International Challenges

There is a competition for the use of the land (and for the use of water) between food and other commodity productions (such as feed, biofuel, and fiber). The existing competition is further intensified by different drivers and pressures, like environment protection, biodiversity, and recreation.

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5.1.1. Food-Security

The World Food Summit of 1996 defined food security as existing “when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life”.

Commonly, the concept of food security is defined as including both physical and economic access to food that meets people's dietary needs as well as their food preference. The World Health Organization defines three facets of food security: food availability, food access, and food use. Food availability is having available sufficient quantities of food on a consistent basis. Food access is having sufficient resources, both economic and physical, to obtain appropriate foods for a nutritious diet. Food use is the appropriate use, based on knowledge, of basic nutrition and care, as well as adequate water and sanitation. The FAO

adds a fourth facet: the stability of the first three dimensions of food security over time.

Access to food supplies is strongly influenced by food prices

Although price swings are no at all rare in the food market, the latest price shock was the combined effect of several factors. Trigger factors can be sorted into three categories:

ecological and biological factors that influence production and trade; factors affecting the macroeconomic environment (population growth, consumer income increase, drastic increase in world market price of crude oil, etc.); agricultural and trade policy factors (trade barriers, reforms, encouraging biofuel production, etc.). Some of the listed factors have short term, others have long term effects. While the decline in production, for example in the leading exporter countries, influence markets only within a year (cyclical), certain macroeconomic factors can induce long term structural change (Popp and Potori, 2008). The estimated impact of the price shock in 2006–2008 on the number of undernourished varied markedly across regions and countries. Small import-dependent countries, especially in Africa, were deeply affected by the food and economic crisis. Some large countries were able to insulate their markets from the crisis through restrictive trade policies and could protect their consumers through safety nets. However, trade insulation increased prices and price volatility in international markets.

Are we witnessing a paradigm-shift? Instead of free trade we experience the rise of protectionism, instead of food-security (which a global concept) countries seem to rely more on self-sufficiency, instead of private stocks, state storage is strengthened, and instead of importing, countries tend to move their food production abroad. South-Korea, China, the United Arab Emirates, Saudi Arabia and Japan purchase or rent vast areas of arable land in Africa, Asia, and Indonesia and the Philippines. Even Russia and Ukraine are added to the list of the investors.

Although global per capita food consumption decreased in the past few years, the demand for cereals and oilseed crops increased, partly because of diet changes (meat consumption increased in the emerging countries), partly because of the increasing industrial use of these crops. At the same time it is worth mentioning that enough food is produced worldwide to feed all people, still nearly 1 billion people are suffering from chronic hunger.

There are a wide range of factors that contribute to this problem, the most significant of them being the poor distribution of foodstuffs, which of course related to the unequal income distribution. In other words, nearly 1 billion people don’t have the money to buy food. If the demand for food is very high, then in the case of even a slight fall in food production, stocks will rapidly decline. One of the possible explanations is that only a fraction of the globally produced agricultural commodities enter into the international market, e.g. about 16 percent of the world’s wheat, less than 8 percent of the world’s rice and 8-10 percent of dairy products enter this global market. In most years, the United States, Canada, Australia, the EU-27, the former Soviet Union (including three major wheat exporters: Russia, Ukraine, and Kazakhstan), and Argentina account for about 90 percent of world wheat exports and will remain dominant players in the future, too.

The global cropland area is roughly 13.1 billion hectares, which adds up to 18.5 percent of the Earth’s surface. From that area 5 billion hectares are agricultural land (1.4 billion hectares arable land, 0.2 billion hectares permanent cropland, and 3.4 billion hectares pasture), 4 billion hectares forestland and 4.1 billion hectares other areas. Cropland areas have stagnated at approximately 1.5 billion hectares in recent years, of which roughly 1.1 billion hectares are rain-fed and 400 million hectares are irrigated. Although 71 percent of the Earth’s surface is covered by water, only 4 percent of the vast oceans are suitable for fishing. Beside the most important protein crop, soybean, another important protein source for the animal feed industry is the fishmeal. Since fishmeal production is steadily declining, soon new alternative protein sources will be necessary.

As the consumption of animal products is increasing, livestock farming continues to be the largest land user in the world. In the EU, livestock farming uses about two-third of the agricultural land, globally the ratio is over 40 percent and nearly 40 percent of the world grain output is being fed to livestock. In the past decades forage production could not keep up with population growth. There are also huge regional differences in the per capita feed mixture production. If feed production of domestic feed mills or the self-sufficiency level of meat production will increase in the developing countries, then they have to increase their forage production or have to import. The question is, where they will buy the feed grains, or what kind of other alternative raw materials can be used for feed purposes.

The solutions to addressing the availability of arable land are three-fold: the production of more arable land; an increase in the productive capacity of existing cultivated land and the conservation of arable land in order to prevent degradation. According to optimists, the current 1.4 billion hectares of global arable land could be doubled, pessimists say that there is virtually no spare land available for expansion (only Africa, South-America, Russia, Ukraine and Kazakhstan has some reserves). Overall, not more than 5 percent increase can be realized. Cropland areas have begun to decrease in some top producer countries of agricultural commodities (e.g. USA) due to the increasing demand for fertile arable lands for alternative uses such as bio-fuels, encroachment from urbanization and industrialization. Turning areas into agricultural land often hindered by their low productivity, the high costs of the process and the high risk of plant diseases (FAO, 2011a).

