INTERNATIONAL RESEARCH COMMODITIES MARKETS DEMAND-SUPPLY -VALUE 2010-2011
THE FOODBANK SYSTEM ANALYTICS REPORT
2010-2011 © GFB-GLOBAL LIM I TED EUROPE
global need for affordable food • growing demands for feed, fibre, fuel and bio-based materials • environmental protection • sustainable increases in productivity • combat challenges posed by climate change.
WORLDWIDE ANALYTIC REPORTS OF DEMAND AND SUPPLY FROM DAILY PRESS research OR GLOBAL ORGANI ZATIONS.
Afric a's impressive gro w th
Jan 6th 2011, 14:10 by The Economist online Africa is now one of the world’s fastest-growing regions MUCH has been written about the rise of the BRICs and Asia’s impressive economic performance. But an analysis by The Economist finds that over the ten years to 2010, six of the world’s ten fastest-growing economies were in sub-Saharan Africa. On IMF forecasts Africa will grab seven of the top ten places over the next five years (our ranking excludes countries with a population of less than 10m as well as Iraq and Afghanistan, which could both rebound strongly in the years ahead). Over the past decade the simple unweighted average of countries’ growth rates was virtually identical in Africa and Asia. Over the next five years Africa is likely to take the lead. In other words, the average African economy will outpace its Asian counterpart.
3. Global and regional food consumption patterns and trends
3.1 Introduction Promoting healthy diets and lifestyles to reduce the global burden of noncommunicable diseases requires a multisectoral approach involving the various relevant sectors in societies. The agriculture and food sector figures prominently in this enterprise and must be given due importance in any consideration of the promotion of healthy diets for individuals and population groups. Food strategies must not merely be directed at ensuring food security for all, but must also achieve the consumption of adequate quantities of safe and good quality foods that together make up a healthy diet. Any recommendation to that effect will have implications for all components in the food chain. It is therefore useful at this juncture to examine trends in consumption patterns worldwide and deliberate on the potential of the food and agriculture sector to meet the demands and challenges posed by this report. Economic development is normally accompanied by improvements in a country’s food supply and the gradual elimination of dietary deficiencies, thus improving the overall nutritional status of the country’s population. Furthermore, it also brings about qualitative changes in the production, processing, distribution and marketing of food. Increasing urbanization will also have consequences for the dietary patterns and lifestyles of individuals, not all of which are positive. Changes in diets, patterns of work and leisure - often referred to as the “nutrition transition” - are already contributing to the causal factors underlying noncommunicable diseases even in the poorest countries. Moreover, the pace of these changes seems to be accelerating, especially in the low-income and middleincome countries. The dietary changes that characterize the “nutrition transition” include both quantitative and qualitative changes in the diet. The adverse dietary changes include shifts in the structure of the diet towards a higher energy density diet with a greater role for fat and added sugars in foods, greater
saturated fat intake (mostly from animal sources), reduced intakes of complex carbohydrates and dietary fibre, and reduced fruit and vegetable intakes (1). These dietary changes are compounded by lifestyle changes that reflect reduced physical activity at work and during leisure time (2). At the same time, however, poor countries continue to face food shortages and nutrient inadequacies. Diets evolve over time, being influenced by many factors and complex interactions. Income, prices, individual preferences and beliefs, cultural traditions, as well as geographical, environmental, social and economic factors all interact in a complex manner to shape dietary consumption patterns. Data on the national availability of the main food commodities provide a valuable insight into diets and their evolution over time. FAO produces annual Food Balance Sheets which provide national data on food availability (for almost all commodities and for nearly all countries). Food Balance Sheets give a complete picture of supply (including production, imports, stock changes and exports) and utilization (including final demand in the form of food use and industrial non-food use, intermediate demand such as animal feed and seed use, and waste) by commodity. From these data, the average per capita supply of macronutrients (i.e. energy, protein, fats) can be derived for all food commodities. Although such average per capita supplies are derived from national data, they may not correspond to actual per capita availability, which is determined by many other factors such as inequality in access to food. Likewise, these data refer to “average food available for consumption”, which, for a number of reasons (for example, waste at the household level), is not equal to average food intake or average food consumption. In the remainder of this chapter, therefore, the terms “food consumption” or “food intake” should be read as “food available for consumption”. Actual food availability may vary by region, socioeconomic level and season. Certain difficulties are encountered when estimating trade, production and stock changes on an annual scale. Hence three-year averages are calculated in order to reduce errors. The FAO statistical database (FAOSTAT), being based on national data, does not provide information on the distribution of food within countries, or within communities and households.
3.2 Developments in the availability of dietary energy Food consumption expressed in kilocalories (kcal) per capita per day is a key variable used for measuring and evaluating the evolution of the global and regional food situation. A more appropriate term for this variable would be “national average apparent food consumption” since the data come from national Food Balance Sheets rather than from food consumption surveys. Analysis of FAOSTAT data shows that dietary energy measured in kcals per capita per day has been steadily increasing on a worldwide basis; availability of calories per capita from the mid-1960s to the late 1990s increased globally by approximately 450 kcal per capita per day and by over 600 kcal per capita per day in developing countries (see Table 1). This change has not, however, been equal across regions. The per capita supply of calories has remained almost stagnant in sub-Saharan Africa and has recently fallen in the countries in economic transition. In contrast, the per capita supply of energy has risen dramatically in East Asia (by almost 1000 kcal per capita per day, mainly in China) and in the Near East/North Africa region (by over 700 kcal per capita per day). Table 1. Global and regional per capita food consumption (kcal per capita per day) Region
1964 - 1966 1974 - 1976 1984 - 1986 1997 - 1999 2015 2030
Near East and North Africa
Latin America and the Caribbean
Excludes South Africa.
Source: reproduced, with minor editorial amendments from reference 3 with the permission of the publisher. In short, it would appear that the world has made significant progress in raising food consumption per person. The increase in the world average consumption would have been higher but for the declines in the transition economies that occurred in the 1990s. It is generally agreed, however, that those declines are likely to revert in the near future. The growth in food consumption has been accompanied by significant structural changes and a shift in diet away from staples such as roots and tubers towards more livestock products and vegetable oils (4). Table 1 shows that current energy intakes range from 2681 kcal per capita per day in developing countries, to 2906 kcal per capita per day in transition countries and 3380 kcal per capita per day in industrialized countries. Data shown in Table 2 suggest that per capita energy supply has declined from both animal and vegetable sources in the countries in economic transition, while it has increased in the developing and industrialized countries. Table 2. Vegetable and animal sources of energy in the diet (kcal per capita per day) 1967 - 1969
1977 - 1979
1987 - 1989
1997 - 1999
2059 1898 161 2254 2070 184 2490 2248 242 2681 2344 337
3287 2507 780 3400 2507 893 3396 2455 941 2906 2235 671
Industrialized countries 3003 2132 871 3112 2206 906 3283 2333 950 3380 2437 943 T, total kcal; V, kcal of vegetable origin; A, kcal of animal origin (including fish products). Source: FAOSTAT, 2003. Similar trends are evident for protein availability; this has increased in both developing and industrialized countries but decreased in the transition countries. Although the global supply of
protein has been increasing, the distribution of the increase in the protein supply is unequal. The per capita supply of vegetable protein is slightly higher in developing countries, while the supply of animal protein is three times higher in industrialized countries. Globally, the share of dietary energy supplied by cereals appears to have remained relatively stable over time, representing about 50% of dietary energy supply. Recently, however, subtle changes appear to be taking place (see Fig. 1). A closer analysis of the dietary energy intake shows a decrease in developing countries, where the share of energy derived from cereals has fallen from 60% to 54% in a period of only 10 years. Much of this downwards trend is attributable to cereals, particularly wheat and rice, becoming less preferred foods in middle-income countries such as Brazil and China, a pattern likely to continue over the next 30 years or so. Fig. 2 shows the structural changes in the diet of developing countries over the past 30-40 years and FAOâ€™s projections to the year 2030 (3). Figure 1. The share of dietary energy derived from cereals Source: adapted from reference 4 with the permission of the publisher.
