Dr. Koen Deconinck
On the future of food and biofuels production and regional demand over the next 12 years.
As part of the IFA2030 fertilizer industry strategic review exercise, IFA has conducted a series of interviews with leading plant nutrition academics and industry experts about how they see the future for farming and fertilizers.
IFA:How do you see global food and agricultural commodity demand changing up to 2030?
Dr. Koen Deconinck : The OECD-FAO Agricultural Outlook 2018-2027 projects that demand for agricultural commodities will continue to grow, but at a slower growth rate than we have seen in the past decade. Demand for cereals, meat, fish, and roots and tubers are expected to grow at only half the pace seen in the last ten years, and not much faster than the global population growth of around 1% per year.
The slowdown is even more pronounced for vegetable oils, which saw exceptional growth in the past decade. However, there are exceptions. The demand for fresh dairy products will accelerate, driven by strong growth in India. For sugar, global demand is expected to continue growing at more or less the same rate.
IFA: Which factors do you see as contributing to slower demand growth?
Dr. Koen Deconinck : One of the reasons for slower growth is an increasing saturation in China. In the past decade, for instance, China accounted for more than two-thirds of the additional demand for pig meat. In turn, this stimulated the demand for animal feed. However, per capita consumption of pig meat is already at high levels in China, making it less likely that we will see the same growth in the next decade.
Another factor contributing to slower growth is the biofuels industry. Between the early 2000s and today, global biofuel production grew spectacularly, from less than 5% in 2000 to more than 15% today, contributing to a large increase in demand for maize and sugarcane (for ethanol) and vegetable oil (for biodiesel). Although the sector is dependent on policy decisions (which makes it harder to project future trends), it seems likely that biofuel production will grow more slowly in the future.
IFA:Which regions do see showing the highest growth?
Dr. Koen Deconinck: Overall, the developing world will be the source of most of the growth in both demand and supply. Strong growth in demand is expected in sub-Saharan Africa, where population will increase by 33% in the next ten years. This creates additional demand for cereals in particular. Population growth will also spur demand for cereals in the Middle East and North Africa, and in India.
On the supply side, in the coming decade agricultural output is expected to grow by more than 30% in Sub-Saharan Africa, by around 20% in South and East Asia, and by more than 15% in the Middle East and North Africa. Growth of around 15% is also expected for the Americas. In recent years, Eastern Europe and Central Asia (Russia and Ukraine particularly) have emerged as important cereals exporters, a trend which is expected to continue. Agricultural production will grow more slowly in Western Europe and in Oceania (Australia and New Zealand).
IFA: What role will biofuels play in the coming decade?
Dr. Koen Deconinck: The total demand for biofuels is a function of the overall demand for transport fuel and the mandated share of biofuels to be blended in conventional fuels. As mandates can change through policy decisions, this driver of demand is hard to predict. But in both the European Union and the United States, the demand for transport fuel is expected to decline in the coming decade, which limits the growth in global biofuels demand. For ethanol (made from maize and sugarcane), 90% of demand growth will come from developing and emerging economies, in particular Brazil. For biodiesel (made from vegetable oils), demand will fall in the developed world and all growth will come from the developing world.
Recently, China has suggested it could introduce a nationwide E1 mandate (that is, requiring 10% ethanol to be blended in gasoline) by 2020. The details of this policy are not clear, but this could potentially have a large impact. It might more than double China’s demand for ethanol, making it as big a market as Brazil and requiring a large amount of maize and/or sugarcane. However, no details on implementation have been announced yet, so it remains to be seen what will actually happen.
About Dr. Koen Deconinck
Dr. Koen Deconinck is an Agricultural Policy Analyst at the Organisation for Economic Co-operation and Development (OECD) in Paris. He holds a PhD in Economics from the University of Leuven (Belgium) and co-authored a book on “Quality Standards, Value Chains, and International Development” (Cambridge University Press, 2015). Prior to joining the OECD, he worked as a management consultant with Bain & Company, one of the leading global strategy consulting firms. At the OECD, he is part of the team responsible for producing the annual OECD-FAO Agricultural Outlook, which provides ten-year projections for the major agricultural commodities and regions. He is currently completing a major study on market concentration in seed and biotech markets worldwide.