Transcript Document 7243480

Food Security with Biofuels? An FAO Perspective
S. 1
Food Security with Biofuels?
An FAO Perspective
Seminar on Impact of Bio Fuel Crops on the Poor and the
Agriculture Sector
Common Fund for Commodities (CFC)
Kuala Lumpur, 26 November 2007
A. Abbassian
Secretary of the Intergovernmental Group on Grains
Food and Agriculture Organization of the United Nations - FAO
slide 1/48
Food Security with Biofuels? An FAO Perspective
S. 2
Presentation Overview
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
Why biofuels? Why now?
Bio-energy and biofuels: now and after
Do biofuels reduce consumption of fossil
fuels and lower CO2 emissions?
At what cost?
High food prices and biofuels, are they
related?
A threat to food security?
Bioenergy activities in FAO: work in progress
Concluding remarks
slide 2/48
Food Security with Biofuels? An FAO Perspective
S. 3
Bio-energy Today
 Bio-energy already accounts for 14% of total world
energy use; 33% in developing countries (70% in
Africa) but only 2-3% in industrial countries
 Small scale burning of biomass accounts for most
household source of energy for cooking and heating
in poor countries (2-3 billion people!)
 Liquid biofuels used for transport still small: 40% of
transport fuel in Brazil but only 3-5% in USA and
EU and even less elsewhere
Source: P. Hazell and R.K. Pachauri (IFPRI, 2007)
slide 3/48
Food Security with Biofuels? An FAO Perspective
S. 4
Biofuel production in the OECD countries
relative to world production (million liters)*
*Source: International Institute for Sustainable
Development (iisd), Global Subsidy Initiative program
(GSI) –September 2007
slide 4/48
Food Security with Biofuels? An FAO Perspective
S. 5
High food prices and biofuels, are they related?
Explaining the nature of price linkages...

As energy prices rise, costs of agricultural
inputs (fertilizers, pesticides and diesel)
increase, putting pressure on agricultural prices

Also biofuels derived from different feedstocks
become competitive with fossil fuels at
different levels (so-called parity price), putting
pressure on the prices of feedstocks

The link weakens as rising feedstock prices
make them too expensive as a source of fuel
slide 5/48
Competitiveness by feedstock
Parity prices: Petrol–Crude oil–Biofuels
Various feedstocks and farming/production systems
120
100
Crude, US$/bbl
Food Security with Biofuels? An FAO Perspective
S. 6
80
60
40
20
0
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Petrol, US$/l
Gasoline-Crude US$
Cane Brazil, top producers
Cane, Brazil, average
Cassava, Thai oil, 2 mio l/d
Cassava, Thailand, OTC joint venture
Maize, US
Mixed feedstock Europe
Palmoil, MPOB project
BTL: Synfuel/Sunfuel
Source: J. Schmidhuber, FAO ( 2005)
slide 6/48
Food Security with Biofuels? An FAO Perspective
S. 8
FAO food price index and CRB
commodity and energy indices
FAO price indices
for selected commodities
(1998-2000=100)
(1998-2000=100)
Source: FAO (Food Outlook, November 2007)
slide 8/48
Food Security with Biofuels? An FAO Perspective
S. 9
Preliminary FAO work on assessing the
importance of different factor in price formation*
A priori, we may assume that recent grain price hikes are determined, inter
alia, by the price of petroleum, stocks in the major grain exporting countries,
the US$ exchange rate relative to its major trading partners and in the case of
maize, by the quantity of industrial demand – a proxy for biofuel. That is,
 Ptwt = f(Ptoil,STt wt.mj.ex,XRtUS)
 Ptmz = f(Ptoil,STtmz.mj.ex,XRtUS,QDtind),
VAR models for the above were estimated over the period 1978 to
2007 using annual data.
Notes: VAR Unrestricted Model - Based on data for Major
Exporters only – All Data Logged - Prices in Real Terms -Oil
in Brent
*Source: A. Prakash, FAO (2007)
[email protected]
slide 9/48
Food Security with Biofuels? An FAO Perspective
S. 10
Factors driving higher grain prices Can their influences be measured?*



