Wanted: institutions for balancing global food and energy markets
Niek Koning
Arthur P. J. Mol
The increasing demand for biomass for energy use is further escalating existing food security risks. Managing these risks is a task for global institutions. These should ensure timely investment in the world's capacity for producing biomass and balance the use of this biomass for foods and for non-foods. To achieve this, institutional arrangements for global food markets must fulfil two important goals: reduce the short-term price instability of food markets and prevent a structural scarcity of food in the long term. This paper analyses how agro-food markets, energy markets and biofuel markets are currently regulated. As this regulation is ill-suited to manage food price instabilities and balance food and non-food use of biomass, new institutions need to be put in place. A coordinated system of global commodity management not unlike the Commodity Control Organization proposed by Keynes for the post-WWII era is proposed to deal with these coming challenges.
-
Food prices have major effects on food security. High
prices make food inaccessible for poor consumers. Low and
unstable prices hamper investment that should increase
employment and moderate the cost of food production in
poor countries. Since the late 19th century, international
agricultural prices have fluctuated downward. As a
reaction, many countries have stabilized and/or supported their
domestic agricultural prices. In most of them, rapid
agricultural development contributed to overall growth,
reducing poverty and food insecurity (Koning 2007; for
Asian Green Revolution countries, Dorward et al. 2004).
Conversely, poor countries that failed to stabilize and/or
support farm prices have seen their agriculture stagnate.
The plight of farmers was exacerbated by over-taxation and
dumping practices of countries that failed to combine farm
income supports with an adequate management of their
supply. Agricultural stagnation dragged the rest of the
economy with it, leaving large parts of the population poor
and vulnerable to fluctuations in food prices.
After several decades with very low prices, the year
2008 saw a sudden spike in global food prices. Although
prices have meanwhile come down again, this has rekindled
concerns that the long-term decline in food prices might
give way to increased scarcity. Population growth and an
increasing consumption of livestock products may double
the global demand for biomass for food up to mid-century.
Whether the global supply will keep pace with this is
uncertain (Koning et al. 2008; Rosegrant et al. 2006). One
important reason for this is the competition from agro-fuels
(crop-based biofuels). The production of these has strongly
increased since 2000. At first, this was seen as a possibility
to improve farm prices that had become too low to get
agriculture in poor countries moving. However, the role of
the agro-fuel boom in the 2008 price spike made clear that
agro-fuels might also exacerbate food price instability and
make food prices prohibitive for the poor (Banse et al.
2008a; Mitchell 2008; Rosegrant 2008).
To be sure, various strategies may moderate the risks that
the evolution of agro-food markets involves for global food
security. On the supply side, there are many possibilities for
raising food production in developing countries (cf.
InterAcademy Council 2004; World Bank 2007). More
generally, there remains considerable room for increasing
the global supply of food through sustainable yield increases,
bio-refinement and new non-farm biomass production
systems. On the demand side, an increase in food scarcity can be
countered by policies that mitigate the increase in
consumption. Most importantly, effective poverty reduction could
moderate the growth of world population and the ensuing
increase in demand. Poverty is the main factor that is holding
back the decline in demographic fertility in many low-income
countries. In addition, the growing consumption of livestock
products that involve especially unfavourable feed conversion
ratios, such as feedlot beef, could be mitigated. The
development of effective meat substitutes is a possibility, but
a shift to poultry or herbivore fish would also help (Koning et
al. 2008).
Also with respect to biofuels, various options are
available for protecting the food security of the poor.
Governments could stop supporting first-generation
agrofuels, and channel the development of bio-based non-foods
towards feedstocks that minimally compete with food (e.g.
waste, algae). At the same time, small-scale techniques for
the decentralized pre-processing of biomass could be
developed to allow small farmers to benefit from the
growth in bio-based non-foods (Sanders et al. 2007).
However, key conditions for steering global food
security safely through the storms are timely investment
in global capacities for food production and stable
international agricultural prices. The latter should be high
enough to stimulate agricultural development in p (...truncated)