Policy Brief

Number PB11-12

july 2011

Markets vs. Malthus:

Food Security and the
Global Economy
Cu llen S. Hendrix
Cullen S. Hendrix, visiting fellow at the Peterson Institute for
International Economics, is Assistant Professor of Government at the
College of William & Mary. His areas of research include the economic
and security implications of climate change, food security, and civil conflict.
He is the coauthor of Science and the International Politics of Climate
Change (2010) and Food Insecurity and Violent Conflict: Causes,
Consequences, and Addressing the Challenges (forthcoming), and has
consulted for the World Food Programme and the Human Security Report
Project.
Note: The author wishes to thank Stephan Haggard and Marcus Noland
for their review comments and the publications team at the Peterson
Institute for all their work in preparing this brief. This study was supported
in part by Office Chrifien des Phosphates, the national Moroccan phosphates company and one of the worlds largest exporters of phosphates and
derivatives.
Peter G. Peterson Institute for International Economics. All rights reserved.

In the past four years, rising world food prices and the global
economic downturn increased the ranks of the worlds food
insecure1 from 848 million to 925 million by September
2010, reversing decades of slow yet steady progress in reducing
hunger (WFP and FAO 2010). While the human costs have
been considerable, the political consequences have been significant as well. Food prices sparked demonstrations and riots
1. 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 (WHO 2010). Food insecurity exists when people do
not have adequate physical, social or economic access to food as defined above
(FAO 2010).

1750 Massachusetts Avenue, NW

Washington, DC 20036

in 48 countries 200708. While prices receded in 2009, they

reached historic highs in February 2011and were once again
implicated in political turmoil. High food and fuel prices were
among the grievances motivating the demonstrations that led
to the ouster of Tunisian President Zine El Abidine Ben Ali
and Egyptian President Hosni Mubarak.
These crises have fed concerns of two skeptical groups. For
Neo-Malthusians, they are further evidence that food insecurity
is the inevitable consequence of overpopulation and outstripping the worlds finite resources. For food sovereignty advocates, the blame lays with the developing worlds dependence
on international food markets. The solution, food sovereignty
advocates argue, is to move toward national food self-sufficiency
programs, as a matter of both human and national security.
This brief assesses the claims of these two groups. The
Neo-Malthusian position is overblown. Population growth
and economic development contribute somewhat to price
increases, but there are few structural, resource-based impediments to increasing aggregate agricultural production. The
biggest near-term threats to food security are not dwindling
agricultural inputs and agricultural trade, but rather the
familiar problems of poverty and political barriers to market
accessin particular, the distortions created by agricultural
policy in the United States and European Union. A robust
trading system is the best way to address current food security
problems. In light of forecast changes in global patterns of
agricultural productivity, a robust trading system will become
even more important to ensuring that a world undergoing
climate change will be able to feed itself.
Rising World Food Prices and Price
V o l at i l i t y
Though only 15 percent of world food production is traded on
international markets, prices for the remaining 85 percent
which circulates in local, regional, and national marketsare
increasingly aligned with world prices. Significant price passthrough to domestic markets occurs even in heavily subsidized
markets like the European Union (Ferrucci, Jimnez-Rodrguez

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H E N D R I X S jGuRlAyP H2 0I C1S1

Number PB11-12

Figure 1 World food prices, UN Conference on Trade and Development (UNCTAD) and Food and Agriculture
Organization (FAO), 19602011
food price index (2000 = 100)
350
Food price index, UNCTAD
Food price index, FAO
300

250

200

150

100

50

1996
May 1
998
Janua
ry 200
0
Septe
mber
2001
May 2
003
Janua
ry 200
5
Septe
mber
2006
May 2
008
Janua
ry 201
0

mber

ry 199

Septe

Janua

1991
May 1
993

mber

ry 199

Septe

Janua

1986
May 1
988

mber

ry 198

Septe

Janua

Janua
ry 196
0
Septe
mber
1961
May 1
963
Janua
ry 196
5
Septe
mber
1966
May 1
968
Janua
ry 197
0
Septe
mber
1971
May 1
973
Janua
ry 197
5
Septe
mber
1976
May 1
978
Janua
ry 198
0
Septe
mber
1981
May 1
983

Sources: UNCTAD and FAO.

and Onorante 2010) and North Korea, the most autarkic food
market in the world (Haggard and Noland 2007).
Following a 20-year period of stability and relatively low
prices in world food markets, price increases and price volatility marked the 2000s, particularly the period from 2007 to
the present. Both the United Nations Conference on Trade
and Development (UNCTAD) and the Food and Agricultural
Organization (FAO) food price indices set record highs in
February 2011, eclipsing the previous highs that were set in
April 2008 (see figure 1).
Not only are prices up, but volatility is as well: during 2007
10, mean volatility in both indices was more than double that of
200007. Volatility in rice, the worlds most widely consumed
staple, has nearly tripled (although world markets are thin).
Volatility in both wheat and soybean oil has roughly doubled.
Near-term forecasts do not suggest a prompt return to

price normalcy. Recent projections by a host of organizations,

including the FAO, the US Department of Agriculture, and the
European Commissions Department of Agricultural and Rural
Development, all point to higher than normal agricultural
commodity prices and continued price volatility (FAO, 2010,
USDA, 2011, COM, 2011). The sense that a sea change has
occurred in food markets is pervasive. The question is why.
Malthus Reconsidered: Demographics and Dwindling
Natural Resources
One common argument is that too many mouths are chasing
too few calories, and that our capacity to meet our food needs
is bumping up against significant structural constraints.
Neo-Malthusians contend that and levels population growth,
along with increasing affluence and per capita levels of food

