Global food markets

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Global food markets

• Economics of Food Markets
• Lecture 2
• Alan Matthews

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Lecture objectives

• To explore factors affecting the global balance
  between food supply and demand
• To highlight the continuing role of hunger and
  what can be done about it
• To discuss changing patterns of international
  trade in agri-food products

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Long term perspectives

• Think about in terms of simply supply-demand
  diagram
• Factors affecting demand
• Population growth, income per head, changing
  tastes
• Factors affecting supply
• Resources, technology

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Source FAO World Agriculture Towards 2015/2030
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Source FAO Food Outlook
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Long term perspectives

• Malthusian predictions not yet confirmed by
  historical experience
• Great volatility around the trend
• What does the future hold?
• International organisations relatively sanguine
• Dissenting voices, e.g. Lester Brown
• Global population growth slowing down
• The China syndrome?
• Vanishing resources?
• Technology?

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Prospects for food and nutrition

• Tremendous progress in improving nutrition levels
  over last four decades
• But almost 800 million people still suffer from
  undernutrition
• The importance of agricultural development to
  address poverty and undernutrition

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FAO World Agriculture Towards 2015/2030
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FAO World Agriculture Towards 2015/2030
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Changing international trade patterns

• Agricultural exports a declining share of global
  merchandise trade
• Overall agricultural trade surplus of developing
  countries has virtually disappeared
• Least developed countries are net food importers
  since the mid-1980s
• Trends driven by both policy and market factors

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FAO World Agriculture Towards 2015/2030
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Source Regmi Gehlhar Amber Waves Feb 2005
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Policy impacts on international trade

• Tariffs continue to curb trade
• Domestic support remains high
• More liberalisation would mainly benefit
  developed countries
• Does globalisation disadvantage the poorest
  countries?

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FAO World Agriculture Towards 2015/2030
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Global supply chains

• Understanding the competitive nature of the
  global food industry means understanding changing
  consumer preferences and the food industrys
  efforts to meet these demands. The task of moving
  food from the farm to the table is becoming
  increasingly complex, involving diverse local,
  national, and global agents and networks. Food
  markets are constantly evolving, driven not only
  by changes in consumer preferences, but also by
  technology, linkages between members of the food
  supply chain, and prevailing policies and
  business environments. Sophisticated supply
  chains and distribution channels are now being
  adopted across different regions and national
  boundaries
• - Regmi and Gehlhar 2005

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Taming commodity markets

• Commodity markets declining and volatile prices
• Price stabilisation
• Buffer stocks
• Price raising
• Export cartels
• Market-based mechanisms
• Compensatory financing schemes
• Risk management

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Key messages global food markets

• Positive achievements
• declining food prices, fewer people hungry
• Issues
• can this continue?
• do OECD farm policies hurt the poor?
• can we tame commodity markets?
• Can globalisation of food markets work in favour
  of the poor?