Main results**
The specified variables, together, capture around 90% of the variation in grain prices
Statistically, grain prices are strongly influenced by the specified variables
Causality tests (Granger) showed that variations in prices are both caused by past variations in these
variables, jointly and individually
Relative influences
Changes in maize and wheat prices were decomposed by the relative contribution of each variable.
Changes in stocks have the greatest influence on prices
proportion of change (∆) in maize price explained by changes in:
∆Ptmz
0.27
∆STtmz.mj.ex ∆QDtind. ∆XRtUS ∆Ptoil
0.35
0.12
0.11
0.15
proportion of change (∆) in wheat price explained by changes in:
∆Ptwt
0.44
∆STtwt.mj.ex ∆XRtUS
0.25
0.15
∆Ptoil
0.16
**Results based on forecast error variance decomposition
*Source: A. Prakash, FAO (2007)
[email protected]
slide 10/48
Food Security with Biofuels? An FAO Perspective
S. 11
Wheat stocks and price
Source: FAO
Maize stocks and price
slide 11/48
Food Security with Biofuels? An FAO Perspective
S. 12
Coarse Grains exporters
Coarse Grains stocks
and ratios
Source: FAO (Food Outlook, November 2007)
slide 12/48
Food Security with Biofuels? An FAO Perspective
S. 13
Soybeans/Maize nearby
futures ratio
Maize utilization and
exports in the USA
Source: FAO (Food Outlook, November 2007)
slide 13/48
Food Security with Biofuels? An FAO Perspective
S. 14
Biofuels Tomorrow
 By 2010 the EU plans to double the share of renewable
energy in its primary energy consumption to 12%. Biofuels
will increase to 5.75% of total transport fuels
 The USA also plans to more than double its current 2% share
for biofuels by 2016 but this may accelerate
 Brazil plans to increase biofuels share from 37% to about
60% by 2020
 China and India have launched new bio-energy industries
Source: P. Hazell (2007)
slide 14/48
Projected grain utilization in OECD
and non-OECD countries
2016
Coarse Grains
Average
2004-2006
Food
Feed
Other
2016
Average
2004-2006
100
200
300
400
500
2016
Average
2004-2006
Food
Feed
Other
2016
Million Tonnes
OECD
0
NMEs
NMEs
Wheat
OECD
Food Security with Biofuels? An FAO Perspective
S. 15
Average
2004-2006
0
200
400
600
800
Million Tonnes
Source: OECD-FAO Agricultural Outlook 2007-2016
slide 15/48
Food Security with Biofuels? An FAO Perspective
S. 16
Outlook for selected world crop prices to 2016
(Index of nominal prices, 1996=1)
1.6
1.6
1.5
1.5
1.4
1.4
Coarse Grains
1.3
1.3
1.2
1.2
1.1
1.1
Wheat
1.0
1.0
Rice
0.9
0.8
0.7
0.7
0.6
0.6
0.5
1996
0.5
1996
2006
2011
2016
Oilseed
0.9
0.8
2001
Vegetable oil
Oilseed meal
2001
2006
2011
2016
Source: OECD-FAO Agricultural Outlook 2007-2016
slide 16/48
Food Security with Biofuels? An FAO Perspective
S. 17
A threat to food security? How the Low Income
Food Deficit Countries are/could be affected?
 What is food security?
Food security exists when all people, at all times,
have physical, social and economic access to
sufficient amounts of safe and nutritious food that
meets their dietary needs and food preferences for an
active and healthy life
 Four dimensions of food security:
Availability, Access, Stability and Utilization
slide 17/48
Food Security with Biofuels? An FAO Perspective
S. 18
Food Security: Availability
 Availability of food could be threatened by bioenergy production:
currently, about 14 million hectares (1 % of the
world’s arable land) used for liquid biofuel
production
 2.5-3.8 % arable land could be used for biofuels
by 2030
and 20 % of the world’s arable land by 2050
Source: FAO - CFS 33rd Session-May 2007
slide 18/48
Food Security with Biofuels? An FAO Perspective
S. 19
Food Security: Access
 Access is influenced directly by food
prices and incomes
 In the longer run, the competition between
food and fuel could be alleviated
 The expanding market for biofuel
feedstock could contribute significantly to
higher incomes for farmers and offer
employment opportunities in rural areas
slide 19/48
Food Security with Biofuels? An FAO Perspective
S. 20
Food Security: Stability
 Stability can be disrupted by price