Number PB11-12
consumption causing exponentially increasing demands on our
natural resources. As the resource base dwindles, increases in
food production will not keep pace with increases in population, leading inexorably to shortages, land and water degradation, distributional conflicts, and widespread, chronic food
insecurity.
Neo-Malthusians like Paul Ehrlich, author of 1968s
Population Bomb, and the Club of Rome, which published
Limits to Growth in 1972, looked remarkably prescient in the
1970s, publishing their works just years before world food
prices skyrocketed and remained both high and extremely volatile for a decade, largely due to the oil shocks of 1973 and 1979
and the entrance of the Soviet Union as a major purchaser in
world markets.
Aside from price spikes in 198889 and 1996, however,
the next two decades were characterized by falling prices and
gains in eradicating world hunger.
Following the 200708 price spike, Neo-Malthusian
worries returned to the forefront, in the pages of the Wall Street
Journal2, in major academic and popular press books3, and in
Foreign Affairs (Against the Grain, January/February, 2010).4
Jeffrey Sachs, of Columbia Universitys Earth Institute, argued
that Malthus might have been right, at least with respect to
Africa.5 As prices ramped up in the summer of 2007, Niall
Ferguson, the Laurence A. Tisch Professor of History at Harvard
University and William Ziegler Professor at Harvard Business
School, wrote in the Los Angeles Times that a new era of dearth,
misery and its old companion, vice, are set to make a mighty
Malthusian comeback.6
There has been a clear upward linear trend in world food
prices over the last half-century. Expanding populations and
economic development in emerging economies have no doubt
increased demand, especially since 1990. But are higher prices
and increased volatility since 2000, especially the recurrent price
spikes, due to growing populations and increasing affluence?
The answer is yesbut only in part. These long run,
structural processes were well underway during the 1990s,
2. Justin Lahart, Patrick Barta and Andrew Batson, New Limits to Growth
Revive Malthusian Fears, Wall Street Journal, March 24, 2008.
3. Julian Cribb, The Coming Famine: The Global Food Crisis and What We
Can Do to Avoid It. Berkeley: University of California Press, 2009. Thom
Hartmann, Threshold: The Crisis of Western Culture. New York: Penguin Books,
2009. Paul Roberts, 2008. The End of Food. New York: Houghton Mifflin
Harcourt.
4. Carlisle Ford Runge and Carlisle Piehl Runge, Against the Grain, Foreign
Affairs 89(1): 8-14.
5. Jeffrey D. Sachs, Are Malthuss Predicted 1798 Food Shortages Coming
True? Scientific American, August 25, 2008.
6. Niall Ferguson, Dont Count Out Malthus, Los Angeles Times, July 30,
2007.

july 2011
a decade during which world food prices fell and volatility
was low. China grew just as fast during the 1990s as it did
in 2000s, and India grew only marginally faster (7 percent
versus 5.5 percent annually, on average). Global consumption
of wheat, maize and rice grew at 0.8, 1.0 and 2.1 percent per
year from 200007, but grew at 1.4, 1.4, and 2.6 percent from
19952000. Changing patterns of demand in fast-growing
developing economiesin particular, rising demand for beef,
which requires more grain to be used as feedmay be part of
the story, but again, these changes were well underway in the
1990s. The main effect of the increase in demand has been to
decrease world stockpiles, which were at record highs in the

The main effect of the increase in demand

has been to decrease world stockpiles
late 1990s but dwindled until 200910. Stockpiles are crucial
to mitigating price shocks for relatively price-inelastic goods,
such as basic foodstuffs. As Figure 2 demonstrates, there has
been zero aggregate growth in land under cereal grain cultivation since 1990; all increases in grain availability have been
due to increasing yields: growing more food per cultivated
hectare. As the rate of yield increase has slowed while demand
has increased in recent decades, stockpiles have fallen.
While this story is intuitive, it begs the question of why
markets have not adjusted by increasing production, either
through increases in yields or land under cultivation. Population
growth and economic development are structural, slow-moving
variables. Generally speaking, it is hard to explain price shocks
and excessive volatility with factors that are easily anticipated by
markets. No one was surprised that the world added 77 million
people between 2006 and 2007, and China and India, the two
emerging economies whose growing affluence is most often
cited as the cause of structural increases in demand, grew at
rates entirely consistent with their recent performance.
Total food production in both real and per capita terms
has increased significantly since 2000, even as real prices have
risen. World population has increased by 12.7 percent, but
world cereal production has increased by almost 20 percent,
and meat production by 23 percent. World cereals and meat
production per capita were higher in 2008, the worst year of
the previous crisis, than at any point in past 50 years. The world
has grown steadily more populous and wealthier, but food
production has increased as well. And while changing dietary
patterns are pushing up aggregate demand for foodmore
consumption of meat, which requires considerable expansion
of feed grain productionthe simple Neo-Malthusian notion,
that aggregate need is outstripping aggregate supply, is wrong.

