Drivers of Change in Global Agriculture and Livestock Systemsa

Prabhu Pingali and Ellen McCullough

Introduction

Over the past four decades, global agriculture has met the demand for food and nonfood products, as evidenced by growth in agricultural output and a long-term decline in commodity prices. Though prices for major commodities spiked sharply between the fall of 2007 and 2008, they returned to their pre-spike levels by early 2009 (FAO 2008a). Some evidence suggests the world may be experiencing a reversal of the sustained decline in commodity prices due to structural shifts in demand, such as rising demand for food and animal feed in emerging economies and for biofuels stock. However, the speed at which prices rose and fell indicate that the acute price crisis cannot be attributed to changing demand alone. Critical factors in the food price spike were supply shocks, especially drought in important export-oriented bread baskets, and commodity speculation, which may have been partially fueled by expectations of demand for biofuels stock. Reactionary policy measures, such as banning exports and grain hoarding, exacerbated the problem. The food crisis forced an estimated 100 million people into poverty and 70 million people into hunger (FAO 2008b, Ivanic and Martin 2008). Low income food deficit countries, such as Haiti, were hit hard by rising food import bills. Over the medium to long term, the United Nations Food and Agriculture Organization (FAO) and the Organization for Economic Cooperation and Development (OECD) predict that prices for major food commodities will increase some relative to 2000 levels, but much less dramatically than what was experienced in 2008 (OECD/FAO 2008). One important outcome of the food crisis was the unprecedented media and political attention paid to the agricultural sector, which resulted in substantial financial commitments to the sector. The attention faded as prices began to fall and as the financial crisis began to unfold.

Agricultural growth has contributed to improvements in food security, poverty reduction, and overall economic growth in much of the developing world. The success in increasing agricultural production has not, however, been shared uniformly across regions and countries. Many of the least developed countries, particularly in sub-Saharan Africa, and marginal production environments across the developing world continue to experience low or stagnant agricultural productivity, rising food deficits, and high levels of hunger and poverty. Economic development is almost always accompanied by a falling share of agriculture in GDP. Globally, the share of agriculture in total GDP has fallen from 9% in the early 1970s to 4% in recent years (World Bank 2006a). This number is considerably higher in developing countries, although it is also on the decline. Countries can be characterized by the extent to which agricultural growth has contributed to economic growth, and the extent to which the poor people in a given country depend on agriculture for income (World Bank 2008).

Agricultural economies are those in which growth in agriculture is a large contributor to GDP growth and where the majority of poor people are found in rural areas and are largely concentrated in sub-Saharan Africa. Failed states and areas of conflict are almost always marked by low per capita GDP and a high share of agriculture in the economy. Transforming economies are also characterized by rural poverty, but their economic growth no longer results predominantly from agricultural growth. Most transforming economies are found in Asia. Finally, urbanized economies are those in which the majority of poor people live in urban areas and agriculture is not a major source of economic growth. These urbanized economies are concentrated in Latin America. In agricultural economies, agricultural growth is a means of achieving both economic growth and poverty reduction. In transforming economies, agricultural growth is essential for poverty reduction but not necessarily for economic growth. In urbanized economies, there are still many opportunities for agricultural growth to contribute to poverty reduction, and there is also a compelling need to manage large labor flows out of the agricultural sector (World Bank 2008).

The process of agricultural development also occurs amidst a major organizational transformation of food systems that was well under way by the 1990s. These changes have been led by consumption trends but were reinforced by transformation in the retail sector as well as innovations in production, processing, and distribution technologies.

Drivers of Change

Four important driving forces in agriculture are together responsible for major global shifts in consumption, marketing, production, and trade: rising incomes, demographic shifts, technology in food chains, and the liberalization of trade and capital. It is not possible to tease out each driver's individual effects, so a brief introduction of the drivers will be followed by a more detailed discussion of their collective influence on food systems.

Per capita incomes have risen substantially in many parts of the developing world over the past few decades. In developing countries, per capita income growth averaged around 1% per year in the 1980s and 1990s but jumped to 3.7% between 2001 and 2005 (World Bank 2006b). East Asia has led the world with sustained per capita growth of 6% per year in real terms since the 1980s. In South Asia, growth rates have been consistently positive...