million persons per year (Figures 3.1, 3.2).

What matters most for food and nutrition is the population growth of the developing countries and indeed of those regions with the highest incidence of poverty and undernutrition (sub-Saharan Africa and South Asia). The developing countries are still on a high demographic growth path (2.0 percent p.a.) and will account for over 90 percent of the additional world population in the projection period. But their growth rate is also on the decline, though slowly. The region with the highest population growth rate (over 3.0 percent p.a.) is sub-Saharan African, though also here the growth rate may peak during the projection period. Still, its population is projected to increase to some 900 million by the year 2010, an average growth rate of 3.2 percent p.a. (revised to 834 million and 2.9 percent p.a. in the latest UN assessment). Making food availabilities grow at an equal rate would still be an achievement and a break from past trends, but even if achieved, it would only serve to prevent further deterioration of the already very inadequate nutrition levels.

Economic growth assumptions

The overall economic growth rates used in this study (Table 3.1) are taken from other sources, mainly the work of other organizations, e.g. the World Bank, and supplemented by judgements only when no projections from other sources were available. The problems associated with the use of exogenous assumptions about the overall economic growth outlook in assessing the food and agriculture prospects were indicated earlier (Note 1).

For the developing countries the outlook is for economic growth to be much better in the 1990s than that of the "crisis" decade of the 1980s. In this latter period, all developing regions except Asia experienced declines in per caput incomes. In the projection period the prospects are for Asia to maintain its high growth rate and all the other regions to shift in varying degrees from negative to positive, though modest, growth rates in per caput incomes. But there are no

Table 3.1 Population projections and GDP growth assumptions

Note: Population data and projections are from the 1990 UN Assessment, Medium Variant (UN, 1991). Country level data are shown in the Appendix 3, where regional totals from the 1992 and 1994 UN Assessments (UN, 1993b; 1994) are also shown.
*World Bank (1994a). Regional groups not always identical to those used in this study.
^†1980-93.
^‡High-income OECD countries.
^§The GDP growth rates 1989-2010 are lower than those of the World Bank because they include the deep GDP declines of 1990-94 estimates at some 30%.
The World Bank's growth rates refer to the region "Developing Countries in Europe and Central Asia" which in addition to the ex-CPEs, includes Turkey,

Greece and Portugal.

Asia-type growth prospects for these regions, particularly not for sub-Saharan Africa. Although the region's economic growth rate could nearly double compared with the dismal 1980s, this would still leave it with nearly stagnant and very low per caput incomes over the projection period, given its high population growth rate. These developments can hardly lay the foundation for significant improvements in its food and agriculture. Such prospects are indeed reflected in this study's assessments for the region (see below).

The OECD countries are assumed to continue along their growth path of the 1980s, though their low population growth rate would make for rather respectable increases in per caput incomes. The OECD growth rate is an important parameter in the World Bank's assessment of the developing countries' growth prospects (see reference in Table 3.1). The direct link with the latter's food and agriculture is likely to be weak because of the low income and price elasticities of the OECD for the demand of their main traditional agricultural exportables, though the link can be significant for products like fruit and vegetables. However, the indirect links can be important, at least for some regions, if OECD growth stimulates investment flows and their exports of manufactures and this contributes to higher incomes and agricultural demand in the developing countries themselves.

The uncertainties surrounding the prospects for recovery and long-term growth of the ax-centrally planned economies (CPEs) of Europe, particularly of the former USSR, are well known. Their combined GDP had fallen by about one-third between 1989 and 1993. The working hypothesis used in this study is that growth could lead to restoration of their per caput income level to that of the pre-reform period by 2010. The reforms and these growth prospects can be expected to have profound influences on their own food and agriculture and on world food markets. These are discussed later on in this chapter. Here it suffices to mention that world cereals markets may be affected by increased export availabilities from Eastern Europe and greatly reduced import requirements of the former USSR. Both will contribute to continued weakness in these markets as these developments will tend to offset part of the stimulus of continuing growth in the import requirements of the developing countries. In parallel, the import demand of the ex-CPEs for the main traditional agricultural exportables of the developing countries is unlikely to be very buoyant, notwithstanding their still very low levels of per caput consumption of such products (coffee, cocoa, etc.) and the considerable potential for increases.

3.3 Agriculture: prospective developments in aggregate production and demand

The world as 8 whole

For the world as a whole, the prospects are that the growth of aggregate (gross) production will continue to slow down. This is in line with the longer term historical developments when the annual growth rate fell from 3.0 percent in the 1960s, to 2.3 percent in the 1970s and to 2.0 percent in 1980-92. The further deceleration of production growth in the post mid-1980s period was noted in Chapter 2. It is foreseen that the growth rate will fall further to 1.8 percent p.a. in the period to 2010 (Table 3.2). A host of factors explain this progressive deceleration. It may not be interpreted to mean that the world as a whole is running out of potential to increase agricultural output, though production constraints at the local level do contribute to this outcome. This happens when local resource constraints are obstacles to development and the growth of incomes with the result that potential demand for food is not expressed as effective demand for imports that would induce production to increase in another part of the world. The decline in cereals production in the main exporting countries after the mid-1980s is telling in this respect (see Chapter 2).

