Globalizing food markets:
Food Security and
Environmental Effects in Latin
America
Insa Niemeyer
CEIGRAM, FMB Water Observatory,
May 12th 2011
Contents
1.
Statement of the Problem: General Trends
2.
The Gains from Trade: a Theoretical Perspective
a.
Effects on Food Security
b.
Environmental Implications
3.
Hypothesis
4.
Methods: Data from 5 Latin American Countries
5.
Preliminary Results
6.
Next Steps
Statement of the Problem
Challenge
Rapid
demographic
changes
Diatary changes
Urbanization
Impact on
global food
demand
Bio fuel demand
How can we feed
the world in a
sustainble
manner?
Climate change
• effects on yields
• higher year tor year
volatility
Unevenly
distributed natural
resources
• land
• water
Food supply
Statement of the Problem
Current development on global food markets
Globalising world:
Supermarket buying power
• Trade liberalization by WTO
global commodity chains
• Bilateral FTA
Increasing
global farm
trade
Green
water
Implications on
water and land
resources
Blue
water
Altered product
quality
standards
Impacts on food
availability
(quantity) and
access (prices)
LUC
virtual water trade = solution of
sustainability prospects?
Food trade = increasing or decreasing food
security?
The Gains from Trade: A theoretical perspective
a) Effects of trade relevant to food security
Theory of comparative advantages
The effects of international trade are shown as:
the difference between the domestic price of a good without trade and the world
price of a good,
the difference between total supply quantities without trade and world trade.
Food importer
Food exporter
Price
Price
supply
Pa
supply
Pw
welfare gain
Pa
welfare gain
Pw
demand
import volume
Qdomestic
supply
Qa
export volume
demand
Qdomestic
demand
Quantity
Qdomestic
demand
Qa
Qdomestic
supply
Quantity
The Gains from Trade: A theoretical perspective
a) Effects of trade relevant to food security
Winners and losers of international trade:
EXPORTERS: domestic producers win, domestic consumers lose
IMPORTERS:
domestic producers lose, domestic consumers win
Trade raises the economic well-being of importing and exporting nations
Implications for food security
IMPORTER:
reduced food prices > if food cheaper in real terms depends on income
change
Specialization on non-food industry > promotes economic
development > poverty reduction
EXPORTER:
food prices higher > if food more expensive in real terms depends on
income change
Trade with food commodities > promotes economic development
> poverty reduction
The Gains from Trade: A theoretical perspective
b) Environmental implications
Basic trade theory does not consider environmental effects:
Food importer
C
Food exporter
Se
Price
Price
Se
D
C
S
B
Pa
Pw
A
B
Pa
A
D
Qdomestic
supply
IMPORTER:
S
Pw
D
Qa
D
Pdomestic
Qdomestic
demand
demand
Pa
Pdomestic
supply
s = marginal cost curve > if no environmental externalities included
se = marginal cost curve + environmental externatlities
Production substituted by imports > reduces environmental costs by area
ABCD > additional welfare gain for importing nations!
EXPORTER:
Welfare loss through environmental damage reduced by area ABCD
> still gain from trade?
The Gains from Trade: A theoretical perspective
b) Environmental implications
Open trade may provoke negative and positive effects on the
environment
+ PROS +
- CONTRAS -
More efficient use of natural resources
“Race to the bottom” > reduction of
environmental standards in order to
gain competitive advantage
Optimal global resource allocation
Increased scale of production >
increases pressure on the environment
Spread of environmentally friendly
technologies
Increased value of farmland >
uncompetitive small-scale farmers
migrate to sensitive ecosystems
Environmental Kuznets Curve
Hypothesis
Environment
Globalising food markets adds environmental
pressure on exporting nations and releases
pressure on importing nations
Food security
Globalisation of food markets helps achieving
food security for both importing as well as
exporting nations
Methods
Countries: Argentina, Brazil, Chile, Mexico and Peru
Dynamics of trade (1996-2008, source: own elaboration, data from FAO (2011):
1.