Number PB11-12
Figure 2

H E N D R I X S Gj uR Al yP H2I0C 1S 1

Productivity gains and cultivated area losses, 19612009

yield (hectogram/hectare)

harvested area, (million hectares)

40,000

740
Yield
Harvested area

35,000

720

30,000
700
25,000
680
20,000
660
15,000
640
10,000

620

5,000

0
1961

1971

1981

A corollary to the carrying-capacity argument is that

while current rates of growth in the food supply are sufficient to keep up with increasing demand, we will soon run
up against significant resource constraints that make current
modes of agriculture fundamentally unsustainable. These arguments revolve around constraints on four major inputs: arable
land, water, oil, and fertilizers. Of the four, a lack of arable land
is least compelling. A 2009 joint OECD-FAO report finds
that currently available cropland could be more than doubled
by adding 1.56 billion hectares of cultivable land without
encroaching on forests and protected areas or limiting urban
expansion (OECD-FAO 2009).7 Unfortunately, most of it is
located in regionsSub-Saharan Africa and South America
that face producer disincentives arising from US and EU agricultural policies, and would require higher world prices, or
subsidies, in order to induce necessary investment.
Peak water (Gleick and Palaniappan 2010), peak oil
(Deffeyes 2008, Pfeiffer 2006) and peak phosphate (Cordell,
Drangert and White 2009, Elser and White 2010) advocates
contend that modern agricultural production is dependent
7. Though the report acknowledges that doing so would require intense use of
other inputs, principally freshwater.

24

1991

2001

2009

300

on the use of non-renewable inputs, which by definition will

eventually be depleted. Price increases will accelerate once peak
productionthe maximum rate of extractionis reached
and the resource enters a terminal decline in productivity and
recovery costs begin to increase. Peak arguments must be right
in the most general sense: oil, phosphate, and potassium are all
nonrenewable resources, and as such are finite.8 The question is
whether the arguments are right on geological or human time
scales.
While freshwater resources are globally abundant and
renewable, peak water advocates argue that localized scarcity
is a significant concern, particularly in the arid and semi-arid
regions that are dependent on groundwater aquifers. These
sources are technically renewable but can be depleted (Gleick
and Palaniappan 2010). More than ten percent of world agriculture depends on groundwater-sourced irrigation, including
several major grain producing areas such as Punjab and the
North China plain (FAO 2003a). In order for global agricultural production to keep pace with population and demand
8. Groundwater does not properly belong in this category, as recharge rates
for groundwater are highly variable, ranging from very high in wetlands to
virtually zero in arid climates.

Number PB11-12
growth, this figure will likely have to increase. However, the
1.6 billion additional hectares of potential arable land identified
by the OECD-FAO study would not be heavily dependent on
groundwater.
There is no doubt that rising oil prices have contributed
to recent food price increases. Agricultural commodity prices
increase 0.17 percent for every one percent increase in oil prices;
USDA estimates that a doubling of costs in energy-intensive
productsmostly fuel, but fertilizers to a lesser extent
increased export prices of corn, wheat, and soybean by 1520
percent from 200207 (Baffes 2007, Mitchell 2008). These
cost increases are smaller than those estimated for diversion of
food grains into biofuel production. Energy costs are part of
the story, and movement away from fossil fuel dependence is
a laudable goal, but the current food-price situation cannot be
blamed entirely (or even mostly) on higher energy costs.
Finally, others are concerned about major non-renewable
and non-substitutable fertilizer inputsprincipally phosphate.
A recent article in Global Environmental Change placed the
timing of peak world phosphate production at 2033 (Cordell,
Drangert and White 2009). However, this estimate was based
on world reserves of 16 billion metric tons (mt); the 2011
US Geological Survey Rock Phosphate world reserve estimate
was revised to 65 billion mt. Assuming peak methodology is
applicable to phosphate production, this pushes the peak
year of production back at least fifty years, to 2090, at which
time annual rock phosphate production would be have to be
456 million mtnearly two and half times total production
in 2010 (176.5 million) (USGS 2011a). To reach peak in that
year, annual production would have to grow at an average rate
of 1% for the next 72 years, almost double the average rate of
growth in the past twenty years (0.54 percent). Potash reserves
tell a similar story: peak production, given current reserve estimates, will occur in 2076 at 59 million mt. To reach peak in
that year, annual production would have to grow at an average
rate of 0.8 percent for the next 65 years, only half the average
rate of growth in the past twenty years.
While we can ill-afford to be sanguine about depleting any
non-renewable resources, the application of peak methodology
to phosphate and potash is problematic. On theoretical and
empirical grounds, peak methodology has been demonstrated
to produce unstable peak production and reserve estimates,
especially when applied to less comprehensively surveyed
resources like rock phosphate (Hendrix 2011, Giraud 2011).
The most basic reason is that peak production estimates are
dependent on present reserve estimates, but survey effort, and
thus reserve estimates, are highly price-elastic. Until 200708,
when food prices drove up demand for agricultural inputs,
prices for rock phosphate and potash had been falling for thirty

july 2011
years. Higher prices spurred both survey effort, i.e., the search
for new concentrations of valuable minerals, and the conversion of known geologic resourcesmineral concentrations that
have been sampled and surveyedto reserves, the extraction of
which is economically feasible given prevailing technology and
market prices. The result has been much higher reserves estimates. By comparative standards, survey effort is still relatively
low. Barclays Capital estimates that the energy industry will
spend $490 billion on oil and natural gas exploration globally
against world oil production valued at $2.5 trillion in 20109;
industry-wide spending on rock phosphate exploration, in
contrast, was $2.6 million against $21.6 billion in FY 201011.
Regarding potash, 9.5 billion mt are currently classified as
reserves, but 250 billion more are classified as resources (USGS
2011b). Aggregate availability of key fertilizer inputs does not
rank highly in terms of present causes for concern.
Moreover, increasing fertilizer input prices have not been a
large contributor to food price levels or volatility. Fertilizer input
price pass-throughs to food, even for input-intensive crops, such
as US maize, are low: a $100/mt price increase of diammonium
phosphate (DAP), the main phosphate-based fertilizer, only
increases maize prices by $0.79/mt. Potash ($1.18/mt) and
urea ($3.54/mt) have similar price pass-through levels.10 At the
then-historic high price levels for DAP reached in 2008, DAP
still only accounted for 9.3% of corn production costs. Rising
fertilizer costs have had small impacts on crop prices, even as
prices for both have risen. Rather, rising energy prices have been
driving both (Baffes 2009).
T h e A l lu r e ( a n d I l lu s i o n ) o f N at i o n a l
S e l f - S u ff i c i e n c y
While some point the finger at demographic patterns and
depleted resource bases, others lay blame on the international
trading system. Following the events of 200708 and in the
midst of the current crisis, the food sovereignty movement
has gained significant steam. Proponents of national food
sovereignty movements generally favor agricultural policies
that promote domestic production as an alternative to reliance
on food imports. Especially in times of crisis, such as war or
surging prices on global markets, food sovereignty holds the
allure of insulating domestic consumers and producers from
wild fluctuations in prices.
Beginning with the Agricultural Act of 1949 in the
United States and the Treaty of Rome in the European
9. Oil Industry Set for Record Exploration Spending in 2011, Voice of
America, December 29, 2010.
10. Elasticities were estimated by PotashCorp, based on USDA estimates.
PotashCorp, Why fertilizer? 2009.