Figure 2. Calories from major commodities in developing countries Source: reproduced from reference 3 with the permission of the WHO 03.20 publisher.
3.3 Availability and changes in consumption of dietary fat The increase in the quantity and quality of the fats consumed in the diet is an important feature of nutrition transition reflected in the national diets of countries. There are large variations across the regions of the world in the amount of total fats (i.e. fats in foods, plus added fats and oils) available for human consumption. The lowest quantities consumed are recorded in Africa, while the highest consumption occurs in parts of North America and Europe. The important point is that there has been a remarkable increase in the intake of dietary fats over the past three decades (see Table 3) and that this increase has taken place practically everywhere except in Africa, where consumption levels have stagnated. The per capita supply of fat from animal foods has increased, respectively, by 14 and 4 g per capita in developing and industrialized countries, while there has been a decrease of 9 g per capita in transition countries. Table 3. Trends in the dietary supply of fat Supply of fat (g per capita per day) Region
Change between 1967 - 1969 and 1997 - 1999
Latin America and the Caribbean
East and South-East Asia
Excludes South Africa
Source: FAOSTAT, 2003. The increase in dietary fat supply worldwide exceeds the increase in dietary protein supply. The average global supply of fat has increased by 20 g per capita per day since 1967-1969. This increase in availability has been most pronounced in the Americas, East Asia, and the European Community. The proportion of energy contributed by dietary fats exceeds 30% in the industrialized regions, and in nearly all other regions this share is increasing. The fat-to-energy ratio (FER) is defined as the percentage of energy derived from fat in the total supply of energy (in kcal). Country-specific analysis of FAO data for 1988-1990 (5) found a range for the FER of 7-46%. A total of 19 countries fell below the minimum recommendation of 15% dietary energy supply from fat, the majority of these being in sub-Saharan Africa and the remainder in South Asia. In contrast, 24 countries were above the maximum recommendation of 35%, the majority of these countries being in North America and Western Europe. It is useful to note that limitations of the Food Balance Sheet data may contribute much of this variation in the FER between countries. For instance, in countries such as Malaysia with abundant availability of vegetable oils at low prices, Food Balance Sheet data may not reflect real consumption at the individual household level. Rising incomes in the developing world have also led to an increase in the availability and consumption of energy-dense high-fat diets. Food balance data can be used to examine the shift in the proportion of energy from fat over time and its relationship to increasing incomes (6). In 1961-1963, a diet providing 20% of energy from fat was associated only with countries having at least a per capita gross national product of US$ 1475. By 1990, however, even poor countries having a gross national product of only US$ 750 per capita had access to a similar diet comprising 20% of energy from fat. (Both values of gross national product are given in 1993 US$.) This change was mainly the result of an increase in the consumption of vegetable fats by poor countries, with smaller increases occurred in middle-income and high-income countries. By 1990, vegetable fats accounted for a greater proportion of dietary energy than animal fats for countries in the lowest per
capita income category. Changes in edible vegetable oil supply, in prices and in consumption equally affected rich and poor countries, although the net impact was relatively much greater in low-income countries. An equally large and important shift in the proportion of energy from added sugars in the diets of low-income countries was also a feature of the nutrition transition (1). Examinations of the purchasing habits of people, aimed at understanding the relationship between level of education or income and the different amounts or types of commodities purchased at different times were also revealing. Research conducted in China shows that there have been profound shifts in purchasing practices in relation to income over the past decade. These analyses show how extra income in China affects poor people and rich people in a differential manner, enhancing the fat intake of the poor more than that of the rich (7). A variable proportion of these fat calories are provided by saturated fatty acids. Only in the two of the most affluent regions (i.e. in parts of North America and Europe) is the intake of saturated fat at or above 10% of energy intake level. In other less affluent regions, the proportion of dietary energy contributed by saturated fatty acids is lower, ranging from 5% to 8%, and generally not changing much over time. National dietary surveys conducted in some countries confirm these data. The ratio of dietary fat from animal sources to total fat is a key indicator, since foods from animal sources are high in saturated fat. Data sets used to calculate country-specific FERs can also be used to calculate proportions of animal fat in total fat. Such analysis indicated that the proportion of animal fat in total fat was lower than 10% in some countries (Democratic Republic of Congo, Mozambique, Nigeria, Sao Tome and Principe, and Sierra Leone), while it is above 75% in some other countries (Denmark, Finland, Hungary, Mongolia, Poland and Uruguay). These findings are not strictly divided along economic lines, as not all of the countries in the high range represent the most affluent countries. Country-specific food availability and cultural dietary preferences and norms to some extent determine these patterns. The types of edible oils used in developing countries are also changing with the increasing use of hardened margarines (rich in trans fatty acids) that do not need to be refrigerated. Palm oil is becoming an increasingly important edible oil in the diets of much of South-East Asia and is likely to be a major source in the coming years. Currently, palm oil consumption is low and the FER ranges between 15% and 18%. At this low level of consumption, the saturated fatty acid content of the diet comprises only 4% to 8%. Potential developments in the edible oil sector could affect all stages of the oil production process from plant breeding to processing methods, including the blending of oils aimed at producing edible oils that have a healthy fatty acid composition. Olive oil is an important edible oil consumed largely in the Mediterranean region. Its production has been driven by rising demand, which has increasingly shifted olive cultivation from traditional farms to more intensive forms of cultivation. There is some concern that the intensive cultivation of olives may have adverse environmental impacts, such as soil erosion and desertification (8). However, agricultural production methods are being developed to ensure less harmful impacts on the environment.
3.4 Availability and changes in consumption of animal products There has been an increasing pressure on the livestock sector to meet the growing demand for highvalue animal protein. The worldâ€™s livestock sector is growing at an unprecedented rate and the driving force behind this enormous surge is a combination of population growth, rising incomes and urbanization. Annual meat production is projected to increase from 218 million tonnes in 1997-1999 to 376 million tonnes by 2030. There is a strong positive relationship between the level of income and the consumption of animal protein, with the consumption of meat, milk and eggs increasing at the expense of staple foods. Because of the recent steep decline in prices, developing countries are embarking on higher meat consumption at much lower levels of gross domestic product than the industrialized countries did
some 20-30 years ago. Urbanization is a major driving force influencing global demand for livestock products. Urbanization stimulates improvements in infrastructure, including cold chains, which permit trade in perishable goods. Compared with the less diversified diets of the rural communities, city dwellers have a varied diet rich in animal proteins and fats, and characterized by higher consumption of meat, poultry, milk and other dairy products. Table 4 shows trends in per capita consumption of livestock products in different regions and country groups. There has been a remarkable increase in the consumption of animal products in countries such as Brazil and China, although the levels are still well below the levels of consumption in North American and most other industrialized countries. As diets become richer and more diverse, the high-value protein that the livestock sector offers improves the nutrition of the vast majority of the world. Livestock products not only provide highvalue protein but are also important sources of a wide range of essential micronutrients, in particular minerals such as iron and zinc, and vitamins such as vitamin A. For the large majority of people in the world, particularly in developing countries, livestock products remain a desired food for nutritional value and taste. Excessive consumption of animal products in some countries and social classes can, however, lead to excessive intakes of fat. Table 4. Per capita consumption of livestock products Meat (kg per year)
Milk (kg per year)
Region 1964 - 1966 1997 - 1999 2030 1964 - 1966 1997 - 1999 2030 World
Near East and North Africa
Sub-Saharan Africaa Latin America and the Caribbean
Excludes South Africa.
Source: Adapted from reference 4 with the permission of the publisher.