Most relevant crops > 80% imports, exports, production, area harvested
2.
Trade intensity (in thousand tons and value)
3.
Tradable, import-competing and non-tradable crops
Environmental effects in importing and exporting nations
1.
Green, blue and grey water footprint over time
2.
Yield increase vs. agricultural land expansion, rate of technology (number of tractors)
3.
Specialization (water intensive/water extensive products)
Shannon-Wiener Index:
Hs = magnitude of specialization in the production
of certain crops
s = magnitude of different crop categories
pi = relative abundance of crop i
Food security in importing and exporting nations
1.
Domestic food supply over time: (production + imports – exports)
2.
Consumer prices indices / income indices
3.
GINI-index
4.
International food price volatility, prices transmission analysis
Availability of food
Access to food
Preliminary Results
Trade dynamics
Total Latin American exports (left) and imports (right) of all crops (in thousand tons)
EXAMPLE: PERU
Trade dynamis of Peruvian imports (left) and exports (right) (in thousand tons)
EXAMPLE: BRAZIL
Trade dynamics of Soybean and
maize exports in Brazil (in thousand
tons)
Coffee: main importers constant: Europe, USA and Japan
Maize: bulk of exports:1996-2000 shift from MENA to LAC, 20002008 shift to Europe
Soybeans: bulk of exports: 1996-2000 EU and Japan with a minor
role China, 2000-2008 EU and China main importers, Iran and
Thailand enter market
Source: own elaboration, data from FAO (2011)
Preliminary Results
Environmental Effects
Argentine green, blue and grey virtual water imports (left) and exports (right) of all most relevant crops (in km 3)
Argentine green virtual water imports (left) and blue virtual water imports (right) (in km 3)
EXAMPLE:
ARGENTINA
Argentine green virtual water exports (left) and blue virtual water exports (right) (km 3)
Source: own elaboration, data from Mekonnen, M.M. and Hoekstra, A.Y. (2010) The green, blue and grey water
footprint of crops and derived crop products, Value of Water Research Report Series No.47, UNESCO-IHE, Delft,
the Netherlands. http://www.waterfootprint.org/Reports/Report47-WaterFootprintCrops-Vol1.pdf
Preliminary Results
Environmental Effects
Dynamics of area harvested of most important crops in Argentina (left), total area harvested (middle) (in thousand ha),
and change of relative share of area harvested (right) (in%)
Argentine’s production quantity (left) (in thousand tons), change of relative share of production (middle) (in%) and LUC (right) (in
thousand ha)
Trend to specialize in the production
of Soybeans in Argentina
Source: own elaboration, data from FAO (2011)
Slight increase of agricultural area
and decrease in forest area
Preliminary Results
Food Security
Dynamics of domestic supply quantity in Argentina (left), food supply quantity (middle) (in thousand tons) and calory
supply (kcal/cap/day)
Argentine’s per capita GDP over time (left) (in USD), change of producer price index (right) (in %, base 2008)
Source: own elaboration, data from FAO (2011), Instituto Nacional de Estadística y
Censos http://www.indec.gov.ar/principal.asp?id_tema=748 (2011)
Preliminary Results
Food Security
Development of world commodity prices (annual averages in nominal USD)
Argentine’s GINI-Index to measure income inequality
Source:World
own
elaboration,
data
from
Bank
(pink
sheet)
http://blogs.worldbank.org/prospects/world-bank-publishes-latest-commodity-prices-october2010
(2011),
World
Bank
Development
Indicators:
http://search.worldbank.org/data?qterm=GINI%20index&language=EN&format=html
Next steps
Development of a more precise theoretical
framework
Theory of environmental impacts of trade
Theory of impacts of trade on food security
Empirical analysis with data from 5 focal
countries
select more indicators suitable to answer the
questions
Statistical/econometric tests with the the data
Thank you for your attention!
Email:
insa.niemeyer@upm.es