Provided it is not a consequence of governmental interference with market forces, cheap food creates far-reaching benefits. People struggling to survive on a dollar or two a day, of whom there are more than two billion around the world, are better able to feed themselves. Diminished food scarcity also leads to increased expenditures on goods and services other than food, thereby accelerating the economic diversification that is an integral feature of development. Moreover, low prices facilitate the savings required for investment and economic growth. Declining food scarcity has helped drive overall economic progress for decades, even as the demand for edible goods has been increasing at a fast clip.
Since the middle of the twentieth century, when the population was slightly less than 2.5 billion, human numbers have shot up, surpassing 6.0 billion shortly before 2000 and currently approaching 7.0 billion. Adding to food demand have been pronounced improvements in living standards, especially in China and other Asian nations where much of the population could not afford adequate sustenance little more than a generation ago. Yet food supplies have more than kept pace—mainly thanks to technological advances during and since the Green Revolution that have caused global yields of cereals (which comprise at least 60 percent of the human diet if the grain consumed by livestock is taken into account) to rise by 150 percent since the early 1960s.
The general tendency of food supplies to overwhelm food demand has registered in the marketplace. Corrected for inflation, prices of corn, rice and wheat declined by approximately 75 percent between 1950 and the middle 1980s, and then remained at historically low levels for another two decades.
Food prices spiked in 2007 and 2008 due to rising agricultural production costs resulting from higher energy prices, expanded conversion of corn and other crops into biofuels, and export restrictions implemented by nations such as Argentina, Ukraine and Vietnam. However, markets soon returned to normal, with prices in late 2008 a little above what they had been before the spike. Occasional upswings like those of 2007 and 2008 notwithstanding, food prices can remain at current levels or even decline further in the years to come. For example, the World Bank anticipates a deceleration of demand growth, mainly because population increases will dwindle as human fertility continues to decline and because the rate of growth for grain consumption per capita promises to slow down in emerging economies. In addition, ample opportunities remain for boosting production. Under the Bank’s baseline scenario, real food prices should be slightly below current levels in 2050, when human numbers will be at around nine billion and close to stabilizing.6 But there are caveats.
If governments continue to subsidize and mandate biofuel production, midcentury prices of crops could be 30 percent above current levels. Also, food could grow scarcer if global warming impairs agricultural productivity. Increased scarcity would weigh heavily on the poor, who spend most of their meager earnings on food. According to one group of researchers, as many as 26 million more impoverished children could be malnourished in 2050 because of adverse developments in agriculture resulting from climate change.
The question is: will global warming impair agricultural productivity?
This study investigates the potential consequences of climate change for global agricultural output and identifies policies that would reduce any negative impacts. Some researchers have estimated that climate change resulting from manmade global warming could reduce agricultural output significantly (compared to baseline assumptions), especially in tropical countries. As a result, food prices would rise and malnutrition worsen. However, these estimates assume minimal or no adaptation to changes in the climate. In particular, they assume that farmers will fail to switch crops, modify their use of water and other inputs, and adopt new technology. This view is unrealistic: faced with changing conditions, farmers will adapt – unless prohibited.
The study identifies what can and should be done to minimize the impact of climate change on crop production, including:
- Improved water management
- Development and adoption of new crops
- Development and adoption of other new technologies
- Subsidies to agricultural inputs and outputs, resulting in over-production and, in the case of biofuels, unnecessary diversion of crops to non-food uses.
- Political control of water supplies, which results in under-pricing of water (effectively an input subsidy), undermining incentives both to conserve water (leading to overuse) and to develop new supplies. This is likely to cause particular problems if the world warms and increases in evaporation exceed increases in precipitation.
- Politically imposed restrictions on trade.
- Politically imposed restrictions on the use of new agricultural technologies.
- Removing subsidies to agricultural inputs and outputs, including protection and mandates for the production of biofuel.
- Creating secure, transferable ownership of water rights and ensuring that these rights are vested in individuals and groups with an interest in the effective stewardship of that water, which might include irrigators and private water companies. Chile’s highly positive experience offers a model in this respect.
- Removing barriers to trade, including restrictions on the import and export of agricultural products.
- Removing burdensome restrictions on the use of modern agricultural technologies. While some regulation may be justified in order to protect health and the environment, in many countries regulations on technologies from pesticides to genetically modified crops are unjustifiably restrictive and result in the use of inferior technologies that are more harmful to health and the environment.