Growing demand for food in developing countries will continue to be a major driver of demand for corn and soybeans over next past decade, according to a new USDA report released last week called Long-Term Prospects for Agriculture Reflect Growing Demand for Food, Fiber, and Fuel.
|Average Annual Growth in Global Demand
- Oilseed meals 2.2%
- Beef, pork, poultry 2.2%
- Corn 1.8%
- Coarse grains 1.5%
- Rice 1.0%
- Wheat 0.9%
Source: USDA-Economic Research Service
"Economic growth in developing countries is especially important for agriculture because food consumption and feed use are particularly responsive to income growth in those countries," the report notes. "As incomes rise in developing countries, consumers tend to diversify their diets, moving away from traditional staple foods, such as wheat and rice, and increasing their consumption of such foods as meat, dairy products, and vegetable oils."
The authors of the report, Paul Westcott and Ronald Trostle, note that annual average global consumption gains over the next decade will be higher for meats (2.2%), corn (2.2%), and coarse grains (1.5%) than for wheat (0.9%) and rice (1%).
Population soars in developing world
World population surpassed 7 billion in March 2012, according to the U.S. Census Bureau. Over the next decade, global population gains will probably slow due to declining birth rates, but population growth will remain higher in the developing world, compared with developed countries. "As a consequence, the developing-country share of the world's population is expected to increase to 82% by 2021, up from 79% in 2000," the report notes.
Africa and the Middle East combined are expected to see some of the strongest gains in food demand. "Not only is import growth for staple food commodities, such as wheat and rice, expected to continue to be strong, but the region's rising demand for meat is projected to lead to increasing imports of both poultry and beef as well as imports of feed grains and protein meals for a growing domestic meat production sector," note the authors.
U.S. markets changing
Two decades ago, Japan and the European Union were the two leading destinations for U.S. agricultural exports. Today China and Mexico are two of the United States’ three largest markets.
Over the next 10 years, the authors note that China's imports of corn are expected to grow sharply and account for almost half the overall growth in world corn trade. China will have an even bigger impact on world soybean trade over the next decade, eventually accounting for more than 80% of global import growth.
"Projected increases in Mexican meat demand over the next decade will bring greater meat imports as well as expansion of domestic livestock production and increased imports of feedstuffs," says the report. "Mexico is second only to China in projected growth for corn imports over the next 10 years."
A continued decline in the value of the U.S. dollar will keep exports booming. "The continuing depreciation is part of a global rebalancing of trade and financial markets in the aftermath of the global financial crisis and recession," say the authors. U.S. producers, however, will also see growing competition from South America and will lose world market share in soybeans to Brazil.
Even so, prices are expected to remain at historically high levels. For many years, the authors note that inflation-adjusted, or real, prices declined. From 1979 to 2001, real prices for corn, wheat, and soybeans fell an average of 4.4 to 5% per year. In 2002, however, real prices for corn, wheat, and soybeans began to rise. By 2009, prices of these crops were 45% higher for corn, 49% higher for wheat, and 81% higher for soybeans, compared with 2001 prices. Real prices could begin to decline, though, once world stocks are rebuilt.
Get the full report.