The progressive slowdown in the growth of world production mirrors the similar slowdown in the growth of demand, itself resulting from the lower population growth and the progressive saturation of per caput food consumption levels for parts of the world population. The little scope for further growth in per caput consumption in most developed countries is a ease in point. This has a major impact on the scope for further expansion of the world totals because the developed countries account for a high share of gross world consumption of agricultural products, 49 percent in 1988/90, notwithstanding their much lower share in world population (24 percent). At the same time, the considerable scope for further growth in consumption in most developing countries gets expressed as effective demand only gradually, for the well-known reasons of the slow growth in their per caput incomes and, in the countries facing production constraints, import financing capacity.

In conclusion, the further slowdown in world agriculture conveys a composite signal of positive and negative elements for the world's food and agriculture futures. On the negative side is the fact that the potential for producing more to increase food supplies to the people with low consumption levels will be utilized only in part. On the positive side is the slowdown in world population growth and the fact that more and more people attain satisfactory levels of food consumption; and, of course, the less the need for increasing output, the smaller the additional pressures exerted on resources and the environment. But this is not always so. In situations of poverty, a low growth rate of production may be associated with more resource degradation than a higher rate of production. This is because a low rate contributes to perpetuate poverty and can set in motion the vicious circle of poverty-degradationpoverty, as discussed in Chapter 2.

The developing countries

The preceding discussion on the possible outcomes at the world level (slower growth than in the past 20 years) applies largely also to the developing countries as a whole, though with less force and important exceptions (see Table 3.2). Also here, the gradual progress towards higher consumption levels in some countries and regions and the overall lower growth rate of population will lead to a slower growth in demand and production compared with the past. East Asia, and to a smaller extent the Near East/North Africa, are the regions closest to this pattern of evolution, though in the latter region the slow growth in income and increasingly stringent foreign exchange constraints will]] also play a role. Both regions had the highest growth rates of per caput demand (all uses) in the past 20 years, though the sharp slowdown in the growth of per caput demand in the Near East/North Africa region was already evident in the 1980s. East Asia would continue to have the highest, though lower than in the past, growth of per caput demand and production of all regions, given its high projected economic growth. South Asia and Latin America should maintain their middling growth rates of the past 20 years in both per caput demand and production. This leaves sub-Saharan Africa as the only region that could have a higher growth rate compared with the past. This is a significant improvement, but on]y relatively speaking, since it would only mean that per caput production and demand may just stop falling.

Table 3.2 Growth rates of gross agricultural production and domestic demand, all uses (% p.a.)

However, these prospective developments for aggregate agriculture cannot be appreciated without a closer look at the prospects for the major commodity sectors. Much of the remainder of this chapter is devoted to such an examination. But an initial idea of how the prospects for the different commodities enter the determination of the agricultural aggregates is given in the lower part of Table 3.2. In it, the projected growth rate of production for sub-Saharan Africa, which is lower than that of projected population, is broken down into three commodity sectors. It is clearly seen that when the sector of the non-food commodities (coffee, cocoa, tobacco, rubber, etc.), which grows slowly because of export market constraints, and that of the roots/tubers (growing less rapidly than population due to long-term declines in per caput consumption) are separated out, the rest of agriculture (essentially the other crop and livestock products, predominantly for domestic use), could grow at 3.2 percent p.a. This growth rate, if achieved, would match that of population and could even exceed it if the latter turned out to be lower as indicated by the latest demographic projections. This is an optimistic assessment of sorts, given the long historical experience of much lower growth rates and falls in per caput production. Even so, it would only prevent further deterioration.

The developed countries

Much of what was said earlier on the world prospects for aggregate production and demand applies to the developed countries. In the OECD countries, there is limited scope for further growth in per caput consumption. The past policies of import substitution in some major countries and the export opportunities offered by the increasing net food deficits of the developing countries and the ex-CPEs had contributed to relax the demand constraints and allow for moderate growth in production. The relief offered by these two factors, particularly that of the state-aided import substitution, had been largely exhausted by the mid-1980s. The scope for further import substitution is very limited for most commodities. Moreover, the policy reforms under way will make it difficult for this group of countries to continue to expand exports with the aid of subsidies. In parallel, the growth of net import requirements of the developing countries for the main agricultural exportables of the OECD area is likely to be slow. Furthermore, part of the associated expansion of the export markets is likely to be counterbalanced by reductions in the net import requirements of the former USSR and some expansion of export availabilities from Eastern Europe. Therefore, the likely outcome for the aggregate agricultural production of the OECD area is that the growth rate will be no higher than the 0.8 percent p.a. achieved in the 1980s, which itself was down from 2.0 percent p.a. in the 1970s.

The uncertainty concerning the prospects for the reforming ex-CPEs was underlined above. Their production fell sharply in the initial years of the reforms, with aggregate 1992 gross output being about 15 percent below that of the three-year average 1988/90. The recovery that will follow is expected to be slow and may lead to the growth rate of aggregate production in the next 20 years (measured from the pre-reform level of 1988/90) being only one half that of the last 20 years (Table 3.2). The sharp reduction in per caput consumption in the initial years of the reforms will probably be reversed, but future levels are unlikely to be above those of the pre-reform period. The commodity composition of consumption may change and the per caput domestic use of all agricultural products may be lower, due to lower waste rates and fewer cereals being used for animal feed per unit of livestock output. Therefore, not all declines in production and total domestic use should be considered as reducing the food welfare of the population (see The Economist, 18 June 1994).

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