volatility
 Expanded use of agricultural commodities
for biofuel production could increase the
volatility of food prices
 Increased risks for the environment
slide 20/48
Food Security with Biofuels? An FAO Perspective
S. 21
Food Security: Utilization
 Affected by bio-energy, but less directly so
than for other aspects
 Utilization is closely linked to health status
and access to clean water
 Bio-energy could make water less readily
available for household use
 On the other hand, modern bio-energy
could make cooking both cheaper and
cleaner
slide 21/48
Food Security with Biofuels? An FAO Perspective
S. 22
Food security effects of rising prices
across countries
 Rising food and fuel prices will likely compromise food
security of countries that are net importers of both food
and fuel as their current account deficits increase:
 two-thirds of 47 low income food deficit countries
(LIFDCs) for which data exist are also energy deficit
and
 include countries like Bangladesh, Ethiopia, Eritrea,
Ghana, Haiti, India, Kenya etc.
 Countries that are net exporters of both food and fuel
will find themselves in a win-win situation
 For countries that are net exporters in one and net
importers of the other, the situation depends on the
relative size of the food or energy exports and imports
slide 22/48
Food Security with Biofuels? An FAO Perspective
S. 23
Forecast import bills of total food
and major foodstuffs
Source: FAO (Food Outlook, November 2007)
slide 23/48
Food Security with Biofuels? An FAO Perspective
S. 24
Forecast changes in food
import bills of selected
LIFDCs: 2007 over 2006 (%)
Forecast changes in global
food import bills by type:
2007 over 2006 (%)
Source: FAO (Food Outlook, November 2007)
slide 24/48
Food Security with Biofuels? An FAO Perspective
S. 25
Who are the hungry?
Countries in Transition
25 million
Developed Market Economies
9 million
Sub-Saharan Africa
206 million
Asia and the Pacific
524 million
Near East and N. Africa
38 million
India
212
China
150
Latin America and the Car.
52 million
Source: FAO
World: 860 million
Developing countries: 830 million
slide 25/48
Food Security with Biofuels? An FAO Perspective
S. 26
World Development Report 2008:
 75% of the world’s poor live in rural areas
and most work in agriculture
 Majority of the world’s poor will still be
in rural areas in 2040
 Agricultural growth is the main engine for
poverty reduction
 For the two-thirds poorest, income growth
originating in agriculture has more impact
than income from non-agricultural sectors
Source: World Bank (2007)
slide 26/48
Food Security with Biofuels? An FAO Perspective
S. 27
Which biofuels? Jatropha factor!
 Is it economic at current (rising) oil price?
 Does it have favorable energy and carbon
balances?
 Will it conflict with food production?
 Can biofuel production be made pro-poor?
Scale matters!
 Should countries invest in it now or wait for
next generation technologies?
slide 27/48
Food Security with Biofuels? An FAO Perspective
S. 28
Constraints to investment
Legislation
 No legislation in place for
Bioenergy
 National Bioenergy Task
Force
Land Tenure
 All land owned by state
 Released to villages, state,
individuals
Infrastructure
 Scale matters and the
technology is highly capital
intensive
 Very limited number of roads
 Bioenergy proposals always
close to existing
infrastructure (road or
railroad)
The way forward
 Who are the poor and most
food insecure relative to
bioenergy development?
 Identify and respect national
priorities about food security
and self-sufficiency (maize)
 Land and legislation could be
serious hurdles to bioenergy
investment
 Resolve potential conflict over
access and control of natural
resources
 Source of income and energy
 Create incentives for
reinvestment
 Stimulate domestic economy
and rural development
 Source of export earnings –
even as a feedstock?
slide 28/48
Food Security with Biofuels? An FAO Perspective
S. 29
Bioenergy activities in FAO: work in
Progress...
Examples (i) Technical assistance to member countries




