Global agricultural market trends and their impacts on European Union agriculture

The economic, political and climatic conditions in which farmers around the world have to make their production and investment decisions are changing dramatically. This study analyses the driving forces of changes in agricultural world markets and their implications for European Union agriculture for the time period 2003/05 - 2013/15. The impacts on European Union agriculture are quantified using of a multi-market-model. The mega-trend of declining world market prices has ended. Since the turn of the millennium world market prices for agricultural goods have been increasing. This trend can be expected to continue. Not only will prices have a tendency to increase, but also fluctuations of agricultural world market prices are likely to be higher in the future than they have been in the past. The reason for the positive trend in agricultural world market prices is that global demand growth outstrips the growth in global supply, and this trend will continue in the foreseeable future. The global demand for food will continue to grow mainly for two reasons. One is the continued growth in world population; the other is the sustained growth in per capita incomes in developing and newly industrialised countries, with corresponding increase of per capita food consumption. Global food supply will have difficulty keeping pace with the growth in demand. A key factor is that the globally available agricultural land is limited in scale. Consequently, to meet the needs of the rapidly growing world population the necessary production growth will have to a large extent be met by a rise in productivity on the land already being farmed today. However, this will be difficult to accomplish as global agricultural productivity growth has been in decline since the Green Revolution of the 1960s and 1970s. Moreover, the rapid expansion of bio-energy production diverts agricultural land and other inputs away from food production. In addition, increasing water scarcity is starting to act as a constraint to production growth, and climate change is also beginning to affect production. The quantitative results of the analysis for key crops demonstrates that, both in the European Union and globally, agricultural demand will grow faster than supply during the time period 2003/05 - 2013/15. European Union demand for grains can be expected to increase by 10-20 percent and by more than 50 percent in oilseeds. However, European Union supply of wheat and other grains can only be expected to increase by less than 10 percent, corn by 15-20 percent, and oilseeds by more than 30 percent. As a consequence, the price of wheat can be expected to increase by more than 10 percent and the price of corn and oilseeds by more than 30 percent. With regard to the trade balance, the net trade position of European Union agriculture can be expected to deteriorate. While there would be a reduction in net imports of corn, net imports of oilseeds are expected to increase by more than 70 percent. Moreover, it is foreseeable that for wheat the European Union will switch from being a net exporter to a net importer. The same is true for other grains. Two additional aspects warrant further considerations. These are achieving world food security and combating global warming. For the world’s poor, increasing food prices may become a matter of survival. The results of the analysis confirm that the developing countries will not even come close to securing food supply for their rapidly growing population through domestic production, even under the best of all realistic scenarios. Consequently, the increasing food import needs of developing countries can only be met if the industrialised countries produce more and export more food. However, growth in bio-energy production in the European Union will let the region revert back to a net importing position in wheat, and it will have to increase imports of oilseeds. This will reduce the European Union’s ability to help in the fight against starvation in the world, unless there would be an increase in agricultural productivity beyond what is anticipated in this analysis. Climate change is now widely accepted as a fact, and human activity is a contributing factor. While probably not being of major importance during the time period considered in this study, world agriculture will be affected by global warming in the long run. On balance, world food production will be negatively affected as a consequence of climate change. Climate change and the associated additional increase in world food prices will amplify hunger and malnutrition in developing countries. Food production will decline predominantly in the countries which are already characterised by increasing food import needs. These countries are also those that are unable to make the necessary investment in agricultural research to adapt food production to the changing climate and to cope with increase in demand. Higher food prices will also increase the incentives for deforestation in order to claim additional farm land. Deforestation however, is one of the most important causes of global warming. In the global picture, the European Union will be less affected by climate change. It may even benefit. Europe will become a more secure production location in comparison to other world regions. Consequently, it has to take responsibility to significantly contribute to world food security and also to combat global warming by utilising its production potential. To avoid negative repercussions and to fully capitalise on its production potential, it is imperative that the European Union employs strategies which increase overall agricultural productivity on the available agricultural land. Zusammenfassung In diesem Beitrag werden die Bestimmungsfaktoren der Entwicklungen auf den Weltagrarmärkten untersucht und deren Auswirkungen auf die EU Landwirtschaft für den Zeitraum 2003/05 - 2013/15 quantifiziert. Dabei zeigt sich, dass die weltweite Nachfrage nach Agrargütern stärker steigt als das Angebot, so dass der Trend der Weltagrarpreise positiv ist. Die gegenwärtig (Mai 2008) sehr hohen Preise werden indes nicht von Dauer sein. Vielmehr ist mittelfristig mit einem eher moderaten Preisanstieg von etwa 15-30 % im Untersuchungszeitraum zu rechnen. Bei Weizen und anderem Getreide (außer Mais) wird die Europäische Union wieder zu einem Nettoimporteur. Die zu erwartenden Entwicklungen auf den Weltagrarmärkten und die dadurch steigenden Preise für Nahrungsgüter werden zu einer ernsthaften Verschärfung der Welternährungslage führen. Da die Flächen, die weltweit für die Nahrungsgüterproduktion verfügbar sind, begrenzt sind, muss die Steigerung des Angebots, die notwendig ist, um die rasch wachsende Weltbevölkerung in hinreichendem Umfang mit Nahrungsgütern zu versorgen, weitgehend über eine Steigerung der Produktivität derjenigen Flächen erreicht werden, die bereits heute landwirtschaftlich genutzt werden. Eine Steigerung der Produktivität in der Weltlandwirtschaft führt zu geringeren Nahrungsgüterpreisen. Sie verringert daher auch die Anreize auf dem Weg der Brandrodung zusätzliche landwirtschaftliche Nutzflächen zu erschließen. Gegenwärtig tragen diese Brandrodungen 18 % zum anthropogenen Klimawandel bei. Dies ist mehr als der Klimaeffekt der weltweiten Industrieproduktion. Damit ist das landwirtschaftliche Produktivitätswachstum nicht nur zentral im Kampf gegen den Hunger auf der Welt, sondern es leistet auch einen wichtigen Beitrag zur Verringerung des Klimawandels.World agriculture, food security, climate change, agriculture productivity growth, Weltlandwirtschaft, Sicherung der Welternährung, landwirtschaftliches Produktivitätswachstum, International Relations/Trade,