The growing demand for livestock products is likely to have an undesirable impact on the environment. For example, there will be more large-scale, industrial production, often located close to urban centres, which brings with it a range of environmental and public health risks. Attempts have been made to estimate the environmental impact of industrial livestock production. For instance, it has been estimated that the number of people fed in a year per hectare ranges from 22 for potatoes and 19 for rice to 1 and 2, respectively, for beef and lamb (9). The low energy conversion ratio from feed to meat is another concern, since some of the cereal grain food produced is diverted to livestock production. Likewise, land and water requirements for meat production are likely to become a major concern, as the increasing demand for animal products results in more intensive livestock production systems (10).
3.5 Availability and consumption of fish Despite fluctuations in supply and demand caused by the changing state of fisheries resources, the economic climate and environmental conditions, fisheries, including aquaculture, have traditionally been, and remain an important source of food, employment and revenue in many countries and communities (11). After the remarkable increase in both marine and inland capture of fish during the 1950s and 1960s, world fisheries production has levelled off since the 1970s. This levelling off of the total catch follows the general trend of most of the worldâ€™s fishing areas, which have apparently reached their maximum potential for fisheries production, with the majority of stocks being fully exploited. It is therefore very unlikely that substantial increases in total catch will be obtained in the future. In contrast, aquaculture production has followed the opposite path. Starting from an insignificant total production, inland and marine aquaculture production has been growing at a remarkable rate, offsetting part of the reduction in the ocean catch of fish. The total food fish supply and hence consumption has been growing at a rate of 3.6% per year since 1961, while the worldâ€™s population has been expanding at 1.8% per year. The proteins derived from fish, crustaceans and molluscs account for between 13.8% and 16.5% of the animal protein intake of the human population. The average apparent per capita consumption increased from about 9 kg per year in the early 1960s to 16 kg in 1997. The per capita availability of fish and fishery products has therefore nearly doubled in 40 years, outpacing population growth. As well as income-related variations, the role of fish in nutrition shows marked continental, regional and national differences. In industrialized countries, where diets generally contain a more diversified range of animal proteins, a rise in per capita provision from 19.7 kg to 27.7 kg seems to have occurred. This represents a growth rate close to 1% per year. In this group of countries, fish contributed an increasing share of total protein intake until 1989 (accounting for between 6.5% and 8.5%), but since then its importance has gradually declined and, in 1997, its percentage contribution was back to the level prevailing in the mid-1980s. In the early 1960s, per capita fish supply in lowincome food-deficit countries was, on average, only 30% of that of the richest countries. This gap has been gradually reduced, such that in 1997, average fish consumption in these countries was 70% of that of the more affluent economies. Despite the relatively low consumption by weight in low-income food-deficit countries, the contribution of fish to total animal protein intake is considerable (nearly 20%). Over the past four decades, however, the share of fish proteins in animal proteins has declined slightly, because of faster growth in the consumption of other animal products. Currently, two-thirds of the total food fish supply is obtained from capture fisheries in marine and inland waters, while the remaining one third is derived from aquaculture. The contribution of inland and marine capture fisheries to per capita food supply has stabilized, around 10 kg per capita in the period 1984-1998. Any recent increases in per capita availability have, therefore, been obtained from aquaculture production, from both traditional rural aquaculture and intensive commercial aquaculture of high-value species. Fish contributes up to 180 kcal per capita per day, but reaches such high levels only in a few countries where there is a lack of alternative protein foods grown locally or where there is a strong
preference for fish (examples are Iceland, Japan and some small island states). More typically, fish provides about 20-30 kcal per capita per day. Fish proteins are essential in the diet of some densely populated countries where the total protein intake level is low, and are very important in the diets of many other countries. Worldwide, about a billion people rely on fish as their main source of animal proteins. Dependence on fish is usually higher in coastal than in inland areas. About 20% of the worldâ€™s population derives at least one-fifth of its animal protein intake from fish, and some small island states depend almost exclusively on fish. Recommending the increased consumption of fish is another area where the feasibility of dietary recommendations needs to be balanced against concerns for sustainability of marine stocks and the potential depletion of this important marine source of high quality nutritious food. Added to this is the concern that a significant proportion of the world fish catch is transformed into fish meal and used as animal feed in industrial livestock production and thus is not available for human consumption.
3.6 Availability and consumption of fruits and vegetables Consumption of fruits and vegetables plays a vital role in providing a diversified and nutritious diet. Alow consumption of fruits and vegetables in many regions of the developing world is, however, a persistent phenomenon, confirmed by the findings of food consumption surveys. Nationally representative surveys in India (12), for example, indicate a steady level of consumption of only 120-140 g per capita per day, with about another 100 g per capita coming from roots and tubers, and some 40 g per capita from pulses. This may not be true for urban populations in India, who have rising incomes and greater access to a diverse and varied diet. In contrast, in China, - a country that is undergoing rapid economic growth and transition - the amount of fruits and vegetables consumed has increased to 369 g per capita per day by 1992. At present, only a small and negligible minority of the worldâ€™s population consumes the generally recommended high average intake of fruits and vegetables. In 1998, only 6 of the 14 WHO regions had an availability of fruits and vegetables equal to or greater than the earlier recommended intake of 400 g per capita per day. The relatively favourable situation in 1998 appears to have evolved from a markedly less favourable position in previous years, as evidenced by the great increase in vegetable availability recorded between 1990 and 1998 for most of the regions. In contrast, the availability of fruit generally decreased between 1990 and 1998 in most regions of the world. The increase in urbanization globally is another challenge. Increasing urbanization will distance more people from primary food production, and in turn have a negative impact on both the availability of a varied and nutritious diet with enough fruits and vegetables, and the access of the urban poor to such a diet. Nevertheless, it may facilitate the achievement of other goals, as those who can afford it can have better access to a diverse and varied diet. Investment in periurban horticulture may provide an opportunity to increase the availability and consumption of a healthy diet. Global trends in the production and supply of vegetables indicate that the current production and consumption vary widely among regions, as indicated in Table 5. It should be noted that the production of wild and indigenous vegetables is not taken into account in production statistics and might therefore be underestimated in consumption statistics. In 2000, the global annual average per capita vegetable supply was 102 kg, with the highest level in Asia (116 kg), and the lowest levels in South America (48 kg) and Africa (52 kg). These figures also include the large amount of horticultural produce that is consumed on the farm. Table 5 and Figure 3 illustrate the regional and temporal variations in the per capita availability of vegetables per capita over the past few decades. Table 5. Supply of vegetables per capita, by region, 1979 and 2000 (kg per capita per year)
Region World Developed countries
1979 2000 66.1 101.9 107.4 112.8
North and Central America
110.9 112.5 71.8
Source: reproduced from reference 13 with the permission of the publisher. Figure 3. Trends in the supply of vegetables per capita, by region, 1970-2000 Source: reproduced from reference 13 the permission of the publisher.