Project formulation and technical advisory services
Support the design and implementation of bioenergy policy and
programmes
Country studies/projects: Argentina, Belarus, Chile, China, Costa Rica,
Croatia, Dominican Republic, Myanmar, Peru and Slovenia
Respond to requests for investment, feasibility and technical support
Examples (ii) Cooperation with national, regional and
international partners




Secretariat of the Global Bioenergy Partnership (GBEP) at FAO
FAO currently Vice-Chair of UN-Energy, with bioenergy as one of the
main programme elements of this interagency mechanism
Increased requests and activity on bioenergy from FAO Reg Offices
FAO partners with numerous intergovernmental organizations
slide 29/48
Food Security with Biofuels? An FAO Perspective
S. 30
Bioenergy and Food Security (BEFS)
Project






Three-year - USD 3.7 million – 11 January 2007
Guidance on potential effects of bioenergy on
food security in developing countries
Started country selection process and
development of analytical framework
Capacity-building, policy formulation and
technical guidance
National Bioenergy Teams and replicable project
models
Legislative Framework Report
slide 30/48
Food Security with Biofuels? An FAO Perspective
S. 31
Concluding remarks...
 high oil prices and the need to reduce greenhouse gas emissions are
among the important drivers in this fast expanding sector.
 grains/oil plant-based biofuels are becoming a major source of
demand but they are expensive to produce and currently rely on high
subsidies and market protection
 debates on their net energy balance and on their effectiveness in
reducing carbon emissions continue
 in the meantime, food prices are affected (increasing) although other
factors such as low food inventories have had even more significant
impacts
 there are good reasons to caution against too much reliance on
biofuels as a way forward in getting away from using “risky” fossil
fuels
 but biofuels can empower rural poor farmers in developing countries,
to embark on faster income growth and development
 assuming access to technology and land tenure as well as availability
of adequate infrastructure, capital, legislations, etc.
 a carefully planned, tailored, sustainable, bioenergy strategy is
needed
slide 31/48
Food Security with Biofuels? An FAO Perspective
S. 32
Relevant International Meetings/Reports
 World Development Report 2008: Agriculture for Development (World
Bank, October 2007)
 Food Outlook (FAO, November 2007)
 World Energy Outlook – 2007 from International Energy Agency (IEA)provides medium to long-term energy market projections and analysis
with China and India as its special foci in this year’s report (7 November
2007)
 The Intergovernmental Panel on Climate Change (IPCC) - Synthesis of
IPCC Fourth Assessment of the state of knowledge on climate change
(17 November 2007)
 United Nations Framework Convention on Climate Change (UNFCCC) Bali, 3 - 14 December 2007
 Food Outlook (FAO, June 2008)
 FAO High-Level Conference on World Food Security and the Challenges
of Bioenergy and Climate Change 2-5 June 2008
 OECD-FAO Agricultural Outlook 2008-2017 (July 2008)
 State of Food and Agriculture 2008 (SOFA), FAO. Focus: Bio-energy
(November 2008)
slide 32/48
Food Security with Biofuels? An FAO Perspective
S. 33
Key FAO contacts on bioenergy
Chairman of the Interdepartmental Working Group
[email protected]
SOFA 2008 Bioenergy
[email protected]
Global Bioenergy Partnership
[email protected]
International Bioenergy Platform (IBEP) Website:
http://www.fao.org/sd/en2_en.htm
slide 33/48
Food Security with Biofuels? An FAO Perspective
S. 34
Grains Team in FAO Trade and Markets Division
A. Abbassian (Analyst and the Secretary of the Intergovernmental
group for Grains)
[email protected]
Tel: (++39) 0657053264
C. Cerquiglini (Database Management and World Outlook Reports)
[email protected]
J. Heine (Database Management and Monthly News Report)
[email protected]
S. Ripani (Administrative Assistant)
[email protected]
FAO Grains Website:
http://www.fao.org/es/esc/en/15/53/index.html
slide 34/48
Food Security with Biofuels? An FAO Perspective
S. 35
MORE IN......
October 2007*
November 2007*
July 2007
Monthly News
Report on Grains
*published 6 times a year
*published 2 times a year
slide 35/48