Number PB11-12
Union, enhancing food self-sufficiency through programs of
domestic subsidies has been a goal of agricultural policy in the
developed world. Japans agricultural markets are characterized by even more massive distortions. In spite of significant
pressure during the Doha round of WTO negotiations, the
United States and European Union have been reticent to back
away from significant domestic support for agriculture, and
Japanese liberalization has been glacial. In the midst of the
200708 crisis, Michel Barnier, current EU Commissioner
for Internal Market and Services and then French Minister of
Agriculture and Fisheries, defended the EUs policy on food
self-sufficiency, arguing, Food is not televisions or cars. You
cant leave all that to the laws of the market.11
While food sovereigntyor reducing import dependency, at leasthas been on the agenda in the United States
and Europe for decades, it is back in vogue in the developing
world. In 1960, developing countries ran food trade surpluses
totaling $1 billion; by the beginning of the 21st century, deficits were the norm and 48 of 63 low income countries, and 45
of the 46 least developed countries, were net food importers.
Speaking this year at the World Social Forum in Dakar, former
Brazilian president Luiz Inacio Lula da Silva said that African
nations should pursue a green revolution and move toward
food self-sufficiency, noting, There can be no sovereignty
without food sovereignty.12
During the price spike of 200708, over 85 percent of the
105 emerging and developing countries surveyed by the World
Bank had taken some policy measures to reduce the transmission of world food prices to domestic consumers. While
these measures included a reduction of import restrictions,
they also included releasing food from reserves, price controls
and consumer subsidies, direct cash transfers, food-for-work
programs, food rations or stamps, and export restrictions, some
of which, particularly export restrictions, have large marketdistorting effects (FAO 2008, World Bank 2008, 2009).
Acute crises often call for extensive market interventions.
In the aftermath of these crises, however, renewed emphasis
has been placed on food sovereignty or food self-sufficiency
as a durable policy goal by many developing countries. Even
Qatar and Saudi Arabia, two arid countries with extremely
limited access to renewable water, announced plans to become
food self-sufficient through a mixture of increasing domestic
production and leasing farmland abroad. Qatar plans to
increase cultivated land by over 140 percent in the next

july 2011
decade using water from solar-powered desalinization plants.13
Olivier de Schutter, UN Special Rapporteur on the Right to
Food, recently called on the G20 to help developing countries
reverse dependence on food imports via producer subsidies
and protected markets.14
There is some evidence that agricultural protectionism
is rising. Since 2007, global average import tariffs on maize,
the main staple in much of Latin American and Africa, have
increased by 68 percent, while the percentage of duty free
maize imports has dropped by over a third (see figure 3). Tariffs
for wheat, however, have seen secular declines throughout the
period.
More damaging, however, has been the imposition of
export bans. Of the top five food-exporting emerging and
developing countries (Brazil, China, Argentina, Thailand and
Indonesia), only Thailand and Brazil did not further exacerbate the 200708 crisis by imposing export restrictions (FAO
2008). Export restrictions may have contributed as much as
35 percent to world rice prices and 25 percent to wheat prices
during the crisis (Martin and Anderson, 2010).
Export restrictions increase domestic food supplies, but
impose a variety of losses: in the domestic arena, producers
do not get accurate demand signals, nor do they benefit from
higher prices. This distorts incentives to invest in expanding
productive capacity, which is necessary to increase supply
in the long run. These restrictions are a crude means of
addressing acute food insecurity, as they subsidize consumption by comparatively well-off households, rather than just
by the poor. Moreover, export restrictions are classic beggarthy-neighbor policies, throwing costs of adjustment back onto
international markets.
While export bans flew in the face of long-run economic
logic and specific World Bank policy recommendations, doing
so earned political dividends. China, India, and Indonesia
enacted export restrictions that were largely successful in insulating domestic markets from international price pressures.
Incumbent governments in India and Indonesia were both
reelected in 2009, partly on the basis of their success in stabilizing food prices (Timmer 2010, FAO 2009). In Russia, both
the president and prime ministers approval ratings improved
following the August 2010 announcement of an export ban
on wheat, meslin, barley and rye.15
In the absence of major reform to subsidy policies in
13. Andrew England, Qatar gets taste for food self-sufficiency, Financial
Times, June 29, 2010.