Global agricultural market trends revisited: The roles of energy prices and biofuel production

Global agricultural market, trends energy prices, biofuel production, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Crop Production/Industries,

Decoupled Payments to EU Farmers, Production, and Trade: An Economic Analysis for Germany

After an extended process of reform the European Union has introduced direct payments to farmers which are decoupled from production decisions as a central element of its Common Agricultural Policy. They are also referred to as Single Farm Payments. In this paper we analyze the production and trade effects of this policy and its compatibility with WTO international trade rules. A survey of the literature suggests that the system of direct payments in its present form has effects which are analogous to a subsidization of agricultural land. Thus, they act to increase production and trade. Furthermore we quantify the total economic cost of production of selected commodities in the European Union and compare them to the price at which EU production is sold in foreign markets. Our analysis suggests that the costs of production in the European Union for key agricultural commodities are below international prices. It can be established that commodities for which the European Union is a net exporter are sold below cost, for extended periods of time and in substantial quantities. The EU system of decoupled payments to farmers, thus, acts to inflict economic injury to third countries. Under WTO rules, dumping can only occur when a country is an exporter. In this paper we demonstrate that on the markets included in the analysis dumping occurs on the market for wheat. The extent of injury is exemplified for Australia.European Union, Common Agricultural Policy, WTO rules, decoupled payments, Agribusiness, Agricultural and Food Policy, Food Security and Poverty, International Development, International Relations/Trade, Risk and Uncertainty,

The Economics of Consumer Protection in Developing Countries' Food Economy: The Case of Diarrhea Prevention and Treatment in Rwanda

Food Consumption/Nutrition/Food Safety, Health Economics and Policy,

The Economics of Alternative Strategies for the Reduction of Food-borne Diseases in Developing Countries: The Case of Diarrhea in Rwanda

The paper provides a methodology which is suitable for the analysis of the social cost of disease and the benefits and cost of health intervention by integrating public health analysis and economics. The approach developed in the paper is applied to food-borne diarrhea in Rwanda. The results suggest that simple treatments such as Oral Rehydration Therapy have a higher social rate of return than consumer protection via education.public health, consumer protection, social cost, economics of food-borne diseases, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, I12, I18, Q12,

Social rate of return to plant breeding research in Germany

This article focuses on the social rate of return to plant breeding investment in Germany between 1980-2000. Starting point of the analysis is the development of total factor productivity which is decomposed into the effects of factor input and research investment. Information on investment in plant breeding have been obtained via questionnaires sent to both private plant breeding companies and public research organizations. The empirical results suggest significant underinvestment in German plant breeding research, as the calculated social rate of return is in the range of 16 to 28%.agricultural research, plant breeding investment, social rate of return, Public Economics, Research and Development/Tech Change/Emerging Technologies,

