The State of Agricultural Commodity Markets 2022


The role of trade in water and land use

By 2050, agriculture will need to produce almost 50 percent more food, fibre and biofuel than in 2012 to meet growing demand, driven by population and income growth.164 Yet, the distribution of land and water resources over the world does not necessarily favour countries where future demand is expected to increase. Some countries with a rapidly growing demand for food, such as China and India, are already facing land or water constraints.165 As the current trends of population growth, urbanization and dietary changes progress, regions that are already affected by increasing land or water scarcity are likely to increase their reliance upon trade as a tool to safeguard food security.

Analysts suggest that virtual land and water trade in agricultural products is expected to increase in the decades to come. A study estimates that inter-regional virtual water trade could triple by the end of the twenty-first century.166 Modelling frameworks that trace the complex inter-relationships between agriculture and water resources project that agricultural trade could increase between 74 and 178 percent by 2050, with up to 50 percent of global demand for food being met through trade.167 Production increases to meet growing demand will exacerbate the pressure on water resources, and relying on trade would not only ensure adequate food quantities for countries that have low water resources but could also lead to water savings, compared with a hypothetical alternative in which demand for food is met entirely by domestic production.168

Although global water withdrawals are projected to rise due to increased production, trade openness could progressively shift the origin of exports towards water-abundant regions, easing the pressure on water-scarce countries. Trade could also help allocate production to regions that are characterized by relatively high water productivity – that is, regions that use relatively lower amounts of water per unit of output.169 In this way, more trade in food and agricultural products would foster water savings at the global level. A study estimates that trade could generate between 40 and 60 m3 of annual water savings per capita.170 To date, the evidence already suggests that trade volumes between regions with different water productivities have increased over time, underlining the role of trade in enhancing the efficiency of water use.171

Similarly, trade can also contribute to better use of land globally. This occurs when trade facilitates the flow of agricultural products from countries characterized by higher yields per hectare, to countries that are relatively less productive.172 For example, trade in cereals is estimated to enable annual land savings in the magnitude of 50 million hectares.173 As land and water endowments are complementary in agricultural production, trade contributes to saving both land and water.174

While a stronger demand for exports can contribute to local resource depletion in important ways, at the global level, trade is efficiency-enhancing in resource use. A study suggests that, in the absence of trade, many countries would need to double their water consumption, cropland area, or both, to produce nationally the food and agricultural products they currently import.175 Yet, many countries are already constrained by their natural resource base and would not meet their food demand without trade. This would also force countries to pursue production in marginal areas with less favourable growing conditions, potentially increasing the pressure on already vulnerable ecosystems and aggravating resource depletion and land degradation at the local level.

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