18th AFA Int’l Annual Fertilizer Forum & Exhibition Feb., 7-9-2012, Sharm El-Sheikh , Egypt Maritim Jolie Ville Hotel
Food Security in the Arab World: Global Challenges and Regional Opportunities
Dr. Hadi Fathallah Economist, FAO Egypt
2/18/2012
FOOD SECURITY IN THE ARAB WORLD: GLOBAL CHALLENGES AND REGIONAL OPPORTUNITIES Hadi Fathallah Food and Agriculture Organization
Agenda
Global Price Volatility Interdependent
Fertilizer Outlook Global
Trends and Economic Outlook
and Regional Supply and Demand
Fertilizers and Farmgate Prices An
Interrelated System
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Global Price Volatility
Key Global Drivers of Agricultural Markets and Price Volatility
Weather and climate change
Stock levels
Energy prices
Exchange rates
Growing demand
Rising energy related production costs and resource pressures (productivity growth)
Trade restrictions
Financialization of agricultural markets
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Food Price Index and Major Food Commodity Price Indices in Current USD 450.0 400.0 Food Price Index
350.0 300.0
Meat Price Index
250.0
Dairy Price Index
200.0
Cereals Price Index Oils Price Index
150.0 100.0
Sugar Price Index
50.0 1/1990 10/1990 7/1991 4/1992 1/1993 10/1993 7/1994 4/1995 1/1996 10/1996 7/1997 4/1998 1/1999 10/1999 7/2000 4/2001 1/2002 10/2002 7/2003 4/2004 1/2005 10/2005 7/2006 4/2007 1/2008 10/2008 7/2009 4/2010 1/2011 10/2011
0.0
Source: Food and Agriculture Organization
Food Commodity Indices in Focus: 2008 – Present In Current USD 450.0 400.0 350.0
Food Price Index
300.0
Meat Price Index Dairy Price Index
250.0
Cereals Price Index
200.0
Oils Price Index
150.0
Sugar Price Index
100.0 50.0 0.0
Source: Food and Agriculture Organization
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Economic Outlook
The world economy has been recovering from 2010 after the spike in commodity prices followed by deep recession experienced in the preceding two years The global economic and financial situation impacts agriculture and demand for fertilizer. The world and regional fertilizer outlook, therefore, needs to be viewed from the perspective of the world economic growth Energy prices moved upward from 2010 as a result of higher demand outpacing supply. During the first half of 2011, the price of Brent crude crossed more than US$ 110 per barrel in a major part of the period. High crude oil prices provide strong incentives for biofuel production. They also pull agricultural commodity prices up, which in turn, provide strong incentives for higher fertilizer application rates In recent years, the production of biofuels has boosted demand for food crops such as maize, wheat, sugarcane, and soybeans, pushing up their prices because of increased competition among the food, feed and fuel sectors
Agriculture Outlook
FAO Agricultural Outlook expected global wheat output to increase by 3.2 percent up to nearly 674 million tons, in 2011 from the 2010 reduced crop, mostly reflecting improved yield prospects. World production will not be sufficient to meet the expected demand, in spite of demand not rising as fast as in the previous season Against the rising prices of agricultural commodities, the prices of fertilizers have also marked significant increase since 2010. For instance, the index (2002-04 =100) of FOB price of DAP increased from 176 in 2009 to 263 in 2010 and moved further up at 323 in the first half of 2011 The food price index in 2011 at 233 crossed the earlier peak of 200 in 2008. Under such scenario, the high agricultural commodity prices provide incentives for farmers in market-oriented economies to invest in fertilizers and other inputs for higher productivity
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Comparative Commodity Indices in Current USD
2000 1800 1600 1400 1200
Agr: Food, 2005=100, current$
1000 800
Crude oil, avg, spot, $/bbl, current$
600
Fertilizers, 2005=100, current$
400
Gold, $/toz, current$
200 2008M01 2008M03 2008M05 2008M07 2008M09 2008M11 2009M01 2009M03 2009M05 2009M07 2009M09 2009M11 2010M01 2010M03 2010M05 2010M07 2010M09 2010M11 2011M01 2011M03 2011M05 2011M07 2011M09 2011M11
0
Source: FAO; World Bank; IMF; International Financial Statistics; Shearson Lehman Brothers, Metal Market Weekly Review; Thomson Reuters Datastream; Platts Metals Week.
