The three wise men (of agriculture)

There’s a new book coming out soon that should be of interest to many readers of this blog. It’s written by Tony Fischer, Derek Byerlee, and Greg Edmeades, and called “Crop yields and global food security: will yield increases continue to feed the world?” At 550 pages, it’s not a quick read, but I found it incredibly well done and worthwhile. I’m not sure yet when the public release will be, but I’m told it will be a free download in early 2014 at the Australian Centre for International Agricultural Research website.

The book starts by laying out the premise that, in order to achieve improvements in global food security without massive land use change, yields of major crops need to increase about 1.3% of current levels per year for the next 20 years. They explain very clearly how they arrive at this number given trends in demand, with a nice comparison with other estimates. The rest of the book is then roughly in two parts. First is a detailed tour of the worlds cropping system to assess the progress over the last 20 years, and second is a discussion of the prospects for and changes needed to achieve the target yield gains.

For some, the scope of the book may be too narrow, and the authors fully recognize that yield progress is not alone enough to achieve food security. But for me, the depth is a welcome change from a lot of more superficial studies of yield changes around the world. These are three men who understand the different aspects of agriculture better than just about anyone.

The book is not just a review of available information; the first part presents a lot of new analysis as well. Tony Fischer has dug into the available data on farm and experimental plot yields in each region, with his keen eye for what constitutes a credible study or yield potential estimate (think Warren Buffet reading a financial prospectus). This effort results in an estimate of yield potential and yield gap (the difference between potential and farm yields) by mega-environment and their linear rate of change for the past 20 years. The authors then express all trends as a percentage of trend yield in 2010, which makes it much easier to compare estimates from various studies that often report in kg/ha or bushels/acre or some other unit.

There are lots of insights in the book, but here is a sample of three that seemed noteworthy:

1. Yield potential continues to exhibit significant progress for all major crops in nearly all of their mega-environments. This is counter to many claims of stagnating progress in yield potential.
2. Yield gaps for all major crops are declining at the global scale, and these trends can account for roughly half of farm yield increases globally since 1990. But there’s a lot of variation. I thought it interesting, for example, that maize gaps are declining much faster in regions that have adopted GM varieties (US, Brazil, Argentina) than regions that haven’t (Europe, China). Of course, this is just a simple correlation, and the authors don’t attempt to explain any differences in yield gap trends.
3. Yield gaps for soy and wheat are both quite small at the global level. Soy in particular has narrowed yield gaps very quickly, and in all major producers it is now at ~30%, which is the lower limit of what is deemed economically feasible with today’s technology. One implication of this is that yield potential increases in soy are especially important. Another is that yield growth in soy could be set to slow, even as demand continues to rise the most of any major crop, setting up a scenario for even more rapid soy area expansion.

Any of these three points could have made for an important paper on their own, and there are others in the book as well. But to keep this post at least slightly shorter than the actual book, I won’t go on about the details. One more general point, though.  The last few years of high food prices has brought a flurry of interest to the type of material covered in this book. For those of us who think issues of food production are important in the long-term, this is generally a welcome change. But one downside is that the attention attracts all sorts of characters who like to write and say things to get attention, but don’t really know much about agriculture or food security. Sometimes they oversimplify or exaggerate. Sometimes they claim as new something that was known long ago. This book is a good example of the complete opposite of that – three very knowledgeable and insightful people homing in on the critical questions and taking an unbiased look at the evidence.

(The downside is that it is definitely not a light and breezy read. I assigned parts of it to my undergrad class, and they commented on how technical and ”dense” it was. For those looking for a lighter read, I am nearly done with Howard Buffet’s “40 Chances”. I was really impressed with that one as well – lots of interesting anecdotes and lessons from his journeys around the world to understand food security. It’s encouraging that a major philanthropist has such a good grasp of the issues and possible solutions.) 

The future of crop demand

It is common to hear statements about needing to increase food production by 70%, or even to double it, by 2050. In the past I’ve tried to avoid such statements, mainly because I hadn’t really dug into the sources behind them. But as part of prepping for a new class I’m teaching in the fall, I decided to take a closer look. And what I found, maybe not surprisingly, is a lot of confusion.

For starters, the baselines are often different, with some using 2000, some 2005-07, and some 2010. More importantly, the definition of “food” can be quite different, with some referring to cereal production, some to all calorie production, and some simply to the total value of agricultural output. And the studies use different assumptions about drivers of demand, like incomes or biofuel policies, so it’s often not clear how much differences are driven by assumptions in the models themselves vs. the inputs into the models.

Here’s a quick rundown of the common citations. First and foremost is the FAO, which produced the commonly cited 70% number. Last year they actually revised this down to 60% in their new projections, but not because the projected demand changed very much, but because they up-revised their estimate of actual output in 2006. The baseline for the FAO number is still 2006, so the 60% refers to an increase over a 44-year period. And the 60% refers to price-weighted aggregate of output, so that part of the 60% is simply a shift toward producing higher value stuff. Total cereal production only rises 46%, from roughly 2 to 3 billion tons per year. About two-thirds of that increase occurs by 2030. In terms of calorie consumption, global per capita consumption rises by 11%, and total calorie consumption rises by 54%.

