9.1 billion by 2050 | Analyst takes issue with the agency’s population and land base figures
CHICAGO, Ill. — Much of the recent investor enthusiasm surrounding agriculture is based on a deeply flawed Food and Agricultural Organization report, says a grain industry analyst.
Ray Wyse, grain strategist and partner in S.W.A.T. LLC, doesn’t believe global demand will be anywhere close to what the United Nations agency is forecasting or that supply will be as constrained as it is projecting.
It means farmers should get used to $4 corn and other lackluster commodity prices.
The FAO issued a report in 2009 that said agriculture faces a massive challenge in feeding a world population forecast to reach 9.1 billion people by 2050. The estimate has since in-creased to 9.6 billion.
Feeding those extra 2.3 billion people would require a 70 percent increase in food production with only a five percent increase in arable land.
The report made headlines around the world and is still referenced at agricultural and food conferences.
It created a sense of optimism in the industry because it paints a picture of overwhelming future demand for agricultural products.
It has also become a mantra for seed technology companies, which use the report as ammunition against those opposed to genetically modified crops.
They say it will be impossible to feed all those new people without embracing biotechnology because the productivity gains will have to come from higher yields.
Wyse said the UN’s 9.1 billion population estimate has become gospel in farm circles and beyond. However, when he delved into the report he discovered it was the medium estimate in a range that went from a high of 16 billion to a low of six billion people.
“That’s a pretty good range,” Wyse told delegates attending the 2013 DTN Ag Summit. “You could drive a truck through that.”
Most of the population growth is expected to happen in Asia and Africa. Wyse said he has serious reservations about the African estimates.
For instance, the FAO predicts Nigeria will be home to 440 million people by 2050.
“This is going to be the equivalent of taking 140 percent of the U.S. population and sticking it in an area the size of Texas,” he said.
Nigeria would have a population density far greater than the United Kingdom, Japan, Israel or the Netherlands with nearly 500 people per sq. kilometre. Even more people are expected to squeeze into Burundi, which would be home to nearly 1,000 people per sq. kilometre.
Wyse, who spent many years working for Archer Daniels Midland and ConAgra, said it is easier to believe the estimates for Asia, where people have a long history of getting along well while living in close proximity.
That isn’t the case in Africa with its colonial legacy and history of tension between various tribes and religious sects. He said the Rwandan genocide and the current civil unrest in the Central African Republic are examples of Africans not getting along.
And then there is the never-ending conflict between Muslims and Christians.
“We haven’t been able to work that thing out since Abraham and Ismail in the Bible, but maybe the UN has got it right: this thing is going to get figured out and it’s going to work out,” he said with tongue in cheek.
Wyse believes, after taking a closer look at the population estimate, that it was done by a statistician and not somebody with a good grasp of history and sociology.
“I think we can definitely call into question the number of people that are coming to dinner,” he said.
Even if the UN population forecast turns out to be correct, he doubts all those people will have the wherewithal to buy food.
Wyse believes advancements in robotics will put a lid on what people can earn and buck the trend toward the rising standard of living in places like China and India.
He also takes issue with the UN’s notion about a limited land base on which to produce food.
He said growers in the former Soviet Union are farming 75 million fewer acres than they did at their peak, which is about the size of the entire U.S. soybean crop.
Brazil is double cropping 15 million more acres of corn than it did 10 years ago, or about the size of Iowa’s corn area.
As well, there are arable land basins that are not on the UN’s radar, such as the Democratic Republic of the Congo, which some analysts believe could become the Brazil of Africa, with 20 million acres of arable land that can produce three crops a year.
Another common argument is that yields can’t possibly keep up with demand.
Wyse said yield growth may be decreasing in the United States, where there has been maximum adoption of GM crops, but there is plenty of potential in countries where adoption is low.
Wheat yields in China used to be far below those in the U.S., but they are now much higher. It is a non-GM crop, and Wyse wonders what will happen when China fully embraces GM corn, rice and soybeans.
“When B.t. cotton came into China they jumped from about four bales a hectare (1.5 bales per acre) to about five bales a hectare (two bales per acre) just instantly,” he said.
Wyse said agriculture is moving out of the era of mandated biofuel demand and into one of normal human consumption demand.
“Everything that comes from here on out is going to be based on real growth, not mandated growth of demand. It’s going to be actual mouths to feed,” said Wyse.
However, he doubts there will be as many people as the UN is predicting, which means corn is generally going to stay in the $4 range.
He advised growers to lock in one or even two years of production during periods when prices pop.