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Mark Keenum, Under Secretary
for Farm and Foreign Agricultural Services
U.S. Department of Agriculture
Keynote Speech:
“Securing Food Supplies in a Tighter Global Market”
International Grains Council Forum
Mita Conference Hall
Tokyo, Japan
December 5, 2007
11:00 a.m.
Introduction
Arigato gozaimas, Kitahara-san, for your kind introduction. Ohayo gozaimas, everyone.
The International Grains Council (IGC) has a long and distinguished history in facilitating grain trade through cooperation, openness, and fairness. As an IGC member, a major grain producer and exporter, and the largest donor to the United Nations’ World Food Program, the United States has vested interests in, and supports, these efforts.
My responsibilities at the U.S. Department of Agriculture (USDA) include the administration of programs that foster trade expansion, transparency, and fairness, and food assistance and development, on a daily basis. The IGC provides a forum for the open exchange of information about grain trade and food security, another area in which USDA plays a key role. Our concerns are similar, and our goals are mutually supportive. It is a pleasure and an honor to give the keynote speech on securing food supplies in a tighter global market before the IGC.
While there is little doubt that global grain stocks will remain tight, we have adequate supplies to meet food demands in the short term. But in the future, commodity demands will increase with rising populations and growing needs for food, feed, and energy. How are we to assure adequate food supplies in the world of tomorrow?
I believe that we must pursue three avenues to assure adequate food supplies, and that these three avenues are intertwined. First, we must encourage the adoption of market-oriented policies that allow producers to meet worldwide demand for grains. Second, we must pursue advances in science and technology, to capture the production benefits offered through the application of newer technologies that our scientists find to be safe for food, feed, and the environment, such as biotechnology. And third, we must support a fair and open international trading system through the World Trade Organization, the WTO.
World Grain Supplies
Let us examine the situation and outlook for the major grains.
As I’m sure everyone here is aware, when you review world agricultural statistics regularly, you observe the constant ebb and flow of production, consumption, trade, and stocks. Such fluctuations are evidence of the ability and agility of shippers, exporters, importers, and especially producers the world over to adapt to market developments ? provided they have timely, accurate, and comprehensive information.
Wheat: For 2007/08, worldwide wheat supplies are projected to be 727 million
metric tons, and total use is projected to be 618 million metric tons.
World ending stocks will be 110 million metric tons.
Coarse Grains: For corn and other coarse grains, worldwide supplies in 2007/08 are projected
to be 1.2 billion metric tons, and total use at just over 1 billion. Ending
stocks are expected to be about 135 million tons.
Rice: Worldwide rice supplies are projected at 498 million metric tons, total use at 424 million metric tons, and ending stocks of rice at 74 million metric tons.
Food grain stocks are indeed at very low levels. At 110 million metric tons, world wheat ending stocks are at their lowest level in 30 years. Rice stocks are at their lowest since 1983/84, and the stocks-to-use ratio, 17.5 percent, is the lowest since 1981/82. I would note here that world rice exports are projected at a record high this coming year, 2008. And this amount would be even higher if it weren’t for the export bans imposed by Vietnam, on all rice, and India, on non-basmati and high-value rice. Until these bans are lifted, Thailand, the United States, Pakistan, and China will be the only major suppliers of rice to global markets.
Biofuels: Another Factor in the Equation
An increasingly important factor in the always complex and changing supply-and-demand equation is the growing use of agricultural commodities for biofuel production.
The rapid growth of biofuel production has stimulated debate over its global implications for food markets. At USDA, we believe the global agricultural system is market-oriented and capable of meeting growing demand for both biofuels and food.
In the United States, we view renewable energy as a way to reduce dependence on fossil fuels, diversify energy sources, improve U.S. economic security, reduce the pollution impact on the environment, and generate income for U.S. farmers and ranchers thus impacting the rural economy in our country in a positive manner. Emergence of the biofuels industry offers perhaps the biggest economic opportunity U.S. agriculture has had in a generation. While most of the current and projected biofuel expansion in the United States is for ethanol, biodiesel, made from soybeans, is also expanding as well.
Even with increased demand for crops for biofuels, conventional uses, and exports, the United States will remain a reliable supplier of safe grains, and fully capable to meet the needs of our customers. Higher corn prices will drive larger corn plantings, resulting in increased production. For example, this year, U.S. corn farmers responded dramatically to market signals, and U.S. corn production is forecast to increase by nearly 74 million metric tons, or 26 percent, to 354 million metric tons. Again, a 26 percent increase over last year.