3.7 Future trends in demand, foodavailability and consumption In recent years the growth rates of world agricultural production and crop yields have slowed. This has raised fears that the world may not be able to grow enough food and other commodities to ensure that future populations are adequately fed. However, the slowdown has occurred not because of shortages of land or water but rather because demand for agricultural products has also slowed. This is mainly because world population growth rates have been declining since the late 1960s, and fairly high levels of food consumption per person are now being reached in many countries, beyond which further rises will be limited. It also true that a high share of the worldâ€™s population remains in poverty and hence lacks the necessary income to translate its needs into effective demand. As a result, the growth in world demand for agricultural products is expected to fall from an average 2.2% per year over the past 30 years to an average 1.5% per year for the next 30 years. In developing countries the slowdown will be more dramatic, from 3.7% per year to 2% per year, partly as a result of China having passed the phase of rapid growth in its demand for food. Global food shortages are unlikely, but serious problems already exist at national and local levels, and may worsen unless focused efforts are made. The annual growth rate of world demand for cereals has declined from 2.5% per year in the 1970s and 1.9% per year in the 1980s to only 1% per year in the 1990s. Annual cereal use per person (including animal feeds) peaked in the mid-1980s at 334 kg and has since fallen to 317 kg. The decline is not a cause for alarm, it is largely the natural result of slower population growth and shifts
in human diets and animal feeds. During the 1990s, however, the decline was accentuated by a number of temporary factors, including serious economic recessions in the transition countries and in some East and South-East Asian countries. The growth rate in the demand for cereals is expected to rise again to 1.4% per year up until 2015, slowing to 1.2% per year thereafter. In developing countries overall, cereal production is not expected to keep pace with demand. The net cereal deficits of these countries, which amounted to 103 million tonnes or 9% of consumption in 1997-1999, could rise to 265 million tonnes by 2030, when they will be 14% of consumption. This gap can be bridged by increased surpluses from traditional grain exporters, and by new exports from the transition countries, which are expected to shift from being net importers to being net exporters. Oil crops have seen the fastest increase in area of any crop sector, expanding by 75 million hectares between the mid-1970s and the end of the 1990s, while cereal area fell by 28 million hectares over the same period. Future per capita consumption of oil crops is expected to rise more rapidly than that of cereals. These crops will account for 45 out of every 100 extra kilocalories added to average diets in developing countries between now and 2030. There are three main sources of growth in crop production: expanding the land area, increasing the frequency at which it is cropped (often through irrigation), and boosting yields. It has been suggested that growth in crop production may be approaching the ceiling of what is possible in respect of all three sources. A detailed examination of production potentials does not support this view at the global level, although in some countries, and even in whole regions, serious problems already exist and could deepen. Diets in developing countries are changing as incomes rise. The share of staples, such as cereals, roots and tubers, is declining, while that of meat, dairy products and oil crops is rising. Between 1964-1966 and 1997-1999, per capita meat consumption in developing countries rose by 150% and that of milk and dairy products by 60%. By 2030, per capita consumption of livestock products could rise by a further 44%. Poultry consumption is predicted to grow the fastest. Productivity improvements are likely to be a major source of growth. Milk yields should improve, while breeding and improved management should increase average carcass weights and off-take rates. This will allow increased production with lower growth in animal numbers, and a corresponding slowdown in the growth of environmental damage from grazing and animal wastes. In developing countries, demand is predicted to grow faster than production, resulting in a growing trade deficit. In meat products this deficit will rise steeply, from 1.2 million tonnes per year in 19971999 to 5.9 million tonnes per year in 2030 (despite growing meat exports from Latin America), while in the case of milk and dairy products, the rise will be less steep but still considerable, from 20 million tonnes per year in 1997-1999 to 39 million tonnes per year in 2030. An increasing share of livestock production will probably come from industrial enterprises. In recent years, production from this sector has grown twice as fast as that from more traditional mixed farming systems and more than six times faster than that from grazing systems. World fisheries production has kept ahead of population growth over the past three decades. Total fish production has almost doubled, from 65 million tonnes in 1970 to 125 million tonnes in 1999, when the world average intake of fish, crustaceans and molluscs reached 16.3 kg per person. By 2030, annual fish consumption is likely to rise to some 150-160 million tonnes, or between 19-20 kg per person. This amount is significantly lower than the potential demand, as environmental factors are expected to limit supply. During the 1990s the marine catch levelled out at 80-85 million tonnes per year, and by the turn of the century, three-quarters of ocean fish stocks were overfished, depleted or exploited up to their maximum sustainable yield. Further growth in the marine catch can only be modest. Aquaculture compensated for this marine slowdown, doubling its share of world fish production during the 1990s. It is expected to continue to grow rapidly, at rates of 5-7% per year up to 2015. In
all sectors of fishing it will be essential to pursue forms of management conducive to sustainable exploitation, especially for resources under common ownership or no ownership.
3.8 Conclusions A number of conclusions can be drawn from the preceding discussion. • Most of the information on food consumption has hitherto been obtained from national Food Balance Sheet data. In order to better understand the relationship between food consumption patterns, diets and the emergence of noncommunicable diseases, it is crucial to obtain more reliable information on actual food consumption patterns and trends based on representative consumption surveys. • There is a need to monitor how the recommendations in this report influence the behaviour of consumers, and what further action is needed to change their diets (and lifestyles) towards more healthy patterns. • The implications for agriculture, livestock, fisheries and horticulture will have to be assessed and action taken to deal with potential future demands of an increasing and more affluent population. To meet the specified levels of consumption, new strategies may need to be developed. For example, a realistic approach to the implementation of the recommendation concerning high average intake of fruit and vegetables, requires attention to be paid to crucial matters such as where would the large quantities needed be produced, how can the infrastructure be developed to permit trade in these perishable products, and would largescale production of horticultural products be sustainable? • A number of more novel matters will need to be dealt with, such as: • the positive and negative impacts on noncommunicable diseases of intensive production systems, not only in terms of health (e.g. nitrite in vegetables, heavy metals in irrigation water and manure, pesticide use), but also in terms of dietary quality (e.g. leaner meats in intensive poultry production); • the effects of longer food chains, in particular of longer storage and transport routes, such as the higher risk of deterioration (even if most of this may be bacterial and hence not a factor in chronic diseases), and the use and misuse of conserving agents and contaminants; • the effects of changes in varietal composition and diversity of consumption patterns, for example, the loss of traditional crop varieties and, perhaps even more significantly, the declining use of foods from “wild” sources. • Trade aspects need to be considered in the context of improving diet, nutrition and the prevention of chronic diseases. Trade has an important role to play in improving food and nutrition security. On the import side, lower trade barriers reduce domestic food prices, increase the purchasing power of consumers and afford them a greater variety of food products. Freer trade can thus help enhance the availability and affordability of food and contribute to a better-balanced diet. On the export side, access to markets abroad creates new income opportunities for domestic farmers and food processors. Farmers in developing countries in particular stand to benefit from the removal of trade barriers for commodities such as sugar, fruits and vegetables, as well as tropical beverages, all these being products for which they have a comparative advantage. • The impact that agricultural policies, particularly subsidies, have on the structure of production, processing and marketing systems - and ultimately on the availability of foods that support healthy food consumption patterns - should not be overlooked. All these issues and challenges need to be addressed in a pragmatic and intersectoral manner. All
sectors in the food chain, from â€œfarm to tableâ€?, will need to be involved if the food system is to respond to the challenges posed by the need for changes in diets to cope with the burgeoning epidemic of noncommunicable diseases.
References 1. Drewnowski A, Popkin BM. The nutrition transition: new trends in the global diet. Nutrition Reviews, 1997, 55:31-43. 2. Ferro-Luzzi A, Martino L. Obesity and physical activity. Ciba Foundation Symposium, 1996, 201:207-221. 3. World agriculture: towards 2015/2030. Summary report. Rome, Food and Agriculture Organization of the United Nations, 2002. 4. Bruinsma J, ed. World agriculture: towards 2015/2030. An FAO perspective. Rome, Food and Agriculture Organization of the United Nations/London, Earthscan, 2003. 5. Fats and oils in human nutrition. Report of a Joint Expert Consultation. Rome, Food and Agriculture Organization of the United Nations, 1994 (FAO Food and Nutrition Paper, No. 57). 6. Guo X et al. Structural change in the impact of income on food consumption in China 19891993. Economic Development and Cultural Change, 2000, 48:737-760. 7. Popkin BM. Nutrition in transition: the changing global nutrition challenge. Asia Pacific Journal of Clinical Nutrition, 2001, 10(Suppl. 1):S13-S18. 8. Beaufoy G. The environmental impact of olive oil production in the European Union: practical options for improving the environmental impact. Brussels, Environment Directorate-General, European Commission, 2000. 9. Spedding CRW. The effect of dietary changes on agriculture. In: Lewis B, Assmann G, eds. The social and economic contexts of coronary prevention. London, Current Medical Literature, 1990. 10. Pimental D et al. Water resources: agriculture, the environment and society. Bioscience, 1997, 47:97-106. 11. The state of the world fisheries and aquaculture 2002. Rome, Food and Agriculture Organization of the United Nations, 2002. 12. India nutrition profile 1998. New Delhi, Department of Women and Child Development, Ministry of Human Resource Development, Government of India, 1998. 13. Fresco LO, Baudoin WO. Food and nutrition security towards human security. In: Proceedings of the International Conference on Vegetables, (ICV-2002), 11-14 November 2002, Bangalore, India. Bangalore, Dr Prem Nath Agricultural Science Foundation (in press).
