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Global Demand for Food Booms

October 5, 2011
By: Fran Howard, AgWeb.com Contributing Writer
 
 

A growing middle class should sustain high U.S. commodity prices

The world is hungry. In Asia, particularly China and India, and other developing regions, the demand for food will continue to increase well into the next decade. That’s good news for U.S. producers who will be among those who benefit.

"In my 30-year career, I’ve never seen a better environment and outlook for American agriculture," says Mike Dwyer, director and chief economist for USDA’s Foreign Agricultural Service (FAS).

Five Fastest-Growing Economies in the World

(Average annual

GDP growth, 2011–15)


China                          9.5%
India                           8.2%
Ethiopia                      8.1%
Mozambique                7.7%
Tanzania                     7.2%

Since 2000, economies in the developing world—Asia, Latin America, Eastern Europe, the Middle East and sub-Saharan Africa—have been growing rapidly. As incomes rise, people increase the amount of food they eat and shift away from grain-based diets to those higher in animal products.

Brazil, Russia, India and China, also known as the BRIC nations, are the largest countries in the developing world and account for 46% of the world’s 6 billion people. What occurs in these countries and the rest of the developing world in the next five to 10 years will help drive global agricultural prices.

China’s Rising Middle Class. In 2009, 100 million households in China were classified as middle-class. By 2020, there will be more than 300 million middle-class households. "This growth represents a food demand tsunami," Dwyer says.

In the world’s most populous country, which is still growing, diets are shifting to include more meat, and incomes are increasing by 7% to 9% annually, says Fred Gale, senior economist with USDA’s Economic Research Service (ERS).

"Millions of people are migrating to urban centers where they eat more meat," he says. People living in Beijing today eat about 30% of their calories away from home. Half of all meat consumed in China is being consumed in restaurants and factory lunchrooms.

According to the Food and Agri-culture Organization of the United Nations (FAO), China is already eating much better than it was 10 years ago. From 1990 to 1992, 210 million people, or 18% of the population, were undernourished. By 2007, the number of undernourished people in China had fallen to 130.4 million, just 10% of the population.

Robust demand from China is the most powerful force driving the soybean market, but Chinese soybean imports could slow. "In 2008, the Chinese government got scared when international commodity prices spiked and it decided to build its soybean stocks," says Phil Abbott, Purdue University economist. The country’s stocks-to-use ratio for soybeans grew from 4% to 23%, or from 3 million metric tons to 18 million metric tons, at the end of 2010.

That said, China still has an increasing number of people who have to eat, so imports are unlikely to return to 2008 levels of 30 million metric tons in the near future.

China’s impact on the global corn market is also increasing. USDA expects China to import 2 million tons of U.S. corn in 2011/12. Some private estimates, however, call for 15 million tons or more of annual corn imports by 2015. "There is concern whether China’s yield growth will provide enough new corn to feed its booming livestock and poultry industries," Dwyer says.

India, Asia’s Hunger Pocket. The other large Asian country experiencing rapid growth in incomes and food demand is India. In the past 20 years, the number of hungry people in India has nearly doubled, and more Indians than Chinese are undernourished. According to FAO, 327 million Indians, or 21%, were undernourished in 2005 to 2007, compared with 172 million, or 20%, in 1990 to 1992.

"We are talking about a really robust food demand situation," says Maurice Landes, senior economist with USDA–ERS. "Most observers are confident this growth will continue."

In the next 20 years, estimates put India’s annual gross domestic product (GDP) gains between 8% and 9%, which means India’s standard of living would double in eight years.

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FEATURED IN: Top Producer - October 2011

 
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COMMENTS (1 Comments)

PullMyFinger - Chappell, NE
Sustain "high" commodity prices? It would be nice to see at least one grain get close to parity before screaming "HIGH COMMODITY PRICES"!!!!
10:42 PM Oct 25th
 



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