Global Agricultural Supply and Demand: Factors contributing to recent increases in food commodity prices Ron Trostle Economic Research Service U.S. Department of Agriculture Agricultural Markets and Food Price Inflation Federal Reserve Bank of Chicago October 2, 2008
Food commodity prices have risen 130 % since January 2002 (>70% in last two years ) Index: January 2002 = 100 250 200 Food commodity price index 150 100 50 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 M M M M M M M M M M M M M M M 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 8 8 8 8 8 9 9 9 9 9 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 Source: International Monetary Fund: International Financial Statistics
Prices of many commodities rose even more Index: January 2002 = 100 700 + 585 % 650 Crude oil 600 550 Average of all comodities 500 Food commodity index 450 + 330 % 400 350 300 250 + 130 % 200 150 100 50 0 Jan 1992 Jan 1996 Jan 2000 Jan 2004 Jan 2008 Source: International Monetary Fund: International Financial Statistics
Food commodity prices: Indices for selected crops and total food Index: January 2002 = 100 550 Corn 500 Soybeans 450 Wheat 400 Rice Food commodity index 350 300 250 200 150 100 50 0 Jan 1970 Jan 75 Jan 80 Jan 85 Jan 90 Jan 95 Jan 2000 Jan 05 Source: International Monetary Fund: International Financial Statistics
Crop price increases: real vs. nominal Average of 4 crops (wheat, soybeans, corn & rice) Index: January 2002 = 100 800 700 600 500 400 Real prices 300 200 100 Nominal prices 0 Jan 1970 Jan 75 Jan 80 Jan 85 Jan 90 Jan 95 Jan 2000 Jan 05 5 Source: International Monetary Fund: International Financial Statistics
Factors contributing to higher food commodity prices 1996 1998 2000 2002 2004 2006 2007 2008 Strong growth in demand, based on: Increasing population + Rapid economic growth + Rising per capita meat consumption Slowing growth in agricultural production Declining demand for stocks of food commodities Escalating crude oil price Increased biofuels production Dollar devaluation Rising farm production costs Adverse weather Large foreign exchange reserves Demand factors in brown Aggressive purchases by Supply factors in green importers Exporter policies Importer policies 6
World grain & oilseeds Total production and use Million metric tons 3,000 Production Total use 2,500 2,000 1,500 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 7 Source: USDA PS&D Database
Total world grain & oilseeds Stocks and stocks-to-use ratio Million metric ons Stocks / Use (%) 800 40% Ending stocks 35% Stocks / Use 600 30% 25% 400 20% 15% 200 10% 5% 0 0% 1970 1975 1980 1985 1990 1995 2000 2005 8 Source: USDA PS&D Database
Long-term trends contributing to higher prices: 1. Supply-side factors � Slower growth rate in yields 2. Demand-side factors � Population growth � Income growth � Increased per capita meat consumption 9
Total world grain & oilseeds 1 Production, yield, area harvested, population & percap production Index: 1970 = 100 220 Exponential trend growth rates: 200 1970-90 90-07 180 Production 2.2 1.3 160 Yields 2.0 1.1 Area 0.15 0.14 140 120 Population 1.7 1.4 Per capita use 0.56 0.11 100 80 1970 1975 1980 1985 1990 1995 2000 2005 Production Yield Population Percap production 1 Total oilseeds = soybeans + rapeseed + sunflowers Area harvested 10 Source: Compiled from USDA’s PS&D Database
Population growth rates decline (Percent by period) Percent 4 1975-1990 1990-2000 2000-07 2009-17 3 2 1 0 World Developed Developing Middle Africa Latin USA East America 11 Source: USDA Agricultural Baseline Projections to 2017.
Strong economic growth Average Real GDP growth rates Percent 12 1975-90 1990-2000 2000-07 2009-17 10 8 6 4 2 0 -2 World Developed Developing China India United States 12 Source: USDA Agricultural Baseline Projections to 2017.
Global rice imports Million metric tons Other 30 Other Asia 25 Indonesia 20 N. Africa & 15 M. East Sub-Saharan 10 Africa EU, FSU, & 5 OE 1/ Latin America 2/ 0 1990 1995 2000 2005 1/ European Union, former Soviet Union, and other Europe. 2/ Includes Mexico. 13 Source: USDA Agricultural Baseline Projections to 2017.
Global soybean oil imports Million metric tons 12 Rest of world 10 EU, FSU, & OE 1/ 8 India China 6 Other Asia 2/ 4 N. Africa & M. 2 East Latin Am 3/ 0 1990 1995 2000 2005 1/ European Union, former Soviet Union, and other Europe. 2/ Asia excluding India and China. 3/ Includes Mexico. 14 Source: USDA Agricultural Baseline Projections to 2017.