11. Simon Taylor, If the CAP fits, the EU will grow, European Voice, January
31, 2008.

14. Olivier de Schutter, Food Crises: G20 needs Architects, not Firefighters,
Project Syndicate, January 28, 2011.

12. Drew Hinshaw, Africa Needs Green Revolution to Buffer Food Prices,
Lula Says, Bloomberg Businessweek Online, February 7, 2011.

15. Medvedev, Putins approval ratings go up after wildfirespolls, RIA

Novosti, September 3, 2010.

H E N D R I X S j Gu Rl yA P2H0I 1C 1S

Number PB11-12
Figure 3

Average tariffs on Maize imports, 200510

average ad vaolrem import duty, percent

percentage of imports duty free

25

60

Average ad valorem import duty, Maize

50

20

40
15
30
10
Percentage duty free

20

10

0
2005

2006

2007

2008

2009

2010

developed countries, market protectionism and/or higher

US ban on phosphate shipments to the Soviet Union in
Average
ad valorem
Import Duty,1980
Maizeand the German
% Dutypotash
Free embargo during World War
prices will be necessary for developing
countries
to achieve
food sovereignty. Some countries, such as Malawi and Zambia,
Ioccurred in radically different international environments
have transitioned from grain importers to grain exporters
than that which obtains currently: the United States was
on the basis of successful, though controversial, subsidy
punishing its chief rival for the invasion of Afghanistan, while
programs. The costs of these subsidy programs are quite high,
Germany was at war with its neighbors and trading partners.
amounting to more than 60 percent of their agricultural
Today, most of the major input exporters are WTO members
budgets, which crowds out needed investment in agricultural
or observers.
research and road networks (IRIN 2008). While these poliSecond, under the food sovereignty system, international
cies seem prescient in times of high food prices, it remains to
markets for basic foodstuffs would become even thinner, as
be seen whether Malawi and Zambia will be able to sustain
incentives to produce tradable agricultural surpluses in any
these subsidy programs at lower food prices, as the political
given country would diminish. Autarky is an inherently risky
realities of producer subsidies make them extremely difficult
proposition, and this risk increases proportionally with the
to remove.
number of other countries pursuing the same policies. These
There are other problems that could arise from the pursuit
risks are poorly understood, as they stem not just from natural
of self-sufficiency. First, modern food production relies on
variability in food yields but also from the more general failure
inputs that are sourced from global markets. Closing off
to reap gains from trade.
markets to food imports risks provoking retaliatory restrictions
If a single food autarkic country has a poor harvest, there
on inputs for which, in many countries, no domestic sources
is implicit (though not costless) insurance against hunger via
are available: 16 countries produce 95 percent of the worlds
international markets and the ability to import. However,
phosphate (Morocco and Western Sahara hold over 75 percent
autarky reduces both imports and exports, which diminishes
of currently estimated world reserves); 13 countries produce
capacity to earn the foreign exchange necessary for accessing
virtually all of the worlds potash. However, the most famous
world markets. A truly food sovereign world would trade risks
examples of self-imposed fertilizer export embargoesthe
that stem from price volatility on international markets for

3
7

Number PB11-12
risks that stem from self-insurance. Domestic grain reserves are
a potential source of stability, but their cost can be significant
(1520 percent of the value of the stock per year (Lin 2008)),
and extended periods of drought and/or successive crop failures
can tax the limits of a country to self-insure in times of stress.
Third, food sovereignty, whatever its theoretical merits, is
not a practical policy goal for many countries under most-likely
climate change scenarios, at least with present levels of technology. The forecast future effects of climate change are disconcerting for global food production. The Intergovernmental
Panel on Climate Change (IPCC) forecasts dramatic decreases
(>20 percent) in rainfall across broad swaths of North Africa
and the Middle East, Meso- and Central America and the
Caribbean, Southern Africa, the eastern Amazon basin, and
Western Australia, leading to an average decrease in the availability of water of 1030 percent (IPCC 2007). In addition,
dramatic rainfall increases (>20 percent) are forecast for the
higher latitudes of the Northern hemisphere and the Horn of
Africa (IPCC 2007).

In the aggregate, global output potential

is forecast to decrease by between
6 and 18 percent in areas currently
under cultivation by the 2080s
The IPCC also forecasts a 90 percent likelihood that variability in rainfall will increase, leading to more numerous heat
waves and dry spells and heavy precipitation events and flooding.
An increase in areas affected by drought is viewed as likely, as is
the forecast that future tropical cyclones, such as hurricanes and
typhoons, will become more intense and destructive. Moreover,
the IPCC forecasts a similar likelihood of an increase in extreme
sea level events, such as storm surges and abnormally high tides
that will inundate coastal areas.
Climate change will affect global food production in two
important ways. First, climate change will affect both how
much food is grown and where it is grown. Second, climate
change will increase the frequency of localized crop failures
due to more frequent extreme weather events such as droughts,
flooding, extended cold and heat waves, and cyclonic storms
(IPCC 2007). The first mechanism challenges the broad feasibility of food sovereignty for much of the globe, while the
second highlights the dangers of a world food system in which
production is highly geographically concentrated.
In the aggregate, global output potential is forecast to
decrease by between 6 and 18 percent in areas currently under

