Hot hungry future is both challenge and opportunity for agri

Growing demand, limited production capacity and the looming spectre of climate change present tremendous challenges and opportunities for the global agri sector, World Bank risk and markets advisor Marc Sadler told delegates at the 2015 Agri Investor Forum in Chicago on Thursday.

Producers can look forward to growing demand as emerging market consumers enter the middle class at accelerating rates, said Sadler. However, he warned that as emerging market appetites rise to meet those of the industrialised world, their tastes are unlikely to mirror those of the entrenched Western middle class. The result could potentially be unpredictable swings in consumer preference for staple crops. For example, consumers in northern China, traditionally heavy consumers of rice, are now showing a preference for wheat. In China’s traditionally grain reliant south, Sadler said, the trend is the opposite.

Consumer consumption patterns in emerging markets, he said, are both dramatic and ‘sticky’. Changes in taste that have arisen in the span of a generation, he said, are already entrenched and are not likely to change again in the near future.

Climate change represents a major challenge to meeting this rising demand, warned Sadler. Based on World Bank models presuming a 2 degree rise in temperature, Sadler warned that some of the hardest-hit agricultural regions in the world will also be among the most crucial. North America, Australia, Latin America and South Asia would all see significant downturns in agricultural production under even modest rises in global temperatures.

These twin problems will be inextricably linked in the coming years, said Sadler. Agricultural production is a major contributor to carbon emissions. As emerging markets continue to grow, they will also act as the laboratories for innovation, where attempts to increase production will be accompanied by efforts to limit carbon emissions. This, said Sadler, is because emerging markets still have the available land to devote to new agriculture production. By contrast, productive land in the West, and Europe in particular, is already in use or overtaken by other development.

“Unless we’re going to start bulldozing buildings and flats in the UK and Germany, we’re not going to get that land back [for agriculture],” said Sadler.

Such complex problems, said Sadler, represent a wealth of opportunities for those able to come forward with small innovations and solutions.

“We’re going to need to solve this with buckshot, not a silver bullet,” he said

New state attitudes toward agriculture will be crucial to feeding a global population of nine billion. According to Sadler, the World Bank is currently working to convince national governments that agriculture is a growth sector. Traditionally, he said, finance ministers have seen the agri sector as a “black hole” sucking in subsidies from national budgets. These year after year losses, he said, are not an inherent trait of the agriculture sector, but rather of persistent inefficiencies that exist across geographies. Both public and private actors will have to invest in eliminating these efficiencies, if the global food supply is to keep pace with demand in a sustainable way.