Global meat 1 Production, per capita consumption, and population Index: 1971 = 100 Exponential trend growth rates: 400 350 1975-90 90-07 300 Production 3.1 2.5 Population 1.7 1.4 250 Per capita 1.4 1.1 200 consumption 150 100 50 1970 1975 1980 1985 1990 1995 2000 2005 Production Per capita Cons Population 1 Total meat = beef + pork + chickens & turkeys. 15 Source: USDA Agricultural Projections to 2017.
Poultry imports 1/ Million metric tons Russia 5 Other N Afr. & 4 M. East East Asia 3 China & Hong Kong 2 Saudi Arabia Mexico 1 European 0 Union 2/ 1990 1995 2000 2005 1/ Selected importers. 2/ EU-27 excludes intra-trade after 2002, EU-15 intra-trade before 2003, Slovenia before 1992. 16 Source: USDA Agricultural Baseline Projections to 2017.
Role of biofuels: � Major producers � Impact on land use 17
Biofuels production: Total of largest producers 1 Billion Gallons 20 Biodiesel 18 Ethanol 16 14 1 The 6 largest 12 producers 10 (USA, Brazil, EU, China, 8 Canada, & Argentina) 6 accounted for 4 96% of world biofuel 2 production in 0 2007. 2004 2005 2006 2007 2008 Source: FO Licht, various reports
Biofuels production: Largest producers Million Gallons Ethanol Biodiesel 18,000 16,000 Argentina 14,000 Ukraine & Russia 12,000 Brazil 10,000 China 8,000 6,000 Canada 4,000 EU 2,000 USA 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 19 Source: USDA Agricultural Projections to 2017
Global area harvested 1 : Total, and for biofuels feedstocks Million hectares 900 800 Total area harvested 700 600 500 400 300 200 area planted to feedstocks 100 < 3% of total 0 1970 1975 1980 1985 1990 1995 2000 2005 1 Crops include: Wheat, Rice, Corn, Barley, Sorghum, Other cereals, Soybeans, Rapeseed, Sunseed, Cotton. Excludes sugarcane and beets 20 Source: Compiled from data associated with generating Baseline Projections to 2017
U.S. corn use Billion bushels 16 14 12 Ethanol 10 FSI less ethanol 1/ 8 6 Exports 4 Feed & residual 2 0 1990 1995 2000 2005 2010 1/ Food, seed, and industrial less ethanol. Source: USDA Agricultural Baseline Projections to 2017.
Growth in world wheat and coarse grains use: 1980/81 - 2002/03 vs. 2002/03 - 2007/08 1980/81 to 2002/03 2002/03 to 2007/08 Use MMT % MMT % Food 160 49 79 44 Feed* 144 44 48 27 U.S. corn for ethanol 27 7 53 29 Total 328 100 180 100 22
Adverse weather reduced production: � In 2006 • Australia • Ukraine & Russia � and 2007 • Europe: dry spring; harvest floods • SE Europe: drought • Ukraine & Russia: drought (2nd year) • USA: late spring freeze • Canada: hot and dry • Australia: 2nd year of severe drought • NW Africa: drought • Turkey: dry 23
Total world grain & oilseeds 1 Production, yield, & area harvested Index: 1970 = 100 260 Production Yield 240 Area harv 220 200 180 Trend growth rates: 1975-90 90-07 160 Prod 2.2 1.3 Area 0.15 0.17 Yields 2.0 1.1 140 120 100 1 Total oilseeds = soybeans + rapeseed + sunflowers 80 1970 1975 1980 1985 1990 1995 2000 2005 24 Source: USDA Agricultural Projections to 2017
Other contributing factors: � Devaluation of U.S. dollar � Increasing foreign exchange reserves held by importers � Role of hedge funds, index funds, & sovereign wealth funds: (affect demand and/or volatility?) 25
Value of U.S. dollar declines after 2002 1/ Index values, 2000=100 130 120 110 100 90 80 70 60 1970 1975 1980 1985 1990 1995 2000 2005 1/ Real U.S. agricultural trade-weighted dollar exchange rate, using U.S. agricultural export weights, based on 192 countries. 26 Source: USDA PS&D Database
Foreign Exchange Reserves E m erg in g A sia: F o reig n exch an g e reserves $bn 1600 C hina 1400 1200 E m erging A sia ex C hina 1000 800 600 400 Japan O P E C 200 R ussia 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 S ource: O xford E conom ics / H aver A nalytics 27
to food price inflation Policy responses 28
Recommend
More recommend
