The population of the world continues to grow, increasing demand for food, water and energy and placing increasing pressure on the environment. While food supplies have more than kept pace with rising population levels in the past, a combination of biofuels, rising standards of living and climate change, including drought, are stressing agricultural production and leading to significant increases in food prices. With food already representing 10-20% of developed consumer spending but 65% of developing nation consumer spending, this impacts most on the world's poor.

According to the UNDP, 40% of the world's population will suffer water shortages by 2050. Scientists forecast that there will be no commercial fishing by 2048 as present levels of fishing would cause stocks to decline to less than 10% of maximum catches recorded.

In the sections below, we list some of the key statistics and developments for the two years prior to December 2007. To see how this fits into our global outlook, we refer you to our World overview. For more recent information, we suggest you refer to the MBendi Blog: Signposts to 2020.

The UN FAO calculates food represents 10-20% of developed consumer spending but 65% of developing nation consumer spending. The UN World Food Program reported that unit food costs had risen by 50% in five years, with maize costs up 120% over the year to June 2007. A FAO / OECD report predicts food price increases of between 20% and 50% over the next ten years, due to reduced subsidies, greater demand for protein, higher production costs and the demand for biofuels.

In the year to June 2007, corn prices rose 60%, wheat prices 53% and soyabean prices 40%. Wheat prices reached record highs in August 2007 after Canada, the world's second largest producer, predicted a 20% drop in crop. By February 2007, strong demand in the USA and Europe for biofuels had led to prices of malting barley, used in making beer, rising by 85% since May 2006. Palm oil prices increased by 60% in 2006 and are expected to increase another 17% in 2007. The Lehman Brothers ingredients cost index rose 16.95% in 2H2006 and 14.9% in 1H2007.

In March 2007, the USDA forecast net returns from corn in 2007 could be US$ 334 per acre versus US$ 125 in 2006. Acreage planted to maize was expected to grow by more than 10% in 2007, mostly at the expense of soyabeans. A UN conference paper estimated rice cost US$ 331 per tonne to produce in the USA versus US$ 70 per tonne in Thailand and US$ 79 in Vietnam. US government handouts were 39% of rice farmers' income during 2002-2006.

An OECD report shows agricultural subsidies paid in 8 developing nations studies were considerably lower than the 30% average paid in OECD countries with Brazil (5%), South Africa (8%), China (8%) and Russia (17%). The International Obesity Taskforce criticised EU and US subsidies which cause the overproduction of sugar, oil and fat, the foods that cause obesity and warned the increase in obesity derived diabetes could overwhelm health budgets.

The World Bank 2007 World Development Report reports that development aid for the agricultural sector dropped from 17% in early 1980s to 3.4% in 2004. Currently 75% of the world's poor live in rural areas.

Fertiliser prices rose 50% during 2007 to their highest in a decade.

The FAO 2006 report says food insecurity affects 800 million people, most among the 1.2 billion extremely poor earning less than US$ 1 per day. International food aid provides 10 million tons of commodities worth US$ 2 billion to 200 million needy people. Food aid can distort local markets.

The UN Food and Agriculture Organisation and the US Department of Agriculture estimated that 2006 harvest won't be enough to feed everyone for the sixth time in seven years. The move to bio-fuels exacerbates the problem while increasing the amount of carbon dioxide in the atmosphere. Food production dropped from 2.6 billion tons in 1994 to under 2 billion tons in 2006, while food stocks dropped from enough to feed the world for 116 days in 1999 to 57 days in 2006.

In October 2006, the US Department of Agriculture reported world wheat stockpiles at the lowest level in 25 years, largely because of drought in Australia. Global wheat production was expected to drop causing stock levels to drop further to 20% below 2005. In March 2007, the USDA forecast that the US could produce its largest corn crop ever as corn acreage was expanded to 90.5 million acres, the largest since 1944, at the expense of soyabean and cotton.

The US Department of Agriculture said global wheat stocks will shrink to lowest level for 30 years. The level of stocks as a proportion of daily usage will be the lowest in 50 years. The US is expecting a record corn harvest in 2007, with yield per acre also up. Ethanol producers are expected to use 3.3 billion bushels of 13.3 bushels harvested. Land devoted to soyabeans in the USA is expected to decline from 75.5 million acres in 2006/2007 to 64.1 million acres in 2007/2008, with yields per acre down as a result of better quality soil used for corn. The Australian government revised its forecast of wheat production from 22.5 million tonnes to 15.5 million tonnes.

Russia, fifth largest wheat exporter in the world, considered banning exports of cereals following Ukraine, sixth largest, which imposed high export tariffs in July 2007. Ukraine, with 41% of the world export market in sunflower oil, is considering banning exports to keep local prices down. Indonesia imposed a 10% surcharge on crude palm oil exports. Indonesia expects to increase palm oil production from 17 million tonnes in 2007 to 27 million tonnes in 2015.

In April 2007, the USDA estimates global soyabean export volumes will increase 40% over the next 10 years with Brazil overtaking the USA as the major exporter. 2006 USA barley production was the lowest since 1936. The US Department of Agriculture estimates global barley production in 2007 will be the same as 2006, 10% down on 2005. Drought in Australia is an important factor here. The US Agriculture Department warned that stocks of corn, wheat and soya beans could drop sharply, with wheat stocks dropping to lowest level in 60 years.

67% of world grain is used as animal feedstock. Chinese demand for chicken and beef is growing at 20% pa. It takes 9 kg of grain and up to 100,000 litres of water to produce 1 kg of beef. Milk supplies from Australia, Europe and the EU have dropped due to drought and the phasing out of subsidies. By May 2007, the price of skim milk has risen 60% in six months to 7 times the average price for the past five years. 80% of the world's exported milk powder goes to developing countries. The world consumes 1.9 billion litres of milk per day.

USA maize used for biofuels will increase from 20% in 2006 to 32% in 2016 while EU biofuels production will increase 12-fold with 58% of rapeseed used for biofuels.

ABSA economists estimated South African taxpayers could fork up between R 2 billion and R billion per year for biofuels subsidies.

According to the UNDP, 40% of the world's population will suffer water shortages by 2050. According to the UN, 2.6 billion people drink water from unsafe and polluted sources. India's urban demand for water is expected to double and industrial demand to triple by 2025. China's urban demand for water is expected to grow 70% and industrial demand 104% between 2010 and 2030. The World Bank estimated that countries of the Middle East and North Africa consume 20% more water than they receive through rain and river flows, leading to depletion of groundwater supplies. This could get worse with global warming.

The US EPA estimates USA underfunding of $US 122 billion for waste water treatment and US$ 100 billion for drinking water over next 12 years. The global investment shortfall is estimated to be US$ 1,200 billion over the next 20 years. Most capital expenditure goes on leaking pipes.

Zenith International estimated global consumption of bottled water grew from 78 billion litres to 180 billion litres over ten years. Nestle, the world's biggest seller of bottled water, saw a 10% increase in sales in 1H2007. All US sales of bottled water doubled between 1997 and 2007 and now amount to US$ 10.8 billion per year. 40% of US bottled water is tap water. San Francisco and UK's DEFRA are leading the drive to ban bottled water because of the energy and plastic waste involved.

An article in Science forecasts that there will be no commercial fishing by 2048 as present levels of fishing would cause stocks to decline to less than 10% of maximum catches recorded.

In December 2006, EU fishing quotas were cut by about 10%. The US proposed that the WTO ban subsidies for catching wild fish. Fishing subsidies total more than US$ 30 billion pa, of which Japan and EU provide more than 20%.

Footnote: If you are aware of any highlights we have missed, please contact us with details.