Another way of ensuring food-security is to increase yields. However, over the past decades in the case of several products, crop yields stagnated or increased only modestly. This is particularly evident in wheat (since the beginning of the ‘1990s in Europe) and in rice (since the middle of the ‘90s in China) production. The main reason is the lack of investment in development. As production capacities are also declined, it would be increasingly difficult to satisfy the growing domestic and global demand. However, at the same time, due to significant agricultural research and development efforts (improved hybrids, increased plant density, changes in leaf angle and root system, etc.) corn yields increased substantially.

Increasing prices of major crops contributed to the modest growth of agricultural investments. The majority of this actions, however, focused on turning new areas into agricultural land, rather than increasing per hectare yields. We can find several examples for that in Africa and South-America. The annual average yield of cereals increased by 0.8 percent in recent years, in contrast to the forecasted 1.0-1.3 percent global growth in demand.

Due to the dwindling stocks, even slightly below average yields can raise problems. In case of a more significant production shortfall, consequences can be catastrophic. The need for increasing crop yields brings along the issue of GM (genetically modified) crops. It is very much possible that more and more countries around the world will produce these plants irrespective of whether the European Union will approve them quickly or not. Without importing feed, the EU would have to cut back on meat, dairy, and egg production. The ban on using animal parts in feed brought on by the BSE crisis (mad cow disease) has heightened Europe’s dependence on foreign imports. And it is also clear that the EU is not able to reduce its dependency on agricultural raw material import, especially with regards to protein feed.

Another obstacle in increasing yields is the rapid decease in the world irrigated land base. Agriculture is a major user of water resources (farming accounts for around 70 percent of water used in the world today). In recent years, draught induced crop failures indicated that agriculture is strongly dependent on water resources. Competition for the use of water is increasing between the different users. In some areas, such as in Northern China, water

scarcity is so serious that farmers had to give up the cultivation in certain areas. And, though water scarcity has always been a problem for northern China, shortages have reached crisis levels as a result of rapid economic development (e.g. the water consumption of the ever growing metropolises and industry). Ground water level has dropped by several meters and large areas become desertified (FAO, 2011b).

Due to the global economic expansion, and because the world’s population will continue to grow, though at a slightly slower pace (an annual average of 1 percent), the demand for food is expected to increase. Today, the world’s population exceeds 7 billion people and according to current projections it will reach 8 billion by 2030, and will likely to reach 9 billion by 2050. 20 % of the global population lives in Europe, and in North and South America. Asia is the most populous continent, with its 4.2 billion inhabitants accounting for over 60% of the world population (also Asia is the engine of economic growth). Africa is the second-most-populated continent, with around 1 billion people, or 15%

of the world's population. The world's two most-populated countries (China and India) together constitute about 37% of the world's population. These two countries - basically the entire Asia-Pacific region – are becoming increasingly dominant players of the global economy. In parallel with the income growth, protein consumption is also increasing. If calculated with only one billion people (the population of China and India is of course much greater), then in the case of 10 kilogram increase of annual per capita consumption of meat, 40 million tons additional feedstuff would be necessary (roughly 4 kg of grain is needed for 1 kg live weight gain).

Demand for food is also influenced by the changing consumer habits. In China about 20 percent of the population (300 million people) now can afford higher quality meals. In India, the structure of food consumption of the middle class (about 150-200 million people, with an annual growth of 30 million) is getting very similar to the Western European habits.

As the purchasing power increases, people eat not only more calories, but more animal products as well. As demand for dairy and meat products is increasing, the demand for cereals and oilseeds also grows.

Consumption habits change as societies change. This process is related, among others, to the global urbanization. Masses of people who give up farming move to the cities, where their consumption habits – partly due to the improvement in the standard of living – change.

This process modifies the structure of the economy and in overall, increase the demand. In extreme cases, however, the urbanization process can limit agricultural production (e.g. by large number of people leaving the rural areas, or/and by the expansion of industrial parks, infrastructure, residential quarters). Today, more than half of the population lives in cities, and the number will be even greater in the future. As the urbanization goes on - and international trade is getting more liberalized – the geographical centers of production and consumption will be increasingly separated. The importance of transport, storage, cooling grows and, of course the costs of handling the commodities also will increase. And food stocks are expensive to hold. It means that poor countries may not have had the stocks available before the crisis to compensate for any domestic production shortfalls On the whole, food prices are expected to rise (FAO, 2011a).

Weather shocks influence the supply side, and we should prepare for future production shortfalls and dwindling stocks in the main exporter countries. What is more, weather shocks, are typically unpredictable and may lead to unpredictable changes in prices, especially if stocks are low to begin with. Knowing that global demand for food increases, the weather shock related impacts can be even more serious.