With this higher production, the United States is capable of meeting increased demand, whether for feed, food, or fuel. Domestically, we will actually use more corn for feed than for ethanol in 2007/08 ? 141 million metric tons used for feed versus 80 million metric tons used for ethanol in our country. At the same time, U.S. corn exports for 2007/08 are expected to increase by 11 percent to compensate for the limited export availability other major corn exporters are experiencing.
Ethanol: Between 1996 and 2006, U.S. production of ethanol rose fivefold, from
3.8 billion liters in 1996 to nearly 19 billion liters in 2006. For 2006/07,
corn use for ethanol is forecast at 53 million tons. For 2007/08, it is
expected to increase 55 percent to nearly 84 million tons. Ethanol’s share
of total corn use has also risen dramatically, from 14 percent in 2005/06
to an expected 26 percent of our corn in 2007/08.
Biodiesel: The National Biodiesel Board, a trade group that represents biodiesel
producers, estimates annual biodiesel production capacity at 7 billion
liters for 165 existing plants as of September 2007 ? a remarkable gain
from May 2006, when the group reported production capacity of 1.5 billion
liters for only 65 plants. For 2007/08, biodiesel is projected to account
for 19 percent of all U.S. soybean oil production. Growth in biodiesel
production is expected to begin to slow in 2008/09 as strong vegetable
oil prices limit profitability for biodiesel producers.
Increased biofuel production is leading to a paradigm shift. This is not just a U.S. phenomenon ? the global market for biofuels is growing rapidly as globalization, development, and increased trade have created greater demand for resources. The European Union (EU) is a major producer of biodiesel, and Brazil is a major producer of ethanol from sugar. About 90 percent of world biofuel production is currently concentrated in these three producers, but other countries are increasing their production as well. Malaysia and Indonesia are producing biodiesel from palm oil, mainly for the export market. Countries such as Argentina also have considerable potential for biofuel production.
The benefits of biofuels are driving countries to explore their renewable energy options, leading to global growth of the renewable energy sector. Worldwide growth in biofuel production has been spectacular in recent years, climbing from 18.2 billion liters in 2000 to approximately 60.6 billion liters in 2007. This growth is raising prices for corn and soybeans as some supplies are diverted from conventional uses to fuel production, and also for other commodities that are being used to replace the diverted supplies. These higher prices are benefiting farmers in other countries, as well as in the United States.
In the years to come, we will see other crops particularly suited to developing countries used for biofuels. For example, Jatropha, a genus of succulent plants whose seeds contain up to 40 percent oil that can be processed into biodiesel, is being researched in India and Africa. The United Nations co-sponsored a conference in Africa last year on how to develop Jatropha plantations for small- to large-scale biodiesel production.
The Promise of Biotechnology
So scientific innovation, in the form of biofuel production, is altering the international agricultural environment. But the vast promise of science is not limited to this field.
Biotechnology in particular has the potential to dramatically change 21st century agriculture as it provides farmers around the world with more sustainable, safer ways to produce healthy and nutritious food. Biotechnology contributes to global food security, enhances product quality, and holds potential to address environmental concerns.
Since the first introduction in the mid-1990’s of major crops improved through the use of modern agricultural biotechnology such as corn, soybeans and cotton, the cultivation of biotech crops has grown steadily around the world. In the United States, one of the world’s largest exporters of agricultural goods and the largest producer of biotech crops, the 2006 corn crop was estimated to be 61 percent biotech, up a net of 35 percent from five years earlier in 2001. The 2006 soybean crop was estimated to be 89 percent biotech, up 21 percent from five years earlier..
But while the United States leads the world in the production of biotech crops such as corn and soybeans, farmers from China to India to South Africa to Spain to Argentina also are experiencing the direct benefits of growing biotech crops. About 102 million hectares were planted globally with biotech crops in 2006, up 12 million hectares from just one year earlier. Biotechnology crops are now planted by 10.3 million farmers, and an additional 29 countries have approved the import of biotech crops for food and feed use.
Benefits such as higher yields and reductions in the use of chemical pesticides and machine-intensive production techniques have given unequivocal advantages to those farmers willing to invest in biotechnology. And through some of the new crops under development, which are resistant to devastating diseases or able to withstand extreme growing conditions, the benefits of biotechnology will become increasingly integral to the food and feed security capabilities of countries in our changing global environment.