Fertilizer Index vs Food Index 600 500 400 300
Fertilizers, 2005=100, current$
200
Food Index
100
2008M01 2008M03 2008M05 2008M07 2008M09 2008M11 2009M01 2009M03 2009M05 2009M07 2009M09 2009M11 2010M01 2010M03 2010M05 2010M07 2010M09 2010M11 2011M01 2011M03 2011M05 2011M07 2011M09 2011M11
0
Source: FAO; World Bank; Fertilizer International
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Food Security Situation in the Region: A Context
Structural issues: Food deficit, poverty, unemployment, high income growth, higher population growth rate, increased urbanization, single sector economies, scarce natural resource (water and land) New and emerging challenges: Political and social unrests, civil insecurity, low intensity armed conflict, cross border population movement, slow down of economic activities (tourism and associated service sectors), food inflation
Key Regional Agricultural Updates to Note
Good harvest was recorded in all the countries in North Africa subregion due to favorable weather conditions during the past season. Less favorable harvest in Levant sub-region due to drought Cereal import requirement to decrease for the next marketing year in Morocco, Algeria, and Egypt Impact of the recent drought, increased water scarcity, inadequate input etc still remains problematic in some countries like Libya, Syria, Jordan, Iraq and Lebanon Food price inflation continues to increase in most of the countries of the region
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Fertilizer Outlook
Fertilizer Outlook



Consumption of fertilizer nutrients increased significantly in 2010 and is expected to grow in a stabilized way during the following years of the forecast period World demand for total fertilizer nutrients is estimated to grow at 2.0 percent per annum from 2011 to 2015. The demand for nitrogen, phosphate, and potash is forecast to grow annually by 1.7, 1.9, and 3.1 percent, respectively, during the period West Asia is in surplus in all the three nutrients. It is a major contributor to global nitrogen supply. The sub-region has a small surplus of phosphate for exports which is expected to grow in the coming years
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Fertilizers Index and Major Fertilizer Commodity Prices in Current USD 1400 1200 DAP, $/mt, current$ 1000 Phosphate rock, $/mt, current$
800
Potassium Chloride, $/mt, current$
600 400
Fertilizers, 2005=100, current$
200
TSP, $/mt, current$
2008M01 2008M03 2008M05 2008M07 2008M09 2008M11 2009M01 2009M03 2009M05 2009M07 2009M09 2009M11 2010M01 2010M03 2010M05 2010M07 2010M09 2010M11 2011M01 2011M03 2011M05 2011M07 2011M09 2011M11
0
Urea, E. Europe, bulk, $/mt, current$
Source: FAO; Fertilizer Week; Fertilizer International; World Bank
Demand for Fertilizer Nutrients Total fertilizer nutrient (N+P2O5+K2O) consumption estimated at 170.7 million tons in 2010 is forecast to reach 175.7 million tons in 2011. With a successive growth of 2.0 percent per year, it is expected to reach 190.4 million tons by the end of 2015 Nitrogen (N) :
The world nitrogen fertilizer demand is expected to increase from a total of 105.3 million tons in 2011 to 112.9 million tons in 2015 at the annual growth of 1.7 percent. The share of increase in Africa is expected to be around 3 per cent, to be contributed mainly by Egypt, Morocco, Nigeria and South Africa Phosphate (P2O5)
The world phosphate fertilizer demand is expected to increase from a total of 41.7 million tons in 2011 to 45.0 million tons in 2015 at a growth rate of 1.9 percent per year Potash (K2O)
Potassium fertilizer demand in 2011 is projected to show an increase of 5.3 percent over 2010. The world potash fertilizer demand is expected to increase from a total of 28.7 million tons in 2011 to 32.5 million tons in 2015 with an annual per annum growth of 3.1 per cent.