And there are some other factors that should not be forgotten. There are financial actors who have increasingly moved into the agricultural markets to bet on future prices of

these commodities. Traders have always speculated on the agricultural-commodities futures market, just as they do in other commodities like copper or oil. Those with an actual commercial interest — food producers and buyers — use this market to bet against price increases and decreases as a form of insurance against volatility.

The sharpest criticism is, however, targets the production of biofuels. Why is that? The raw materials for ethanol and biodiesel production are plants, which at least for now, are grown primarily for food or for feed. Biofuel production has increased in recent years, but still give only a few percent of the fuel market. Its influence on the agricultural commodity markets, however, is huge. Today about 10 percent of the global sugar cane and vegetable oil production, and 7-8 percent of the global cereal production is used by the biofuel industry.

Predictions are that global demand for biofuels will hit 172 billion liters by 2020, up from 81 billion liters in 2008. At current production levels that would mean that an additional 40 million hectares of land would have to be converted to growing crops for biofuel. This growth is also a significant factor in the rise of global food prices (Popp et al, 2010).

Food-security is not just a question of producing food. It relates primarily to the changes in food prices and purchasing power, as the access to food is determined by these factors. The physical existence of food stocks very is important of course, as people tend to be afraid of not being able to buy food even if they could afford it. So what are the risks of access to food that risk management should treat? Money can be made even from fears, but that won’t solve the problems of food security, because money in itself is not a sufficient tool to provide food. Creating a global food-security network is considered to be a very urgent task if we want to avoid some nasty and irreversible consequences. Developing countries should prepare for future food crises partly because of the unfavorable climate change conditions. At the same time both developing and developed countries have to be aware of the possibility of an increasing south-north migration. For the North, this migration might (as it is already so) lead to security challenges. The EU already worries about the influx of immigrants from Africa and more than one EU Member State leaders are voicing opposition to multiculturalism.

There are some things that can be solved in the food chain, too. If food losses were curbed, then even under unchanged circumstances, we will be able to increase the supply of foods and reduce the pressure on water resources. Right now, global food losses occurring along the entire food chain reach up to 50-60 %. Roughly one-third of food produced for human consumption is lost or wasted globally, which amounts to about 1.3 billion tons per year. Food is lost or wasted throughout the supply chain, from initial agricultural production down to final household consumption. With that we waste also the energy and water that is necessary for food production. Knowing that our world’s resources are limited, reducing food losses should be a focus area (IWMI, 2007).

5.1.2. Energy Security

Modern global societies are based on the consumption of fossil energy. The pace of this consumption has been steadily growing over the last century. Today, however, many are getting skeptical about the possibility of preserving the modern western lifestyle in a world where we must dramatically reduce the current pace of consumption of fossil energy, as resources are depleted. In the light of the absolute dependence of modern societies on fossil energy, this process is a serious reason of concern. The huge economic growth of the past decades was due to the fact that we were able to exploit the available resources needed for

transport, production or simply for more comfortable life-style, and paid a very low price for them. Since the 1980’s more and more researcher examined the possibility of the exhaustion of stocks, which is called the Peak-Oil Theory. As the population of the Earth is increasing, energy production should increase, too. Since the average per capita energy consumption is steadily rising, therefore even if there was no change in population, the global energy use still would rise. Improvement in energy efficiency could for an extent counterbalance this process, even could curb the rate of growth significantly. But as the population of the world increases, the use of resources increases exponentially. The issue of Peak-Oil is relevant, because after reaching a situation of Peak-Oil, the total amount of oil available will begin to shrink. This means that it will no longer be possible to increase oil based energy consumption at the world level (each time someone increases their consumption of energy, someone else will have to reduce their consumption proportion).

Politicians and economists generally suggest that economic growth is the remedy for the problems in the economy. The problem with this idea is that it is firstly false, secondly even it was true, the limited availability and depleting status of our resources would not make possible to hold up global economic growth. What is more, enforced economic growth can lead to the final destruction of our planet. If the ecosystem suffers drastic and irreversible damage, along with the ecological collapse, greenhouse emission would double. There is not much encouragement in the present situation of renewable and green resources. They account only for 13 % of the primary energy use (IEA Bioenergy, 2009). Renewable resources are resources of materials or energy that can replenish and regenerate. They can contribute to the improvement of energy security, to the reduction of pollution (especially to the reduction of CO2 emission), to rural development and to the expansion of international trade. The most frequently used renewable resources are biomass, water, geothermal, wind and solar. In

Politicians and economists generally suggest that economic growth is the remedy for the problems in the economy. The problem with this idea is that it is firstly false, secondly even it was true, the limited availability and depleting status of our resources would not make possible to hold up global economic growth. What is more, enforced economic growth can lead to the final destruction of our planet. If the ecosystem suffers drastic and irreversible damage, along with the ecological collapse, greenhouse emission would double. There is not much encouragement in the present situation of renewable and green resources. They account only for 13 % of the primary energy use (IEA Bioenergy, 2009). Renewable resources are resources of materials or energy that can replenish and regenerate. They can contribute to the improvement of energy security, to the reduction of pollution (especially to the reduction of CO2 emission), to rural development and to the expansion of international trade. The most frequently used renewable resources are biomass, water, geothermal, wind and solar. In