People are getting richer. That means they are going to be eating more meat, milk and eggs. And according to speaker after speaker at a recent international conference on the grains sector, that’s great news for the world’s cereal farmers, traders and shippers. Chris Lyddon reports.
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“It gives me great satisfaction to have some eminent speakers from developing countries, since their increasing requirements are the main drivers of global grain demand,” Germain Denis, executive director of the International Grains Council, told its Grains Conference 2005 in London. “This is where almost all future population expansion will take place, with more than half of all people living in urban areas.”
“Put as simply as possible, when people – wherever they may be – enjoy higher living standards, they tend to have larger, and more diverse, food requirements and this generates new trading opportunities,” he said. Global grain use for feed has risen by as much as 60m tonnes over the past decade, reflecting sharply rising meat consumption, which helped to expand trade over this period.
“According to the WTO World Trade Report 2004, almost half of world trade in agriculture now takes place in the form of foods, including meat,” he said. “For its part, the IGC Secretariat estimates that as much as 45m tonnes of feed grain
is traded annually in the form of meat. This continues to rise.”
Roger Gilbert, secretary general of the International Feed Industry Federation, stressed the rise in the world’s population. “By 2050 over 7.5bn people will be under the age of 50,” he said. “With life expectancies on the increase there will be a lot of extra mouths to feed over an extended period.”
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By GlobalData“Add to this mix the fact that as GDP rises and families have more money to spend
on food, the demand for animal products will increase,” he said. “Studies by the American Soybean Association show that when a developing population’s family income rises above US$1000/year chicken enters the diet; as it rises above
US$3000/year other meats enter the diet.”
“For every 1% increase in income a family in the developed world will spend 2% more on food,” he said. “If we did not see a crisis looming before the turn of the century we should see one now. The demand for animal products will outstrip production if we do not take into account population and economic trends in our calculations.”
“Within the next 45 years we will have to triple our output of animal products,” he said. “Demand for protein and energy sources for animal feed will dominate our industry.”
Efficiency
“Don’t think that people living in the developing world will be content to continue eating vegetarian-based foodstuffs, especially when their living standards begin to improve,” he said. “Animal protein not only tastes good, but is good for us. A recent study in Africa shows that even a spoonful of meat a day can dramatically alter the development of school children when compared with other protein and energy sources.”
“We in the animal protein supply business do not have to feel guilty about using natural resources to produce meat, milk and eggs,” he said. “There is no scientific doubt that the utilisation of animal protein is highly efficient.”
Gilbert cited a 1999 report from the Council for Agricultural Science and Technology on “Animal Agriculture and the Global Food”, according to which on a human edible protein basis in the US, milk is 208% efficient; beef, 119% efficient. “What this means is that for every kilo of grain fed to beef cattle, there will be 1.2 kilos of beef produced – and more than double the amount of milk,” he said. “In many other parts of the world, where animals are raised on forage rather than grain, the efficiency basis is even higher.”
Economic success
Economic success means more demand for coarse grains, according to Paul Williams, chairman of the US Grains Council. “As families’ incomes grow, they choose to spend their marginal income first to improve their diets. That means shifting to meat, milk and eggs.”
He listed some countries which have become big coarse grain consumers in recent years as their economies have grown, including South Korea, Taiwan, Egypt and Mexico. “Today, we are looking at new markets in countries with large and growing populations, where growing incomes foretell of that same shift in diets: China, Indonesia, India, Iran, Iraq, and in the future, Africa,” he said.
Trade barriers which distort market forces and prices, consumer fears about quality and food safety opposition to the application of biotechnology in agriculture were all holding back the growth in demand. “Reducing trade barriers will increase market opportunities for everyone – rich and poor, developed and developing,” he said. “High tariffs in developed and developing countries curtail economic activity and investment.”
He quoted a World Bank study which showed that eliminating tariffs in agricultural and non-agricultural goods would increase world income by $832bn a year. 65% of that increase would be in developing countries. “Now, I am not a trained economist, but I just wonder what that would mean for the average family in many countries around the world,” he said. “What would they have on their dinner table each evening? I can’t help but think it would be more of the meats, milk and eggs I spoke of before and as a result, more coarse grains demand in the world market.”
He praised the EU’s agreement eliminate export subsidies in the Doha Round of trade negotiations. “In return, US producers like myself will have to accept disciplines on export credits while countries with state trading entities, or STE’s, will also need to accept further disciplines placed on them – and potentially the elimination of STE monopoly control,” he said.
Williams was also concerned about the use of sanitary and phytosanitary regulations. “While these measures are essential to maintaining each country’s agricultural capacity, it is vital that SPS regulations be strictly science-based,” he said. “Arbitrary restrictions or approval requirements calculated to protect domestic producers from competition have no place in the international market. And as we face major threats, such as Avian Flu, BSE, and Foot and Mouth Disease, it is vital that countries work together to develop protection practices that minimize practical risk but also minimize distortions in trade flows.”
Agricultural reform
Russel Mildon, the European Commission’s Director of Common Market Organisation, insisted that the EU had a good record on free trade. “We are one of the most open countries in the world when it comes to trade and trade in agriculture in particular,” he said. He too expected more feed grain demand. “In the longer term we expect to be producing more meat which will mean more demand for wheat,” he said.
The EU was open to imports from developing countries, having opened its borders to imports of most products, except sugar, from the 50 poorest in 2001.
Reform of the EU’s Common Agricultural Policy had made European farmers more market oriented. “Our farmers are increasingly in a position where they will produce what they think they can sell,” he said. “Our agricultural policy of today bears no relation to our agricultural policy of 20 years ago.”
Argentina’s minister of agriculture, Miguel Santiago Campos also focussed on the increase in demand he says is coming from the developing countries. “Population growth in developing countries will generate most of the increase in global food demand,” he said. “The future is one of market expansion, particularly driven by the increases in the developing countries.”
Free trade in agriculture would be the way to greater affluence for the large proportion of the population of Argentine that lives in poverty, he said. “That’s the only way we see to make poverty history.”