International Policy Network UK
NGOs from around the world demand freedom to trade in agricultural products Monday, 8 September, Cancun – A coalition of NGOs from countries across the globe is calling for free trade in chocolate, and other agricultural goods, to help the poor. The Global Freedom to Trade Campaign, with 25 NGO members representing India, Nigeria and West Africa, Kenya and East Africa, Colombia, believes that chocolate is symbolic of the distorted global trade in agricultural goods. Campaign member James Shikwati, of the Inter Region Economic Network of Eastern Africa, comments: “As world leaders gather this week for the WTO meeting, the Freedom to Trade Campaign believes that chocolate symbolizes the harm done by rich countries through tariffs, quotas, and subsidies on agricultural goods, which perpetuate poverty and only benefit special interests in wealthy countries.” Mexico is the birthplace of chocolate, and today, the Global Freedom to Trade campaign will distribute “Freedom to Trade Chocolate” at an event in front of a Mayan pyramid at the Sheraton Tower and Resorts Hotel in Cancun. Campaign members believe that by scrapping tariffs, quotas, and subsidies, chocolate lovers and consumers alike would enjoy cheaper chocolate, coffee, and other goods. “Tariffs protect the rich. They are welfare for the well-to-do. The poor want to be free to trade – to buy and sell without government restrictions,” commented campaign member Leon Louw, of the NGO the Free Market Foundation in Johannesburg, South Africa. Eliminating tariff and non-tariff barriers would offer farmers in poor countries a real chance to sell their goods abroad. It would also generate local investment, creating jobs and opportunity for people in commodity-exporting countries. And it would allow agricultural producers to diversify exports, making them less dependent on primary products and therefore less subject to periodic commodity price shocks.
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Organic suppliers see increasing demand Operations respond to consumers' specific choices By STEVE BROWN Capital Press Organic farming ranges from the backyard gardener to the sprawling farm, orchard or livestock operation. That same variety of scale is reflected in organic suppliers. "No one dominates," said Michele Catalano, chairwoman of the Organic Advisory Board, which was established in 1987 to advise the Washington State Department of Agriculture concerning the implementation of the WSDA Organic Food Program. Among seed suppliers, she said, "Some companies specialize in organics, like Territorial (in Oregon) and Peaceful Valley (in California). Larger companies, like Osborne (in Washington) and Johnny's (in Maine) will have some organic seed." Catalano said organic growers can refer to two major resources for selecting supplies: WSDA's Brand Names Materials List and the Organic Materials Review Institute list. These extensive lists include such materials as seeds, fertilizers, minerals and pesticides. "Growers large and small often pick and choose among the suppliers," she said. "In buying seed, for instance, they choose based on traits they like." With two co-owners and two employees, Yelm Earth Worms and Castings has extended its market from its plant about 25 miles south of Tacoma into Oregon and California. Now, co-owner Hunt McLean said, the company is shipping to Utah, Colorado and Wyoming, with buyers in Texas showing interest. Yelm Earth's product line revolves around its earthworms -- red wigglers, to be specific. Other products available through its website include worm depots, harvesters, castings, soils, potting mixes, amendments, compost tea and complete vermicomposting systems. "We've got 30,000 square feet of enclosed production space," co-owner Kelan Moynagh said. "We sell a lot of our product in bulk for the local buyers. We sold 500 yards last year. At 800 pounds a yard, that makes 200 tons." McLean said each of the 10 production bays holds two windrows. Each windrow -- which takes about nine months to completely process -- yields two semi-truck loads. "We feed the worms dairy waste that has had the salts washed and pressed out," he said. Moynagh said Yelm Earth sells retail, wholesale and online. "We've seen an uptick in demand, though locally it fell off this year because of the weather. A lot of gardens collapsed after that false start, and gardeners didn't want to reseed." Wilbur-Ellis, known for its variety of feed products and its international network of specialists in crop protection, nutrition and seed technology, has also branched into organics. "Organic products are not a significant part (of our business volume) overall," said John Leman, marketing and sales manager for branded products. "But we have focused on organics, especially in the tree fruit group. Several of our organics experts are up to speed on products and pesticides." Leman said demand, which had been steadily growing, has slowed in the past two years. At Black Lake Organic in Olympia, Wash., owner and manager Gary Kline produces and sells self-
formulated minerals and fertilizers to homeowners and small farmers. It's a local, one-man operation, which last year sold 16 tons of products. Thirty years ago the now-retired biologist started selling organic fertilizers out of his garage. Now his shelves are stacked with packages of individual minerals as well as 10 blends specifically designed for particular classes of plants. His specialty, he said, is "getting minerals in the right proportion based on a soil test. ... Too many organic growers and gardeners lack fully balanced soil fertility and fail to incorporate natural earth minerals along with the organic matter, manures and unfortified compost that they typically supply in abundance." Kline said his small operation allows him to provide personalized expertise alongside his products.
Posted: Thursday, September 30, 2010 12:00 PM Bangladesh Agriculture: In 21st Century Posted by Perspective on 12/02/09 â€˘ Categorized as Cover Story A. T. M. Syful Islam Bangladesh Agriculture University
Agriculture plays a key role in Bangladesh by contributing 24 percent to its exports, 32 percent to its GDP and employing more than 60 percent of its labor force. The dominance of agriculture will continue well into the 21st century as the nation fights against poverty and strives to raise standard of living of its people through sustained economic growth. Bangladesh is the 7th largest country in the world in population where 164.707 million people are virtually elbowing each other in a land that is 147,570 sq km in area with a population density of more than 1100 people per sq km. Overpopulated! Well, there are only a few city-like states â€“ like Singapore â€“ that would top this kind of population density. Excluding those states, Bangladesh would make it to the top of the lists in population density. What makes the situation even more horrifying for Bangladesh is that the country is poised to lose a good part of its territory for rise of sea levels because of global warming, while its very population increases at an unsustainable rate. Year
Source: International Monetary Fund â€“ 2009 World Economic Outlook Food production and population growth in Bangladesh: In Bangladesh, a country currently experiencing rapid population growth and serious food shortages, an effort to increase crop yields through the introduction of HYV (high yield varieties) of rice was initiated in 1966. As of 1979, 15% of the rice fields were planted with HYV rice, and the remaining rice fields were planted with lower yield, traditional varieties. An investigation was undertaken to determine if the increase in crop yields expected from the introduction of HYV rice would sufficiently offset expected population increases and create a balance between food supply and demand in the future. Time series analysis were used to project crop yields for the years 1980, 1990, and 2000 for each district of the country, if 15% of the land was planted in HYV rice and if 20% of the land was planted in HYV rice. Population projections were used to calculate per capita food requirements for each district for the years 1980, 1990, and 2000. Projected crop yields and per capita food requirements were then plotted on maps to determine the relationship between food supply and demand in each district. Even under the most favorable projection, in which 20% of the rice fields were planted in HYV rice, food deficient areas were more extensive than at the present time. These findings suggested that even a massive agricultural effort cannot solve the food problems of Bangladesh; however, if agricultural progress is combined with a rapid reduction in the population growth rate, the country can solve its food problem and also develop a viable economy. In overpopulated Bangladesh, people virtually elbow each other in a land spanning 147,570 square kilometers with a population density of more than 1,100 people per square kilometer. While landmass is being lost to rising sea levels due to rains and floods, blamed on global warming, the population continues to increase at an unsustainable rate. In 1971, when Bangladesh attained independence, its population was about 75 million. Since then it has doubled. The current growth rate varies from 1.5 percent to 2 percent a year according to different assessments. Considering an annual average growth rate of 1.75 percent a year, Bangladeshâ€™s population will double in the next 40 years; at the lowest growth rate it will double in 47 years. This is like the current U.S. population of 300 million living within the confines of the state of Wisconsin, which is close to the size of Bangladesh. Despite such an ominous scenario, optimists point out that Bangladesh is improving in education and healthcare and has achieved a respectable economic growth rate of about 5 percent annually in recent decades. However, progress has had very little effect on overall poverty levels in the country. In fact, studies have revealed that poverty levels have risen and not decreased.
