Global Demand for Food Is Rising. Can We Meet It?

Abstract

Over the last century, the global population has quadrupled. In 1915, there were 1.8 billion people in the world. Today, according to the most recent estimate by the UN, there are 7.3 billion people — and we may reach 9.7 billion by 2050. This growth, along with rising incomes in developing countries (which cause dietary changes such as eating more protein and meat) are driving up global food demand.

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GOVERNMENT
Global Demand for Food Is
Rising. Can We Meet It?
by Maarten Elferink and Florian Schierhorn
APRIL 07, 2016
Over the last century, the global population has quadrupled. In 1915, there were 1.8 billion
people in the world. Today, according to the most recent estimate by the UN, there are 7.3
billion people —and we may reach 9.7 billion by 2050. This growth, along with rising
incomes in developing countries (which cause dietary changes such as eating more protein
and meat) are driving up global food demand.

Food demand is expected to increase anywhere between 59% to 98% by 2050. This will
shape agricultural markets in ways we have not seen before. Farmers worldwide will need
to increase crop production, either by increasing the amount of agricultural land to grow
crops or by enhancing productivity on existing agricultural lands through fertilizer and
irrigation and adopting new methods like precision farming.
However, the ecological and social trade-offs of clearing more land for agriculture are often
high, particularly in the tropics. And right now, crop yields —the amount of crops
harvested per unit of land cultivated —aregrowing too slowly to meet the forecasted
demand for food.
Many other factors, from climate change to urbanization to a lack of investment, will also
make it challenging to produce enough food. There is strong academic consensus that
climate change–driven water scarcity, rising global temperatures, and extreme weather will
have severe long-term effects on crop yields. These are expected to impact many major
agricultural regions, especially those close to the Equator. For example, the Brazilian state
of Mato Grosso, one of the most important agricultural regions worldwide, may face an
18% to 23% reduction in soy and corn output by 2050, due to climate change. The
Midwestern U.S. and Eastern Australia — two other globally important regions — may also
see a substantial decline in agricultural output due to extreme heat.
Yet some places are expected to (initially) benefit from climate change. Countries stretching
over northern latitudes — mainly China, Canada, and Russia —are forecasted to experience
longer and warmer growing seasons in certain areas. Russia, which is already a major grain
exporter, has huge untapped production potential because of large crop yield gaps (the
difference between current and potential yields under current conditions) and widespread
abandoned farmland (more than 40 million hectares, an area larger than Germany)
following the dissolution of the Soviet Union, in 1991. The country arguably has the most
agricultural opportunity in the world, but institutional reform and significant investments
in agriculture and rural infrastructure will be needed to realize it.

Advanced logistics, transportation, storage, and processing are also crucial for making sure
that food goes from where it grows in abundance to where it doesn’t. This is where soft
commodity trading companies, such as Cargill, Louis Dreyfus, or COFCO, come in. While
Big Food companies such as General Mills or Unilever have tremendous global influence on
what people eat, trading companies have a much greater impact on food security, because
they source and distribute our staple foods and the ingredients used by Big Food,from rice,
wheat, corn, and sugar to soybean and oil palm. They also store periodically produced
grains and oilseeds so that they can be consumed all year, and they process soft
commodities so that they can be used further down the value chain. For example, wheat
needs to be milled into flour to produce bread or noodles, and soybeans must be crushed to
produce oil or feed for livestock.
Nonetheless, even if some regions increase their output and traders reduce the mismatch
between supply and demand, doubling food production by 2050 will undeniably be a
major challenge. Businesses and governments will have to work together to increase
productivity, encourage innovation, and improve integration in supply chains toward a
sustainable global food balance.
First and foremost, farmers, trading companies, and other processing groups (Big Food in
particular) need to commit to deforestation-free supply chains. Deforestation causes rapid
and irreversible losses of biodiversity, is the second largest source of carbon dioxide
emissions after fossil fuels, and has contributed greatly to global warming—adding to the
negative pressure on agriculture production for which these forests were cleared in the first
place.
Farmers must also grow more on the land they currently operate through what is called
“sustainable intensification.” This means using precision farming tools, such as GPS
fertilizer dispersion, advanced irrigation systems, and environmentally optimized crop
rotations. These methods can help produce more crops, especially in parts of Africa, Latin
America, and Eastern Europe with large yield gaps. They can also reduce the negative
environmental impacts from over-stressing resources–preventing groundwater depletion
and the destruction of fertile lands through over-use of fertilizer.

The agricultural sector also needs significant long-term private investment and public
spending. Many large institutional investors, including pension funds and sovereign wealth
funds, have already made major commitments to support global agricultural production
and trading in recent years—not least because agricultural (land) investments have
historically delivered strong returns, increased diversification, and outpaced inflation.
Still, investment in agriculture in most developing countries has declined over the last 30
years and much less is spent on R&D compared to developed countries—resulting in low
productivity and stagnant production. And because banking sectors in developing
countries give fewer loans to farmers (compared to the share of agriculture in GDP),
investments by both farmers and large corporations are still limited. To attract more
financing and investment in agriculture, the risks need to be reduced by governments.
Regulators need to overhaul policies that limit inclusion of small, rural farmers into the
financial system— for example, soft loans (i.e., lending that is more generous than market
lending) and interest rate caps discourage bank lending. More supportive policies, laws,
and public spending on infrastructure would help create a favorable investment climate for
agriculture.
Global policy makers, corporations, and consumers must put the global food balance
higher up the agenda. International business leaders who are participating in this supply
chain have to better communicate the need for policy changes and for developed countries
to incentivize investment in regions where there is the most potential for growth. Our food
security will depend on it.
Maarten Elferink is the founder and Managing Director of Vosbor, an Amsterdam based commodity
service and solutions provider dedicated to sustainability, originating soft commodities and derivative products
selectively in Eastern Europe and the FSU for distribution in the Asia-Pacific region.
Florian Schierhorn

Florian Schierhorn is a post-doctoral researcher at the Leibniz Institute of Agricultural Development in
Transition Economies in Halle, Germany and was selected for participation in the Lindau Nobel Laureate Meeting
on Economic Sciences in 2014. His overall research relates to the question of how to meet global food security
without increasing pressure on land.
Related Topics: POLICY | PUBLIC-PRIVATE PARTNERSHIPS | INTERNATIONAL BUSINESS
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6 COMMENTS
ANDREW JEFFREYS a day ago
One important factor not mentioned - food waste. Conservative estimates indicate Western households
throw out 20 - 30% of purchased food for fairly dubious reasons - let alone the tonnes of food discarded by
restaurants etc. Food was a precious commodity in times past when the effort required to obtain it was far
greater than now. Plenty of 'low hanging fruit' there.
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