UK Government Office of Science report – Malthusians are still alive

The global food and farming futures study came out last month and it is fairly pessimistic about the chance for cheap food around the world over the next few decades. It argues that an agricultural revolution is needed to feed the almost 9 billion people who will be on the planet in the next few years. There has to be "sustainable intensification" which will increase food production without hurting the environment.

There is no question that currently there is a major supply shock in many commodity markets but we have to realize that the real price of food has generally been declining for decades. Every time there is a sustained increase in prices does not mean that there will be a long-term shortfall in food.

These doomsday predictions are the traditional Malthusian approach to food analysis. We will run out of it if we are not too careful. Yet, it has not happened. Most of the famine in the world has been created by man-made events. The allocation process is the key to getting people feed not the long-term production. That being said, there has to be new innovation that will offset the fact that the cost of farming has increased and there is a shortage of land for farming. There will also be a shortfall in water. This means that food problems can only be solved if there is innovation to increase crop yields. Of course, innovation cannot be mandated through a simple policy.

Innovation is still one of the major mysteries of economics. R&D money will help and when prices increase the need and response of innovation will also increase, but it is not clear that ingenuity will arise spontaneously. Governments can help with research by allowing for the sharing of information on plant genetics. This is one area which cannot be lock-up through patent restrictions.

Looking at planting intentions and the clear backwardation of many commodity prices, there will be a increase in supply as a resposne to recent price gains. This will be a good first start to help in the short-run. In the long-run, governments can push policies that do not overuse commodities or restrict farm output.