In recent times, small shifts in weather patterns have intensified flooding, causing more deaths and rendering millions homeless. When coastal areas begin to submerge under water, people have no alternative but to migrate to higher land. This process of migration to higher ground has already begun and will intensify as coastal areas are increasingly flooded. The pressure is on Dhaka, the capital city, as more people cram into this already overcrowded city each day. Living conditions in Dhaka are in a continuous state of deterioration. People lack basic amenities like electricity and clean drinking water. Other cities fare no better and encroachment on government land even in rural areas is a common sight. This is likely to result in people migrating to neighboring India. Climate change is likely to affect and impact the world’s food supply. Scientists predict that world harvests will drop 20 to 40 percent by the end of this century as a result of global warming. So the crucial issue is whether Bangladesh can meet its food requirements, given the anticipated massive food shortage, its growing population and the loss of farmland when world food supplies decline. Some experts have advocated the concept of “compact townships” to avoid the congestion of people in major cities and limit the pressure on farmland. Others, however, believe that the country is growing by about 20 square kilometers annually. Dismissing the idea of land growth, Atiq Rahman, a member of the U.N. Intergovernmental Panel on Climate Change said, “The rate at which sediment is deposited and new land is created is much slower than the rate at which climate change and sea level rises are taking place.” Thousands of non-governmental organizations are currently operating in Bangladesh and influencing the lives of many poor people. By taking a unified stand and educating the public on family planning, NGOs can contribute more in advancing the cause of humanity. Expatriate Bangladeshis are also morally obligated to come forward to help meet this great challenge in their own innovative ways. Population and food challenge of Bangladesh in the 21st century Rice is the staple food of about 135 million people of Bangladesh. It provides nearly 48% of rural employment, about two-third of total calorie supply and about one-half of the total protein intakes of an average person in the country. Rice sector contributes one-half of the agricultural GDP and one-sixth of the national income in Bangladesh. Almost all of the 13 million farm families of the country grow rice. Rice is grown on about 10.5 million hectares which has remained almost stable over the past three decades. About 75% of the total cropped area and over 80% of the total irrigated area is planted to rice. Thus, rice plays a vital role in the livelihood of the people of Bangladesh. Total rice production in Bangladesh was about 10.59 million tons in the year 1971 when the country’s population was only about 70.88 millions. However, the country is now producing about 25.0 million tons to feed her 135 million people. This indicates that the growth of rice production was much faster than the growth of population. This increased rice production has been possible largely due to the adoption of modern rice varieties on around 66% of the rice land which contributes to about 73% of the country’s total rice production.
However, there is no reason to be complacent. The population of Bangladesh is still growing by two million every year and may increase by another 30 millions over the next 20 years. Thus, Bangladesh will require about 27.26 million tons of rice for the year 2020. During this time total rice area will also shrink to 10.28 million hectares. Rice yield therefore, needs to be increased from the present 2.74 to 3.74 t/ha.
Calif. Governor Schwarzenegger Leads Asia Trade Mission to Promote California, Boost Economy Fri, 10 Sep 2010 12:04:42 -0400 EDT | No Comments by California Newswire
SACRAMENTO, Calif. /California Newswire/ — Governor Arnold Schwarzenegger yesterday departed for a six-day trade mission to Asia in order to grow California’s economy and create jobs. Leading multiple delegations of business leaders, the Governor will visit China, Japan and South Korea; California’s fourth, third and fifth largest trading partners, respectively. In the course of the mission, the Governor will engage in activities that will boost competition among countries to help fund and build California’s high-speed rail system; increase access to Asian markets for California’s products and services; improve relations with national and regional dignitaries; and connect California and Asian businesses. As the number one exporting state in the U.S. in agriculture and number two overall, trade plays a vital role in California’s economic success. Maintaining relationships with our trading partners is integral to job creation, economic growth and increased revenues in California.
“California is the world leader in many areas, from agriculture to entertainment, and leads in nearly every industry of the future including high-tech, green-tech and bio-tech. More than any other U.S. state, international trade drives California job growth and economic prosperity,” said Governor Schwarzenegger. “With increasing world travel and investment options for foreign tourists and businesspeople, California must take action to remain a top destination for these important job-creating dollars. That is exactly why I am leading this trade mission, to sell California’s world leading goods and encourage increased investment so more jobs, economic growth and increased state revenues can benefit the Golden State.” Trade is significant to California’s economy. In 2009, California exported $120 billion in goods to over 220 foreign markets; $27 billion of which was to China, Japan and South Korea. It is estimated by the U.S. Department of Commerce that one in seven jobs in the state are related to trade and every million dollar increase in exports supports 11 jobs. California’s top exports
include: computer and electronic products; food and agriculture; and transportation equipment. Tourism also has a positive economic impact on California’s economy, supporting over 880,000 jobs and generating $5.3 billion in tax revenues annually. In 2009, California received $15.6 billion in international visitor spending, with close to $1.3 billion coming from the over one million Chinese, Japanese and Korean tourists that visited California. “At a time when California’s unemployment rate is more than 12 percent, our relationship with China and its exploding economy has never been more important,” said Jim Wunderman, President and CEO of the Bay Area Council, an organizer of the China portion of the trade mission. “The best thing to get us out of this recession is to open up more demand for the products and services of the people of California. We now live in a globalized world and big efforts like this show California aims to win in the 21st Century economy. This mission, in effect, is bringing a big fortune cookie that says ‘Buy Californian!’” The Bay Area Council (Council), California Chamber of Commerce (Cal Chamber) and Los Angeles Chamber of Commerce (L.A. Chamber) have all formed delegations of business, agricultural and tourism leaders that will travel to different locations in Asia in conjunction with the Governor’s trade mission. The Council, led by President and CEO Jim Wunderman has a delegation of over 50 members, including: Lloyd Dean, CEO of Catholic Healthcare West & Chairman of Bay Area Council; Patrick Lo, CEO of Netgear; and Marc Hedrick, CEO of Cytori Therapeutics. Due to their working relationship with Shanghai, the Council delegation will be based in China; joining the Governor on his stops in Hangzhou and Shanghai. Cal Chamber will lead a delegation of 20, including leaders from Marvell Semiconductor, Roll International, E & J Gallo Winery and Mammoth Mountain Resort. Some members from the Cal Chamber delegation will join the Governor on all his stops; others will only join him in portions. The L.A. Chamber delegation will be based in South Korea and will join the Governor on his stops there. The L.A. Chamber is bringing leaders from businesses including Sea World Parks & Entertainment, New Logic Research, the Ports of Long Beach and Los Angeles, Alvarado Manufacturing and 3Plus Logistics. For a full list of delegates, click here. The Governor will connect these California innovators and entrepreneurs with Asian businesspeople and investors. From discussing jobs and economic growth with Alibaba Group Chairman and Chief Executive Officer Jack Ma in Hangzhou, to visiting the 2010 World Expo in Shanghai and joining the American Chamber of Commerce in Tokyo and Seoul to discuss business innovation and trade, the Governor will play an important role in opening doors for California and Asian companies to collaborate. California agricultural exports to China, Japan and South Korea came in at $3.5 billion in 2009; with lots of room to grow. Opening additional access to these markets for California’s agricultural products is a top priority for the Governor during this trade mission, where he will promote California-grown products in several supermarket visits throughout Asia and specifically in South Korea, where he is expected to make a speech on free trade. High-speed rail will be a priority for the Governor in Asia. China, Japan and South Korea all have advanced high-speed rail systems. The Governor will ride each of them and meet with top officials from each country’s transportation ministry. California will begin construction on its own high-speed rail system in 2012, and this fact-finding mission will play an important role in providing information and generating international competition for bids to assist with the expertise in building the railway. The Governor will also meet with national and regional dignitaries, including: Tokyo’s Governor Shintaro Ishihara, South Korea’s Gyeonggi Province Governor Kim Moon-soo and South Korean President Lee Myung-bak. Bolstering the diplomatic relations between California and its trading partners is vital to continued economic openness and cooperation.