The “doubling” statement, as far as I can tell, comes mainly from a 2011 paper by David Tilman and colleagues that said calorie demand would double between 2010 and 2050, and protein demand would rise by 110%. That was mainly based on extrapolating historical patterns of cereal and protein demand as a function of income, combined with projections of income growth. Coincidentally, doubling of production is also what we found in the baseline simulations we did for a climate adaptation analysis published earlier this year in ERL, and discussed in a prior post.

I won’t take time here to bore you with details of the methods in FAO vs. Tilman vs. others. But it seems a lot of the disparity is not so much the methods as the input assumptions. For example, FAO has world GDP per capita growing at an average rate of 1.4%, which they acknowledge as conservative. In contrast, Tilman has a global per capita GDP growth rate of 2.5% per year. Over a 40-year period, that translates to an increase of about 75% for FAO but 170% for Tilman! In our paper, we had a rate in between of 2% per year based on USDA projections. The reason we still get a doubling with lower income growth than Tilman is probably because we had a larger biofuel demand. (Note that my coauthors Uris Baldos and Tom Hertel have since switched to using income projections from a French group, which - maybe not surprisingly - are a little more pessimistic than the American ones.)  Now, global per capita growth rates only tell us so much, because what mainly matters for demand is how incomes grow at lower and middle income levels where people most rapidly increase consumption with higher income. Unfortunately, studies don’t usually report for the same sets of countries, and I’m too lazy to try to recompute. But the global numbers suggest pretty important differences at all income levels.

To me, it’s always useful to compare these projections to historical growth rates. Below I plot global cereal production from FAO since 1961. A couple of things are clear. First, production was about 150% higher in 2010 than 50 years earlier. Second, the growth rate appears pretty linear at a clip of roughly 28 million tons per year. A naive extrapolation gives an increase of 1.1 billion tons over a 40 year period from 2010 to 2050. For reference, I show what a 50% and 100% increase from 2010 trend levels would be. Obviously the 50% number (or the FAO’s 46%) are closer to this naive extrapolation than a doubling. 

This isn’t to say that the doubling number is definitely wrong, but just that it would mean a significant acceleration of cereal demand, and/or a significant shift of calorie consumption away from cereal-based products. It would be really nice if someone could systematically explore the sources of uncertainty, but my guess for now is that income growth is a big part of it. Unfortunately, this means our hope for narrowing uncertainty is largely in the hands of economists, and we know how good they or anyone else are at predicting GDP growth . But for those who work mainly on supply side questions, it’s mostly good enough just to know that demand for crop production will rise by 50% or more, because even 50% is a pretty big challenge.

(Note: for anyone interested in a summary of an unrelated recent paper on extreme heat, see here. And for an exchange we had about adaptation in the US see here. Wolfram told me a blog about the latter is coming, but as I told him, so is Christmas.)

World Supply Estimates

USDA’s monthly report is out today. A lot of attention is going to the new corn estimates, which put forecasted yields at 123 bu/acre. Trend yield for 2012 is about 160 bu/acre, so that would mean a 23% drop from trend. That’s still not quite as bad as 1988, which was closer to 30% belowtrend. As Wolfram showed in a previous post, the heat this year has been about as bad as ever, the rainfall not quite as bad as 1988. So overall I don’t think the downward revisions by USDA should come as much of a surprise.

What I hadn’t been paying as much attention to was the situation in other crops. Lost in the news was that USDA actually downgraded the forecast of global production not just for corn and soy, but also wheat and rice. Wheat downgrades are mainly related to the former soviet union, with Russia and Kazakhstan seeing “July heat and dryness across most of the spring wheat growing areas.” For rice, there have been lots of stories about the late monsoon in India, although conditions seem to be improving there a lot in the last week.

Overall, the production forecasts for wheat, rice, and coarse grains are all lower than what production was last year. This is not so unusual in a historical sense. For example, I plot below the global production for these three since 1961 (all points up to 2010 are from FAO, last 2 are estimates/forecasts from the latest USDA numbers). Gray lines show years where production of all three was down from previous year. Since 1961 there have been 7 other years where all three crops dropped, including three since 2000. 

Even if it’s not unusual, it’s a little surprising to me that it would occur in a year that had such high prices to begin with. A lot of economists argue that yields are very price responsive, for example farmers will put more fertilizer or labor into a crop if prices are high. Others say that yields and production are not very responsive in the short term, but over the long term production will respond (mainly because of expanding area). I’m not sure yet what to make of the recent data, but it certainly seems like a good test of theory. Hopefully somebody out there is calculating what production changes over the past 3-4 seasons, when prices have been high, can tell us about the likely value of supply elasticity.