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World Demand of Fertilizers Nutrient 2011-2015 (Thousand Tons) 200,000.00 180,000.00 160,000.00 140,000.00 Nitrogen (N) Phosphate (P2O5) Potash (K2O) Total (N+ P2O5+K2O)
120,000.00 100,000.00 80,000.00 60,000.00 40,000.00 20,000.00 0.00 2011 2012 2013 Source: Food and Agriculture Organization
2014
2015
World and Regional Growth in Fertilizer Demand, 2011-2015 18.00% 16.00% 14.00% 12.00% 10.00% 8.00%
Total (N+P2O5+K2O) K2O
6.00% 4.00% 2.00%
P2O5 N
0.00% -2.00%
Source: Food and Agriculture Organization
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Supply of Fertilizer Nutrients
Nitrogen (N)
Nitrogen the total ammonia capacity was 163.2 million tons in 2011. As a result of successive addition in capacity each year, total ammonia capacity is expected to rise to 188.7 million tons in 2015. From 2011 to 2015, there would be a total addition in supply of 21.8 million tons. The total supply of ammonia (as N) would thereby rise to 156.3 million tons in 2015 Phosphate (P2O5)
A modest increase of 2.9 million tons in 2011 increased the total supply to 51.4 million tons. By 2015, it is expected to rise to 57.6 million tons. Of the total 6.2 million tons addition in world capacity between 2011 and 2015, 46 percent addition would take place in Asia, mainly in East Asia (China) and West Asia (Saudi Arabia and Jordan). About 37 percent capacity would be added in Africa (Morocco and Tunisia) According to IFA, between 2010 and 2015, close to 34 new phosphoric acid units are planned for completion, of which 15 would be located in China, 6 in Morocco and 3 in Saudi Arabia. After taking into account operating rates, the world supply of phosphoric acid (as P2O5) is estimated at 39.6 million tons in 2010, which is estimated to rise to 42.1 million tons in 2011. A modest increase is expected annually, and by 2015, the total supply will be 47.8 million tons Potash (K2O)
World potash capacity is estimated at 42.7 million tons (as K2O) in 2010. A small increase of 1 million tons is expected in 2011 with the total rising to 43.7 million tons. By 2015, the total capacity is likely to be 59.6 million tons. After considering operating rates, world supply of potash (as K2O) is estimated at 38.9 million tons in 2010, which would rise to 39.8 million tons in 2011. A good increase is expected annually from 2012 and by 2015, the total supply may touch 52.3 million tons
World Supply of Nutrient Fertilizers, 2011-2015 (thousand tons) 300000
250000
200000
Ammonia (as N) Phosphoric acid (as P2O5) Potash (as K2O) Total
150000
100000
50000
0 2011
2012 2013 2014 Source: Food and Agriculture Organization
2015
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Regional Share of World Increase in Ammonia (as N) Supply, 2011-2015
West Europe 0%
Central Europe 0%
East Europe and Central Asia 7%
East Asia 19%
Oceania 5% Africa 23%
South Asia 20%
Latin America 14%
West Asia 10%
North America 2%
Source: Food and Agriculture Organization
Regional Share of World Increase in Phosphate (as P2O5) Supply, 2011-2015 South Asia 2%
West Europe East Asia 0% 5% East Europe and Central Asia 12%
West Asia 29%
Central Europe 0% Oceania 1%
Africa 34% Latin America 13%
North America 4% Source: Food and Agriculture Organization
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Regional Share of World Increase in Potash (as K2O) Supply, 2011-2015
West Asia 0%
South Asia 0%
Central Europe West Europe 0% 0% East Asia 15%
Latin America 9%
East Europe and Central Asia 28%
Oceania 0% North America 48%
Africa 0%
Source: Food and Agriculture Organization
Regional Fertilizer Situation Africa
Its share in world consumption of nitrogen is 2.7 percent, phosphate 2.4 percent and potash 1.7 percent The main consumers of fertilizer in the region are Egypt, Morocco, Nigeria and South Africa The growth rate in demand for nitrogen, phosphate, and potash is expected to be 1.9, 3.3, and 4.3 percent, respectively between 2011 and 2015. The fertilizer nutrient supply/demand balance indicates that the region would remain a major exporter of phosphate, followed by nitrogen. For potash, the region would continue to depend solely on import West Asia
The share of West Asia in world consumption of nitrogen is 3.0 percent, phosphate 3.0 percent and potash 0.9 percent Total fertilizer consumption in West Asia is forecast to grow by 3.2 percent per year from 2011 to 2015. The demand for nitrogen and phosphate is expected to grow by 2.9 each and phosphate by 6.7 percent during the period The sub-region is in surplus in all the three nutrients. It is a major contributor to global nitrogen supply. The sub-region has a small surplus of phosphate for exports which is expected to grow in the coming years
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Africa Nitrogen Supply, Demand and Balance (Thousand of Tons ) 14000 12000 10000
World Nitrogen Supply, Demand and Balance (Thousand of Tons ) 200000
8000 6000
180000
4000
160000 2000
140000
0
120000
2010
2011
2012
2013
2014
2015
100000 80000
West Asia Nitrogen Supply, Demand and Balance (Thousand of Tons)
60000 40000
18000
20000
16000 14000
0 2010 2011 2012 NH3 Capacity (as N)
2013 2014 2015 NH3 Supply Capability (as N)
N Other Uses
N Available for Ferts.