july 2011
cultivation by the 2080s, depending on the rate at which
atmospheric carbon stimulates plant growth (Cline 2007).
However, these aggregate effects mask dramatic regional
inequalities in agricultural production potential (see table 1).
Some major exporting countries at higher latitudes, particularly
the United States, Canada, Kazakhstan, New Zealand, Russia,
and Ukraine, are forecast to increase agricultural yields. Yields
in many tropical developing countries, including major rice
exporters Thailand, India, and Vietnam, are forecast to decline,
in some cases by up to 38 percent (Cline 2007). Overall, nonEuropean developing countries are forecast to experience yield
loses between 9 percent and 21 percent.
While expanding area under cultivation will offset some
of these productivity losses, many countries, especially in
Asia, North Africa and the Middle East, face significant land
constraints. India, projected to be the worlds most populous
country by 2030, already uses over 80 percent of its cultivable
land; Egypt, Iran and Turkey use over 100 percent, indicating
that farming is only sustainable through irrigation, which
requires significant investment in rural infrastructure.
Extreme weather events always present significant challenges for local production and livelihoods, but these localized
weather events can have global consequences when they strike
in major food-exporting countries and regions. Historic high
temperatures and wildfires in Russia and the Ukraine destroyed
crops in 28 regions, causing their 2010 grain harvest to drop
by a third, spurring export bans and roiling world markets.16
Former Yugoslav Republic of Macedonia, Kyrgyz Republic and
Moldova had joined their neighbors in banning wheat exports.
Drought in Australia and heat waves in Californias San Joaquin
Valley were further implicated in the 200708 price spike
(Mittal 2009).
Climate change thus presents two problems that suggest
diametrically opposed solutions. Greater concentration of
production in countries with favorable climatic conditions and
a robust trading system will be necessary for the world to feed
itself. At the same time, erratic climatic patterns mean that
geographic concentration of production poses significant risks,
and these risks are forecast to increase substantially.
P o l i t i c s , R at h e r t h a n M a lt h u s o r
Markets
There is a potential disconnect between the two food securities: food security as a component of human security (the
most conventional definition, used by health organizations
16. Dmitry Zaks, Russia may extend grain export ban: minister, Agence
France Presse, February 22, 2011.

j u l y 2 0 1 H1 E N D R I X S G

Number PB11-12
Table 1

Arable land availability and forecast productivity gains/

losses due to climate change

Region/Country

Current percentage
of Arable Land under
cultivation,
FAO estimatesa

Asia and the Pacific

Percent of productivity
loss/gain due to climate
change,
207099b

61.4

7.2

China

47.5

6.8

India

82.2

28.8

Thailand

64.6

15.1

Vietnam

60.2

2.0

Central Asia

59.0

21.1

478.3

28.1

55.6

4.1

Kazakhstan
Europe
France

50.2

7.3

Germany

42.7

11.7

Netherlands

51.1

6.9

Russian Federation

46.8

6.2

North Africa and Middle East

144.2

9.4

2892.6

28.0

Iran

384.8

18.2

Turkey

109.7

3.6

Egypt

North America

48.5

1.3

Canada

36.3

12.5

Mexico

47.4

25.7

USA

53.0

8.2

13.9

12.9

30.0

2.2

South and Central America

Argentina
Brazil
Sub-Saharan Africa
Democratic Republic of the Congo

9.2

4.4

14.2

16.6

0.7

1.9

Ethiopia

25.6

20.9

Nigeria

49.4

6.3

Sources:
a. FAO 2003a
b. Cline 2007, with additional calculations by author. Calculations based on estimates assuming gains from
carbon fertilization.

and NGOs), and food security as a component of national

security, national economic interests, and domestic political
power. From the national interest perspective, market interventions are a key component of food security because they
generate powerful constituencies that provide leaders with
consistent bases of political support.
Nowhere is this clearer than in US and EU ethanol policy.
US ethanol subsidies were $7.7 billion in 2009, and the US
ethanol industry consumed 40 percent of United States corn
production. Globally, biofuel production consumed 6%
of world cereals production (International Grains Council

2010). A World Bank research working paper estimates that

biofuel production contributed more to the 200708 crisis
than the weak dollar (which stimulates purchasing in markets
with relatively stronger currencies), rising fuel costs, and rapid
growth in China and India (Mitchell 2008).
Though initially driven by the goal of reducing the dependence on fossil fuels, ethanol now has its own political logic,
which funnels benefits to ethanol producers in politically
important Midwestern states. In particular, Iowas position as
the first step in the nominations for US presidential candidates makes stated support for ethanol a virtual prerequisite

Number PB11-12
for the US presidency. As such, ethanol subsidies are politically
rational but come with large externalities: biofuels pushed up
the prices on food, both directly on resources used for energy,
such as maize and vegetable oil, and indirectly because of substitutions in production or consumption.
Understanding this disconnect is key to understanding
how market interventions, designed to preserve the latter food
security, have been perhaps the most persistent threat to the
former type of food security.
These discussions also conflate acute and chronic food insecurity. Chronic food insecurity is a persistent lack of sufficient,
safe, nutritious food to maintain a healthy and active life, and is
generally caused by extreme poverty (WHO 2010). Acute food
insecurity refers to temporary gaps in access to the same, and

In the long term, removing agricultural

subsidies would likely have a
modest effect on world prices
may be caused by a variety of factors ranging from high prices
to breakdowns in delivery systems, economic recessions, natural
disasters, and extreme weather events, political turmoil, volatile
derivative markets, and conflict itself. The recent food price
spikes have led to widespread acute food insecurity. But most of
the policy measures directed at shielding consumers from rising
prices are not geared toward addressing more fundamental
causes of chronic food insecurity. These would include poverty,
lack of market access, and high levels of subsistence agriculture
coinciding with environmental degradation and marginal lands.
Market interventions, particularly farm subsidies, have
been massively successful at increasing food production in a
few select cases. The European Union, United States, and Japan
account for 91 percent of all domestic subsidy expenditures
by WTO members, while the EU alone accounts for almost
90 percent of export subsidies (Schnepf 2005). Though the
prevailing conventional wisdom is that the removal of subsidies in developed countries will provide broad benefits for the
developing world, the food security logic of developed country
subsidy policies is complex, as their removal would have both
long-term and short-term effects. In the long term, removing
agricultural subsidies would likely have a modest effect on world
prices and would raise incomes in the developing worldbut
most of the benefits would accrue to large net exporters of
agricultural products, such as Argentina, Brazil, and Thailand
(Birdsall, Rodrik and Subramanian 2005).
However, the short-term effects are more ambiguous.
While developed country subsidies distort incentives for