Japan is California’s third largest trading partner, with nearly $11 billion in California goods exported in 2009. Between 2002 and 2008, California exports to Japan increased 64 percent. Japan is California’s second largest overseas tourist market, with approximately 462,000 coming to California in 2009; resulting in more than $500 million in spending in California. China is the second largest economy in the world and is California’s fourth largest trading partner, with nearly $10 billion in California goods exported to China in 2009. Between 2000 and 2009, California exports to China increased 174 percent. Chinese tourism in California has also grown dramatically in the past decade, increasing 82 percent since 2000. In 2009, an estimated 271,000 Chinese tourists visited California, resulting in $435 million in spending in the state. South Korea is one of the fastest growing economies in the world and is California’s fifth largest trading partner, with nearly $6 billion in California goods exported in 2009. Between 2002 and 2009, California exports to South Korea increased 64 percent. California exports more to South Korea than any other U.S. state. Over 400,000 Koreans live in California, and travel for the purpose of visiting friends and relatives has kept Korea one of the most stable overseas tourism markets over the last 10 years. Approximately 277,000 Koreans visited California in 2009, with combined spending of $326 million. When Governor Schwarzenegger first took office, he promised to be California’s number one salesman and he has delivered on that promise. He has led trade missions to Canada, China, Mexico, Japan and Germany. These trade missions have led to increased economic activity and vital information sharing agreements. As a direct result of the Governor’s 2005 trade mission to China, the California Strawberry Commission sought Chinese clearance to allow imports of California strawberries. This resulted in Chinese special import waivers to allow California strawberries to be distributed at the 2008 Olympics in Beijing. The Governor successfully promoted California’s agricultural products to Mexico during his 2006 trade mission; specifically urging Mexico to lift a ban on the importation of California-grown spinach. In 2007, Mexico lifted the ban. The Governor’s 2007 trade mission to Canada resulted in major strides in reducing greenhouse gas emissions and potentially life-saving research. The Premiers of British Columbia and Ontario both adopted California’s first-in-the-nation Low Carbon Fuel Standards. And the Cancer Stem Cell Consortium was created to facilitate coordination between Canadian and California researchers on cancer stem cell research. Copr. © 2010 eNewsChannels™ and California Newswire.
Organic Demand: A Profile of Consumers in the Fresh Produce Market by John Stevens-Garmon, Chung L. Huang, and Biing-Hwan Lin Demand for organic produce in the United States has increased steadily since the early 1990s. In 2000, for the first time, conventional supermarkets sold more organic food than any other venue (Dimitri & Greene, 2002). According to the Organic Trade Association (OTA), organic food sales in the United States totaled $13.8 billion in 2005, making up 2.5% of the retail food market. This is an increase from 1.9% in 2003 and from 0.8% in 1997 (OTA, 2006). This increase coincides with the implementation of national organic standards by the USDA in October of 2002, which provided uniform labeling for consumer recognition. Demand trends are expected to continue as more conventional retailers take up a larger portion of the organic market. Sales of organic foods are estimated to rise to $23.8 billion by 2010 (NBJ, 2004). The phenomenal growth in organic sales in recent years has brought additional farmland into organic agriculture industry. Dimitri and Greene (2002) estimated that between 1997 and 2001, U.S.
farmers and ranchers nearly doubled the acreage of certified organic land, totaling to 2.3 million acres. With increasing production and supply of organic produce and meats, organic food, once considered a niche product, has become more available and affordable for consumers in mainstream grocery stores. It is estimated that 46% of total organic food sales are now handled by the massmarket channel, which includes supermarkets, grocery stores, mass merchandisers, and club stores (OTA, 2006). A popular perception tends to suggest that most organic consumers are white, wealthy, and have young children. However, the consumer base of organic food appears to have become more diverse and cannot be easily pigeonholed as the market is growing with increased availability and popularity. A study by the Hartman Group (2002) found that half of the respondents who purchased organic food frequently have an annual income below $50,000, and that African Americans, Asian Americans, and Hispanics purchase more organic products than Caucasians. Our analysis used the Nielsen Homescan data from 2001 and 2004 (Box 1) to determine the characteristics of organic consumers, what they buy, how much they spend, and the price premiums they pay for organic produce. These two years give us a sample from before and after the implementation of the National Organic Program's (NOP) labeling standard. We focus on fresh produce because produce represents the largest sector, at about 39% of the organic market (OTA, 2006). One may speculate that the growing popularity of organic consumption could be attributed at least partially to the implementation of NOP. However, it is not our intention to contribute to the debate on the effect of NOP, mainly because Homescan data are not suitable for examining such an issue. We simply present a cursory look at the data to examine whether any notable changes have occurred after NOP by comparing household purchases of fresh produce in 2001 and 2004.
Who Buys Organic Produce? Of all demographic characteristics, race seems to be the most correlated with organic expenditures. In 2001, we found that Asian Americans, compared to other ethnic groups, spent the most food dollars to purchase organic produce on a per capita basis. Though they bought comparable amounts of fresh produce, Asian Americans, on average, spent more on organic produce than White, African, or Hispanic Americans. By 2004, Asian Americans' expenditures on organics fell, while White, African, and Hispanic Americans increased their spending on organic produce (Figure 1). Further, African Americans have replaced Asian Americans to become the ethnic group that spent the most on organic produce. The proportion of African Americans who purchased organic produce also increased from 34% in 2001 to 37% in 2004, while the proportion of organic users among other groups have remained relatively the same. These findings are in general agreement with the report that Asian, Hispanic, and African Americans are the ethnic groups more likely to purchase organic foods than Whites (Hartman Group, 2002). According to a more recent study by the Hartman Group (2006), Asians and Hispanics are motivated primarily by family concerns in buying organic products. Organic expenditures vary by region. We found that in 2004, households in the Western United States purchased more organic produce than those residing in other regions, spending on average about $4.90 per capita. This spending amount represents an increase of 19% over 2001, after adjusting for inflation. Households residing in the northeastern and southern regions also registered an increase in average per capita spending on organic produce. The Central United States showed the lowest average per capita expenditure in 2004, which remained virtually unchanged from 2001. In terms of proportion of households that purchased fresh organic produce, the western region also showed the largest increase (almost 4%) of organic users from 2001 to 2004. The West and South appear to be the two fastest growing markets for organic produce in the United States. According to Homescan data, the average per capita spending on organic produce increased by 12% in real terms between 2001 and 2004. As shown in Figure 2, this increase in spending is observed for all households across various income groups. It is interesting to note that average per capita spending on organic produce exhibited a U-shape relationship with income for households earning
less than $45,000 annually. Among households earning $45,000 and more, organic spending appears to rise with income. These patterns between household income and organic spending are observed for both 2001 and 2004. It is somewhat surprising to find that households with the lowest income level of less than $25,000 spent the mostâ€”more than $4 per capita on organic produce in 2001 and 2004. Furthermore, households in the $35,000-$44,999 income bracket spent about as much on organic produce per capita as those households earning over $100,000 annually ($3.94 versus $4.09 in 2004). For households with annual income at $25,000 or above, there appear little variations on average per capita spending on organic produce in 2001 and 2004. Overall, there is little consistent association between per capita expenditures on organic produce and household income. Studies suggest that lower income families choose to buy organic when possible as a means of preventative medicine, and thus are at least as likely to purchase organic as other income groups (Hartman Group, 2003; OTA, 2004). The lack of a clear positive association between organic expenditure and income level may have prompted Laurie Demeritt, President of the Hartman Group, to observe that "income is about the only thing that doesn't skew at all by user and nonuser. You get little skews in age, little skews in geography, little skews in education, but there's nothing at all for income, so we don't even look at that any more" (Fromartz, 2006). A recent survey conducted by the Food Marketing Institute (2004) showed that only 11% of organic shoppers polled bought organics at a natural-food supermarket, while 57% bought at mainstream grocery stores and discount stores. The fact that mainstream grocery stores are replacing the specialty food stores as the major outlets for organic foods could explain the seemingly fading relationship between organic expenditure and household income. It appears that income may no longer be a good predicator to profile organic consumers as the industry continues to grow and evolve into maturity.