N Fert. Consumption
Potential N Balance
12000 10000 8000 6000
Source: Food and Agriculture Organization
4000 2000 0 2010
2011
2012
2013
2014
2015
Africa Phosphate Supply, Demand, and Balance (Thousands of Tons) 12000 10000 8000
World Phosphate Supply, Demand, and Balance (Thousands of Tons) 70000
6000
60000
4000
50000
2000
40000
0 2010
30000
2011
2012
2013
2014
2015
20000
West Asia Phosphate Supply, Demand, and Balance (Thousands of Tons)
10000 0 2010
2011
2012
2013
2014
2015
-10000 H3PO4 capacity H3PO4 industrial demand P Fert. consumption/demand Non-H3PO4 Fert. demand
H3PO4 supply capability H3PO4 available for fertilizer H3PO4 Fert. demand Potential H3PO4 balance
Source: Food and Agriculture Organization
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2010
2011
2012
2013
2014
2015
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World Potash Supply, Demand, Balance (Thousands of Tons ) 800 600
World Potash Supply, Demand, Balance (Thousands of Tons ) 70000
400 200 0
60000
2010
2011
2012
2013
2014
2015
-200
50000
-400
40000
-600
30000
-800
20000 10000 0 2010
2011
2012
2013
2014
Potash Capacity Potash Supply Capability Industrial Demand and other demand Available for Fertilizer Potash Fertilizer Consumption/demand Potential K2O Balance
World Potash Supply, Demand, Balance (Thousands of Tons )
2015 4500 4000 3500 3000 2500
Source: Food and Agriculture Organization
2000 1500 1000 500 0 2010
2011
2012
2013
2014
2015
Fertilizers and Farmgate Prices
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Farmgate Prices and Price Volatility
At FAO, we look both at Retail Prices and Farmgate Prices, as Food Security includes both the Consumers and Farmers Evidence from other regions, suggests that, in countries where retail prices increased during the world food crisis, farmgate prices also increased But the volatility of prices during the crisis increased risks for farmers and will not promote longer-term investment by smallholders. The magnitude of supply responses in developing countries will be shaped by transmission of world prices not just to the retail level, but also to the farm level
Interrelated System: We all depend on each other
Between 2001 and 2008, world prices for nitrogen, phosphorus and potassium fertilizers all increased by more than world grain prices. The price of urea, a prime source of nitrogen and one of the most widely used fertilizers, more than quadrupled in real terms from 2001 to 2008. To the extent that these higher world prices were passed on to farmers, they reduced farm profitability and hence potential supply response. However, the extent to which fertilizer prices cancelled out farmgate price increases is probably less than commonly believed. The cost of fertilizer used is much less than the gross value of the crop produced, and it is the relative magnitude of these two quantities that determines the net impact of fertilizer price on profitability. Example: Between 2007 and 2008, fertilizer costs more than doubled, seed costs nearly doubled, labour costs increased substantially and yields fell, but a 57 percent increase in paddy prices was enough to lead to an increase in profits of 34 percent. However, the increase in profits is dependent upon maintaining fertilizer use – if fertilizer use falls because farmers cannot afford it, yields fall and profits may well decline.
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Thank You Q&A
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