10

july 2011
developing country producers and increase food prices for
domestic consumers, they also keep food prices artificially low
in world markets. Thus, developed country subsidies increase
aggregate food production, and subsidize consumption in
developing countries while decreasing economic access to food,
via suppressed incomes, in more rural areas. Policymakers in
developing countries thus face a dilemma: in order to induce
investment in agricultural production and promote economic
development, prices need to be higher. But higher prices
decrease urban real incomes, fuel grievances, erode support for
governments, and lead in some cases to political turmoil.
As Nancy Birdsall and Arvind Subramanian point out,
the current situation is the worst of all possible worlds.17
When markets are stable and prices low, we have huge market
distortions that subsidize urban consumption in the developing world at the expense of taxpayers in wealthy countries
and the rural poor, which does little to alleviate poverty, the
root cause of chronic food insecurity. In times of crisis, markets
for food break down as countries institute export restrictions,
further exacerbating the problem and contributing to greater
acute food insecurity. Achieving price stability and adequate
supplies in times of high prices is thus a classic collective action
problem: all governments theoretically benefit from relatively
open markets, yet face domestic incentives to curtail market
access. If food-importing countries believe that markets will not
provide stable access to food, pressures to pursue problematic
food sovereignty programs will no doubt rise.
The same can be said for maintaining adequate stockpiles.
Food is not a market that should clear; there is a significant
global public good that arises from adequate stocks, which
cushion consumption against short-term supply shocks and
dampen prices and price volatility. Yet maintaining food stocks
is a costly enterprise for any country due to stock deterioration,
and globalization may have caused policymakers to become
overly optimistic about relying on this implicit source of insurance without creating new mechanisms to ensure an adequate
reserve. The ad hoc policies in this area have harmed more than
helped. The largest increases in grain stocks from 201011,
such as those in Ukraine and Russia, were achieved through
export bans and came at the cost of higher world prices.
W h at s to b e d o n e
The most pressing challenges to current food security, and
providing food security for future generations, are political
and economic, rather than Malthusian. Moreover, some can
17. Nancy Birdsall and Arvind Subramanian, Food and Free Trade, Wall
Street Journal Asia, April 25, 2008.

Number PB11-12
be addressed in the short term, while others will take longer.
Some solutions can be implemented unilaterally, while others
will require international cooperation.
US and EU biofuel mandates divert needed grains from
stomachs and stockpiles into gas tanks, and they do so inefficiently. Moreover, steep import tariffs on Brazilian sugar-based
ethanol, which is much more bio-energetically and economically efficient to produce, require US consumers and taxpayers
to trade off higher food prices against reduced dependence
on foreign petroleum when no such tradeoff need be made.
Currently, imported ethanol faces a 2.5 percent ad valorem duty
in addition to a $0.54 per gallon surcharge, which is greater
than the $0.45 per gallon tax credit under Volumetric Ethanol
Excise Tax Credit (VEETC), or blenders credit, that is the
backbone of US ethanol policy. The import tariffs, surcharges,
and VEETC are set to expire at the end of 2011, and should be
allowed to do so. The domestic politics of doing so, however,
are bound to be arduous, meaning that corn subsidies in some
form are likely to stay. The US electorates taste for the blenders
credit, however, may be on the wane. On June 16, the Senate
voted 73-27 to end the blenders credit, and though the amendment is unlikely to pass the House of Representatives for reasons
both political and constitutional (tax bills must originate in the
lower house), it should be taken as a positive sign.
If the US government and US taxpayers wish to subsidize
corn production, it is better that said subsidy has the positive
externality of generating consumable surpluses rather than the
negative externality crowding out food production and causing
higher food prices. Chief among the charms of this policy
lever is the fact that it is one of the few things that the US
government could do unilaterally to help bring down world
food prices. Technology subsidies would be better put to use
developing 2nd generation biofuels, which would mitigate the
carbon footprint and land-use changes to an even greater extent
than comparatively efficientbut still far from idealsugarand rapeseed-based ethanol.
Also in the near term, the international community must
act collectively to address export bans, which are individually
rational but impose massive costs on the entire system. Article
XI of the GATT allows for temporary quantitative export restrictions in order to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting
party, and generally require WTO members to consult with
and assess the potential effects on food-importing members,
though this restriction only applies to developing countries that
are net exporters of the commodity being restricted. This policy
is toothless, as the disciplines are extremely vague.
In light of the domestic political and social benefits export
bans can confer, there must be some sort of grand bargain that

july 2011
can ensure that export restrictions go the way of import restrictions, which had been on a downward trend until 2007. One
possible solution would be to replace producer subsidies in
developed countries with disavowal of export restrictionsor
at the least, integrating food trade more fully into the WTOs
dispute settlement mechanisms, which would allow WTO
members to impose retaliatory tariffs. Current proposals before
the G20, and in the Doha round, fall well short of this magnitude of policy change. However, there is a mismatch between
the costs and benefits of this trade. The costs would be borne
primarily by agricultural producers in developed countries and
incumbent politicians in food-exporting developing countries,
while the primary direct beneficiaries would be producers in
middle-income countries and urban consumers in importdependent developing countries. The United States, as both a
major food exporter that has resorted to export bans in the past
(export bans on wheat in 1979) and a key provider of producer
subsidies, will need to be the linchpin of any such negotiations.

