Global food supply and demand stable despite regional imbalances
Food security has currently become an issue of heated discussion. A study of the world food supply and demand pattern and an analysis of the global food security situation is conducive to rational food-management decision making and eliminating people’s misgivings about the situation. From a global perspective, food supply and demand are basically balanced, but there is the problem of regional imbalances. In addition, the impetus for food consumption is insufficient. Examining food consumption since 2000, it has two major underpinnings. First, the rapid economic growth of developing countries meant that their people’s food consumption increased at a fast pace, especially for meat and fish, which brought an almost 6% annual growth in animal feed consumption. Second, the petroleum price has remained high, which has provided a strong incentive for the conversion of corn and sugarcane into ethanol and of vegetable oil into biodiesel.
However, the two factors have become weak at present and will remain so in the next decade. As personal income improves, the direct consumption for food shows an obvious downward trend. Moreover, the average consumption of main agricultural products in most emerging countries is close to saturation. For example, China’s consumption of vegetable oil is almost saturated, and the growth of people’s demand for meat is slowing. At the same time, due to the sluggish recovery of the global economy, the industrial consumption of food will be impacted substantially.
As for the regional imbalance, the main problem that the US has faced since World War II has been a food surplus; but most places around the world have faced food shortages—sub-Saharan Africa remains the region with the highest deficiency of food, and food security has not improved substantially in regions such as South Asia and North Africa.
Moreover, the global food stores have remained at a high level. But outside of China, the stores have been dropping. In the past 20 years, the average stock/consumption ratio of corn was 22%, that of soybeans was 25% and that of wheat was 30%. The ratio of wheat in recent years has remained stable at 38%, which is its highest level in the past 20 years. According to the criterion from the Food and Agriculture Organization of the UN, a stock/consumption ratio above 17% is considered safe, a ratio below 17% is considered unsafe, and a ratio below 14% is considered a food emergency. Judging from these statistics, the world food stock/consumption ratio remains at an acceptable level.
Over the past 20 years, the average annual growth rate of the price of wheat has been 0.21%, and the rates for the prices of the other three foods have been 0.3%. Not considering inflation, the actual food price on the whole will show a downward trend, and it can be predicted that the price of agricultural food in the upcoming ten years will also drop. The major reason is that the supply is slightly higher than the demand. Comprehensively speaking, the food price will remain basically stable at the current level, and the actual price will tend to drop if there is no heavy negative external shock.
Although COVID-19 will cause a short-term disturbance, the fundamental conditions of food supply and demand will not change in the long run. In the situation that the global economy is stagnant or even in recession, food demand will lose the important support from income growth. At the same time, as the petroleum price declines, enterprises will have no incentive to convert corn into ethanol, and the demand for deeply processed corn will tend to weaken. The corn price will have a significant impact on the prices of soybean-related products and livestock products. The pandemic will also bring many uncertainties to the food market. For example, food prices may lose elasticity, and food circulation and trade may possibly be affected by the pandemic. As a result, there is the possibility of food prices being hyped in the short term. But in the long run, a continuous soar in food prices is improbable.
Given the relatively stable global food price, China could accelerate its domestic agricultural transformation and upgrading. At the same time, it is necessary to implement a higher-level of agricultural opening up and appropriately release certain numbers of food inventories to ensure the domestic and international food supply chains function smoothly.
In addition, it is advisable to export food in a well-planned way to contribute to the stability of the global food market. At present, the main food categories affected by the COVID-19 outbreak are rice and other foods whose supply exceeds demand and whose stocks are sufficient in China at the current stage. Therefore, exporting a certain amount of rice would be conducive to stabilizing the global rice price and Asian rice production and consumption.
Mao Xuefeng is a professor from the School of Agricultural Economics and Rural Development at Renmin University of China.
edited by BAI LE