Photo Credit: Flickr: USDA

The global population is expected to grow to more than 9 billion people by 2050. In such a scenario, ensuring the availability of and access to affordable and nutritious food will be a major challenge.

A recent paper in Global Environmental Change investigates the implications of both segmented and fully integrated markets (with no trade barriers) on food and environmental security. The paper investigates changes in food production and land use between 1961 and 2006 in the context of historically segmented markets, as well as how food production and land use would have evolved during this period in the presence of greater market integration. The study then looks at how food production and land use could develop between 2006 and 2050 based on existing segmented markets and in a hypothetical future in which crop commodity markets are fully integrated.

In order to test the historical relationship between globalization and food production, the study utilizes a partial equilibrium model of agricultural trade, separating the world into 15 regions, each producing an aggregate crop commodity using a variable combination of inputs. The authors model output growth using regional population, income, and total factor productivity growth in agriculture as exogenous drivers. The study applies this model from 1961 to 2006 for segmented markets (in which there are trade barriers) and fully integrated markets (without trade barriers). Based on these results, the study then makes projections for global agriculture from 2006-2050 under both segmented and fully integrated markets.

Regionally, the study finds that between 1961 and 2006, Eastern Europe and Central Asia both showed slow growth in overall crop output in tonnes (40 and 75 percent, respectively), while China experienced a dramatic rise in output (over 400 percent). The other major producing regions fall between these two extremes, with output increasing by 100 percent in the EU, 150 percent in North America, 200 percent in South America, and just under 300 percent in South Asia. The study illustrates that the underlying drivers of output change varied greatly across regions. In most regions, strong agricultural productivity growth coincides with greater supply expansion. For Africa south of the Sahara, however, which saw slow per capita income growth and experienced very little agricultural productivity growth during this period, nearly all of the increase in output was driven by increased food demand (due to rising populations) and the resulting supply response.

The authors then reran the model, allowing for fully integrated commodity markets, such that there was a single crop commodity price. In this scenario, there would have been greater disparities in regional crop output growth than actually occurred, with those regions that experienced higher productivity growth expanding more rapidly. For instance, the study estimates that crop output in North America would have grown much more rapidly under integrated markets (by 225 percent), whereas output in Africa south of the Sahara would have grown more slowly due to productivity growth rates well below the global average. While greater exposure to global markets would have hurt farm households in Africa, lower food prices would have significantly benefited urban consumers.

Regarding projections from 2006 to 2050, the study estimates a 90 percent increase in global crop output under segmented markets and a 100 percent increase in global crop output under fully integrated markets. However, this number is significantly below the 200 percent increase in crop production experienced from 1961 to 2006.

Under continued market segmentation, developed regions are expected to experience slow increases in crop output due to slow increases in domestic food demand. In contrast, developing regions are expected to experience faster rises in crop output driven by increased productivity, increased demand from rising incomes, and the supply response stemming from growing populations. For example, in Africa south of the Sahara, exceptionally high growth in demand is estimated to drive crop output up significantly (by 175 percent).

On the other hand, if markets are fully integrated from 2006 to 2050, relative rates of productivity growth become key to the regional composition of world crop output. In this scenario, production increases in Japan and Korea, Eastern Europe, and China by nearly double (to 100 percent, 125 percent, and 175 percent, respectively), given these regions’ relatively strong agricultural productivity growth. In contrast, in Africa south of the Sahara and, to a lesser extent, South Asia, expected slow productivity growth will lead to a significant diversion of production to other regions and subsequent lower increases in crop output (60 percent and 100 percent, respectively).

The authors do highlight a number of limitations to the study. First, the model used is relatively simple and does not account for the full complexity of the global agricultural economy. For instance, the model does not account for variations in possible agricultural inputs such as labor, capital, and fertilizers. Second, the model achieves fully integrated and globalized markets by eliminating all trade barriers. However, such an elimination is extremely unlikely in reality; trade and transport costs, differences in products, and trade barriers are all likely to continue to play an important role in the future. Third, it is extremely difficult to predict how future productivity growth will evolve, especially considering that climate change will limit increases in agricultural productivity.

Despite these limitations, the study’s findings suggest that greater economic integration could serve as a sort of food security insurance. Increased global integration could allow poor and vulnerable countries to import food from other areas, thus helping to prevent dramatic increases in food prices. However, it should be noted that increased international trade may not necessarily translate into increased food security in developing countries, especially in Africa South of the Sahara. A majority of people in developing countries depend on small-scale agricultural production, which can cushion them in times of economic or climate shocks; thus, without increases in their agricultural productivity, these smallholders may be unable to compete with international food markets.

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