The only long-term solution to achieving

price normalc y is to increase growth in
production faster than growth in demand,
Finally, the near-term must see renewed investment in
organizations like the World Food Programme (WFP), which
addresses acute food insecurity, particularly in conflict- and
famine-affected areas. In the midst of the last crisis, the international community responded by nearly doubling contributions to the WFP; as the current crisis began in 2010,
contributions fell in real terms (see figure 4). Considering
the relatively small dollar amounts involved, receding from
commitments to providing safety nets to those in most dire
need is inexcusable. Yet this is precisely what is happening.
The US budget deal, which averted a general government
shutdown on April 8, saw net cuts to US foreign food assistance: US FY 2011 spending on foreign food assistance was
pared back to FY 2010 levels; some $273 million less than
requested by the Obama Administration.
The only long-term solution to achieving price normalcy is
to increase growth in production faster than growth in demand,
which would allow buffer stocks to return to adequate levels.
Doing so can only be achieved with some mixture of increasing
yields and increasing land under cultivation. Yet this will require
some subversion of the price mechanism in order to achieve
necessary increases in output without causing acute food insecurity. Grain producers responded to surging prices in 200708
with the largest two-year increase in area under cultivation (4.5

11

H E N D R I jX u Sl yG 2R 0A P1 H1 I C S

Number PB11-12
Figure 4

Food prices and World Food Programme donations, 200011

billions of US dollars

Food and Agriculture Organization food price index

250
Real World Food Programme (WFP) donations (2005 US dollars)
Real US donations (2005 US dollars)
Food and Agriculture Organization (FAO) food price index (FPI)
200

4
150
3
100
2

50

0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011*

*as of April 3, 2011

percent) in over forty years, leading to lower prices in 2009

and the largest global stockpilesReal
since
2003.
The price
increase
WFP
Donaons
(2005
$USD)
necessary to incentivize such a change, however, had a heavy
human and political toll. Moreover, generating large stockpiles
is individually irrational, even as these stockpiles are needed to
buffer against rapid price increases.
Renewed buffer stocks could be achieved via continued
producer subsidies and/or public investment in yield-increasing
technologies. The current system sees the vast majority of
producer subsidies, over 90%, go to farmers in the United
States, European Union, and Japan, with a large portion of the
benefit passed on to consumers in the developing world. Yet
producer subsidies to farmers in developing countries would
likely produce much larger productivity gains and alleviate
poverty, which is the leading cause of chronic food insecurity.
Comparatively wealthy taxpayers in the United States have
been subsidizing consumption in the developing world for
years; perhaps the time has come to think about subsidizing
developing world production instead.
Public investment in yield-increasing technologies in the
developing world is badly needed, especially in Africa. Total
public R&D expenditures in Latin America and Asia and the
Pacific, two regions that benefitted greatly from the green

12 4

revolution of the 1960s and 70s, have increased significantly

since 2000:
spent $4.3(2005
billion
(in 2005 PPP prices)
RealChina
USA Donaons
$USD)
FAO FPIin
2007; Brazil, with a population of 193 million, spent only
slightly less than Sub-Saharan Africa, with a population of
700 million (Beintema and Stads 2011). When public and
private R&D investment is combined, expenditures in 40
upper-income countries still dwarf those of the middle- and
low-income countries combined. The silver lining to the FY
2011 US budget for food and agriculture aid is the $100
million marked for the Global Agriculture & Food Security
Program (GAFSP), a new World Bank-guided initiative aimed
at improving technical capacity and strategic food security
planning in countries in Africa and Asia most threatened by
widespread hunger.
The need to increase yields through specialization and
more intense use of technologywhich, in the short term,
would imply greater geographic concentration of production
in developed countriesmust also be weighed against the risks
posed by climate-related disasters. The 2011 Japan earthquake
and tsunami raised fears about global supply chains that stem
from geographic concentration of production, particularly in
electronics and car parts. If global food production were similarly geographically concentrated, localized flooding, drought,

Number PB11-12
and other natural disasters could significantly threaten global
food availability. The higher-latitude countries that stand to
benefit from climate changeat least in terms of agricultural
productivity and increasing potential cultivable landcannot
be the only ones to make gains. And if the rest of the gains from
technology accrue to middle-income and rapidly developing
countries like Brazil, Argentina, Thailand, India and China, the
poverty-alleviating effects of increased production will not reach
those countries in most desperate need.
But who will pay? Many middle-income countries appear
to be subsidizing their own technological advancement,
and some lower-income countries have instituted producer
subsidy programs. Sub-Saharan Africa is desperately in need
of a technology-driven green revolution but lacks either the

july 2011
wherewithal or the political will to fund it intensely, outside
of Botswana and Mauritius, two countries whose politics
and levels of development make them outliers. Thus, there
is a significant role for the United States and European
Union is promoting public spending on agricultural R&D in
Sub-Saharan Africa.
Food prices and food price volatility in the 21st century
have brought Malthusian concerns back to the forefront, and
food sovereignty back in vogue as a policy goal. While there are
significant hurdles to ensuring an adequate food supply, they
stem not as much from constraints imposed by our natural
environment as from political and economic constraints on
developing a better international food system that can ensure
adequate nutrition for all.

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The views expressed in this publication are those of the author. This publication is part of the overall programs
of the Institute, as endorsed by its Board of Directors, but does not necessarily reflect the views of individual
members of the Board or the Advisory Committee.

14