The Economic Impact of Exchanging Breeding Material: Assessing Winter Wheat Production in Germany

Climate change impacts imply that the stabilization and improvement of agricultural production systems using technological innovations has become vital. Improvements in plant breeding are integral to such innovations. In the context of German crop breeding programs, the economic impact of exchanging genetic material has yet to be determined. To this end, we analyze in this impact assessment the economic effects on German winter wheat production that are attributable to exchanging parental material amongst breeders in the breeding process. This exchange is supported by the breeders’ exemption, which is an integral part of the German plant variety protection legislation. It ensures that breeders can freely use licensed varieties created by other breeders for their own breeding activities and aims to speed up the development of improved varieties. For our analysis, we created a unique data set that combines variety-specific grain yield, adoption, and pedigree information of 133 winter wheat varieties. We determined the parental pedigree of each variety to see if a variety was created by interbreeding varieties that are internal or external to its specific breeder. Our study is the first that analyzes the economic impact of exchanging genetic material in German breeding programs. We found that more than 90 % of the tested varieties were bred with exchanged parental material, whereby the majority had two external parents. Also, these varieties were planted on an 8.5 times larger area than the varieties that were bred with two internal parents. Due to lower adoption, these only contributed 11 % to the overall winter wheat production in Germany, even though they yielded more. We used an economic surplus model to measure the benefits of exchanging parental breeding material on German winter wheat production. This resulted in an overall estimated economic surplus of 19.2 to 22.0 billion EUR from production year 1972 to 2018. This implies tremendous returns to using the breeder’s exemption, which, from an economic perspective, is almost cost-free for the breeder. We conclude that the exchange of breeding material contributes to improving Germany’s agricultural production and fosters the development of climate-resilient production systems and global food security. © Copyright © 2020 Lüttringhaus, Gornott, Wittkop, Noleppa and Lotze-Campen

The Economic Impact of Exchanging Breeding Material: Assessing Winter Wheat Production in Germany

Climate change impacts imply that the stabilization and improvement of agricultural production systems using technological innovations has become vital. Improvements in plant breeding are integral to such innovations. In the context of German crop breeding programs, the economic impact of exchanging genetic material has yet to be determined. To this end, we analyze in this impact assessment the economic effects on German winter wheat production that are attributable to exchanging parental material amongst breeders in the breeding process. This exchange is supported by the breeders’ exemption, which is an integral part of the German plant variety protection legislation. It ensures that breeders can freely use licensed varieties created by other breeders for their own breeding activities and aims to speed up the development of improved varieties. For our analysis, we created a unique data set that combines variety-specific grain yield, adoption, and pedigree information of 133 winter wheat varieties. We determined the parental pedigree of each variety to see if a variety was created by interbreeding varieties that are internal or external to its specific breeder. Our study is the first that analyzes the economic impact of exchanging genetic material in German breeding programs. We found that more than 90 % of the tested varieties were bred with exchanged parental material, whereby the majority had two external parents. Also, these varieties were planted on an 8.5 times larger area than the varieties that were bred with two internal parents. Due to lower adoption, these only contributed 11 % to the overall winter wheat production in Germany, even though they yielded more. We used an economic surplus model to measure the benefits of exchanging parental breeding material on German winter wheat production. This resulted in an overall estimated economic surplus of 19.2 to 22.0 billion EUR from production year 1972 to 2018. This implies tremendous returns to using the breeder’s exemption, which, from an economic perspective, is almost cost-free for the breeder. We conclude that the exchange of breeding material contributes to improving Germany’s agricultural production and fosters the development of climate-resilient production systems and global food security.Peer Reviewe

Agricultural and Trade Policy Reform and Inequality: The Distributive Effects of Direct Payments to German Farmers under the EU's New Common Agricultural Policy

The Common Agricultural Policy (CAP) of the European Union has been in a process of reform since the early 1990s. As a result of reforms, agricultural market regulations have become more liberal and direct payments have been introduced which are to a large extent decoupled from production. In this paper, we analyze the effects of the direct payments to farmers on inequality of profits in German agriculture. For this purpose, we decompose measures of absolute and relative inequality in total farm profits into the partial effects of the direct payments and all other profit determinants. Key results of the analysis are that the system of direct payments under the New CAP accounts for about one third of the observed inequality in family farms and for almost two thirds of inequality in the large incorporated farms