The trend of growth in adoption of biotechnology and acceptance of products enhanced through biotechnology is being echoed around the world, and trade in these products is growing. Last year Japan, for example, imported from the United States 12 million metric tons of biotech feed corn and 4.5 million metric tons of biotech soybeans that had been previously reviewed and approved for import by the Japanese government.
IIt is essential for each and every country to be confident in the safety
of the food and feed it produces and imports for its people. We, the United
States, build our consumers’ confidence through application of a transparent,
science-based regulatory approach that evaluates human, animal, and environmental
risks prior to deregulation, paving the way of approval for commercial
application. Countries will take different approaches to addressing their
consumers’ basic needs. In the end, each government must ensure its regulatory
system’s results are science-based or suitable to recognized international
bodies and at the same time facilitate the critical flow of products for
a country’s food supply. This is especially important as crops are diverted
for uses other than food or feed, such as for energy production. And as
biotech products are reviewed by regulatory systems around the world, and
their food and environmental safety is confirmed over and over again, we
hope that one day soon countries will come to view such products as just
another improved crop variety that can help them meet their food security
needs.
As more new products become available, greater harmony must exist among global regulatory systems. And once food and feed are confirmed as safe for intended use through one country’s regulatory review, other governments should actively display confidence in these products. Only then can a greater understanding develop about the usefulness of biotechnology towards achieving food, economic, and environmental security. A rejection of new technologies, such as biotechnology, through trade-restrictive measures or skewed interpretation of responsibilities under the Cartagena Protocol for Biosafety, an environmental protocol, can lead unnecessarily to higher costs to the entire food production chain through restriction on commercial activity by artificial assessing liability on traders and creating greater challenges to producers and consumers alike in this rapidly changing global environment.
The Importance of Trade
That brings us to another key area that impacts agriculture as much as supply, demand, and advances in science and technology: the current WTO negotiations.
To attract investment and foster economic growth, international trade partners need the rule of law, transparency, and full and steady compliance with WTO terms. The benefits accruing from standards based on sound science, as well as trade capacity-building and information-sharing, become fully realized when supported by a free and fair system of trade.
The WTO Doha Development Round represents a strong engine to drive economic growth and reduce poverty in each member. That is why a successful conclusion to the Doha Round ? based on these principals of free and fair trade ? is imperative.
To achieve these benefits, the United States is pursuing fundamental agricultural trade reform that would increase market access, end export subsidies, and reduce domestic supports. Progress is critical for our farm sector, as it is for farmers in all countries.
U.S. producers are among the world’s most efficient, but high foreign import tariffs offset that advantage. Average bound agricultural tariffs ? that is, the maximum allowed levels ? of WTO members are 62 percent globally, compared to the U.S. average of 12 percent. We are the world’s most open market place.
A successful agreement must deliver real market access. It must create new export opportunities for agricultural producers and generate meaningful trade flows.
Exemptions to tariff cuts must be limited. Even for products designated as sensitive products or special products, all WTO members must allow increased market access. There must be clarity on special product disciplines, so that countries cannot exempt so much of their tariff schedules that, in fact, they provide no meaningful market access.
Domestic support levels must be harmonized. Countries that use larger quantities of domestic support should make correspondingly larger cuts in their support levels. The United States is willing to accept substantial cuts in trade-distorting domestic support levels, but these cuts need to be balanced by improved real market access in both developed and developing countries.
As everyone here is aware, the United States is preparing a new farm bill. We recognize that, upon a successful conclusion to the Doha Round, we may need to review our own domestic farm laws to ensure WTO consistency. We are committed to ensuring that United States. agricultural policy is consistent with our trade obligations and therefore able to avoid, or withstand, any international trade challenges.
All WTO members must work together to reach a solution that addresses the needs of, and is fair to, all members.
Conclusion
I began this address by noting that there are three avenues to securing global food supplies: farmers’ ability to alter production patterns in response to changing market conditions; scientific and technological advances; and a fair and transparent international trading system.
We must work together to ensure that farmers and consumers throughout the world can realize the benefits of agricultural production, new uses for conventional commodities, and new crops.
We must have the regulations, standards, policies, and systems in place to secure continued market access, particularly in light of rapid developments in agriculturally focused technologies.
We are confident our cooperation in these areas will continue. Only in this way can we reduce market uncertainty and strengthen the international trading system that we all rely upon for a secure food supply. I want to thank you for allowing me to address you today. It is a great honor. Thank you.
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