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Emerging Market Food Consumption Growth Equals Rising Prices

    

The world population, especially in emerging market and pre-emerging market or frontier market countries, is getting richer.  The first thing everyone is buying isn't a new Mercedes or Rolex watch, they're buying food.  According to Chinadaily.com, more than 200 million Chinese, or 23% of the population, are officially overweight.  Nearly 60 million of those individuals are officially classified as obese.  

 

Worldwide food demand is growing.  Continued economic growth around the world is only going to spur more and more food demand.  Once the growth in the world population is added to the mix, this could be the investment opportunity of a lifetime cropping up (pardon the pun) in the agricultural industry.

 

Currently, the world population is about 6.6 million people.  By 2030, it is projected to reach a total of 8.2 billion people.  Although that's approximately 24% growth in total, normally it is not anything to be excited about. 

 

However, not only will there be more people to feed, but those people are eating more and more.  Currently, the average amount of food eaten per person is 2,600 calories per day.  However, those living in developed parts of the Western world, like the U.S. and Europe, consume approximately 3,200 calories per day.  In the eastern hemisphere, the Japanese eat approximately the same amount of calories.  

 

Thanks to improving developing economies, the average caloric intake is expected to be approximately 3,000 calories per day by 2030.  Once again, moving from 2,600 to 3,000 calories per day is only a 15% increase.  Spread out over 23 years that may not seem like a big increase, but it is a big increase for a world that cannot currently produce enough food.  

 

For instance, more than 60% of Beijingers are overweight and the percentage of the population in this category is growing by the day.  That growth is pushing the global food supply-demand situation, which is already very tight, further into imbalance. 

 

With unexciting numbers like these, it's no wonder the world hasn't caught on to how big growth in the agricultural industry will be.  That's only one of the major trends.  

 

The other alarming trend is that the world is moving into cities.  This trend, coupled with a growing demand for food, will only continue to increase.  According to the United Nations, 2007 marks the first year in history where cities have more people than rural communities.  Presently, more than 50% of the world lives in townhouses, apartments and other urban housing structures.  

 

How big is this phenomenon?  Consider that only 13% of the world's population lived in cities in 1900.  That surged to 29% in 1950.  In 2005, 49% of the world's population lived in urban centers.  It won't be long until 55%, then 60%, then 65% of the world's population lives in cities.  Urbanizing populations have a staggering effect on the world, but its impact is greatest in the agriculture industry.  A great deal of activity takes place in cities, such as manufacturing, shipping, research, education and technological development.  But one thing that doesn't exist there is farming.  There's just not enough land available in cities to allow farms to perpetuate.  As a result, an urbanizing population demands more and more food without the wherewithal to produce it.  While we don’t expect a Soylent Green apocalypse scenario (named after the famous movie from the early 1970s—just in case you are wondering about it, Charlton Heston and Edward G. Robinson starred), food lines in some countries’ cities could be commonplace. 

 

The world is getting richer, moving into cities, and eating more, with the BRIC (Brazil, Russia, India and China) countries serving as just a few examples.  The global agriculture boom is still in the very early stages.  We expect the growth of food prices to continue for the next several decades.

 

 

Source: Many of the figures mentioned in this article were obtained from the article entitled “Global Agriculture Boom Has Just Begun Only…” by Andrew Mickey/Commodity Online, published on December 13, 2007 on www.rediff.com. 



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