What Do Organic Consumers Buy and How Much Organic Premium Do They Pay? According to Homescan, tomatoes, potatoes, carrots, onions, lettuce, apples, oranges, bananas, grapes, and strawberries were the top five vegetables and fruits in terms of their shares of fresh produce expenditures for home consumption. American households spent more on organic produce between 2001 and 2004 for all produce except oranges and lettuce. Overall, average per capita spending on these organic fruits and vegetables increased from $1.64 in 2001 to $1.91 in 2004, an increase of 8.5% in real terms. Tomatoes appear to be the most favored organic vegetable among American consumers with average per capita spending amounts 3-4 times those of other organic produce in both 2001 and 2004. Per capita spending on organic apples and lettuce held distant second and third places in 2001, while carrots and apples were ranked second and third, respectively, in 2004. Strawberries and bananas registered the largest increases in organic expenditures by 45% and 33%, respectively. Since organic agricultural production is typically more cost intensive than conventional agriculture, many organic farmers rely on the premiums that organic foods carry to cover their extra costs. High premiums usually indicate high demand, signaling to producers which markets may be expanded. As indicated previously (Box 1), we calculated unit values (spending over quantity purchased) to derive price premiums for selected fresh produce because Homescan panelists do not report prices of organic and conventional produce. Thus, the organic premiums derived from unit values are not strictly the same as would be observed from the unit prices, if available. Except for oranges and onions, average organic premiums for the most valuable produce increased from 2001 to 2004 (Figure 3). In 2001, average organic premiums varied from 1% ($0.01/lb.) above the conventional produce for carrots to 78% ($0.32/lb.) for potatoes. In comparison, organic premiums varied from 9% ($0.08/lb.) for oranges to 78% ($0.36/lb.) for potatoes in 2004. According to our calculations, organic potatoes carried a substantially higher price premium than other organic produce in both 2001 and 2004. This finding can be useful to organic producers who are looking for new crops to
improve their profit margins. The changes in organic premiums between 2001 and 2004 were relatively moderate among the most valuable produce, except for lettuce and carrots. In terms of dollar amount, average organic premiums that consumers paid in 2004 for apples, grapes, strawberries, tomatoes, and potatoes were fairly uniform at about $0.35/lb. above their conventional counterparts. There are substantial variations among individual fresh produce, most notably in carrots and lettuce, which registered the largest increases in price premiums between 2001 and 2004. Tomatoes and apples also showed an increase in average price premiums by 52% and 75%, respectively. Overall, the average price premium for the selected produce increased from $0.19/lb. in 2001 to $0.29/lb. in 2004, which represents a 42% increase in real terms. Price plays an important role in consumers' purchase decisions. A survey by Walnut Acres (2002) reported that 68% of consumers cited high prices as the main reason they did not buy organic foods. However, to many organic consumers, price could be of secondary consideration. They are willing to pay a price premium because they value and demand certain attributes from organic products. To them, the organic attributes are well worth the price difference. The fact that we find the organic premiums for most selected fresh produce increased from 2001 to 2004 suggests that the demand for organic produce remains strong, and consumers are willing to pay additional dollars for the organic attribute. Based on limited data on organic prices over the period 2000â€”04 at the farmgate and wholesale levels, Oberholtzer, Dimitri, and Greene (2005) show that prices for organic varieties are comparatively more volatile than their conventional counterparts and organic price premiums were higher at the wholesale level than at the farmgate level. Of the three produce (broccoli, carrots, and mesclun mix) studied, they found that average annual organic price premiums at wholesale, as a percent of conventional prices, increased for carrots (143% to 148%) and for broccoli (141% to 153%) between 2001 and 2004, while the price premiums decreased for mesclun mix from 9% to 7%. It should be noted that the organic premiums calculated from the Homescan data are not directly comparable with those reported in Oberholtzer, Dimitri, and Greene (2005). However, one would expect relatively lower organic price premiums at the retail level than at the wholesale or farmgate level as organic foods are becoming more competitive and increasingly marketed through mainstream supermarkets and discount club stores.
A Profile of Consumer by User Group In our analysis, we categorized each household into user or nonuser group according to whether or not the household purchased organic produce. Then user households are classified into one of three user groups based on sample distribution of per capita spending on organic produce. In 2004, the first quartile of organic users with per capita spending greater than $0 but less than $0.75 is defined as light users, the second and third quartiles are defined as medium users (between $0.76 and $3.65), and the fourth quartile is the heavy users (> $3.65). The nonusers account for 62.5% of the 2004 sample, while light, medium, and heavy users account for 9.6%, 18.6%, and 9.4%, respectively. In comparison, the proportion of user groups in 2001 are 62.9% (nonusers), 9.5% (light users), 18.4% (medium users), and 9.2% (heavy users). Overall, the result shows that proportionally more consumers have become organic users in 2004 than in 2001, with a slightly higher increase in both medium and heavy user groups. Per capita spending on organic produce by medium users increased from $1.45 in 2001 to $1.81 in 2004; an increase of 16% in real terms. For the light and heavy users, the growth in real per capita organic spending increased by 10% from 2001 to 2004. With respect to market shares of selected organic produce across user groups, Figure 4 shows that light users spent the largest proportion of their organic expenditures on carrots, bananas, and tomatoes. The medium users purchased more tomatoes and carrots relative to other kinds of fresh produce, while heavy users seemed to expend a larger proportion of their organic budgets on
tomatoes, apples, and grapes. Overall, organic tomatoes appear to be the favorite fresh produce among the organic users, accounting for more than 15% of light and medium users' organic produce expenditure and more than 10% for heavy users. It is interesting to note that organic vegetables appear to be the preferred organic produce of light users, while the heavy users seem to have an affinity for organic fruits, especially apples and grapes. Heavy users buy proportionately more of each fruit than either the light or medium users, except for bananas. On the other hand, they tend to buy less of each vegetable than either the light or medium users, except for potatoes. Comparing demographic information across user groups in 2004 gives us further insights in terms of how organic expenditures are related to these characteristics. As shown in Table 1, heavy and medium users have the largest proportions of those who have at least a bachelor's degree, while a larger portion of nonusers and light users have either a high school diploma or some college. Interestingly, households whose heads have less than a high school education account for 1.9% of heavy users, the highest among all user groups. With respect to age, heavy users seem to comprise the largest proportion of the youngest households (household head age < 30 years), while the light users' group has the largest proportion of household head age between 30 and 49 years old. Medium and heavy users also have the largest proportion of older households relative to nonusers and light users, with the age of household head 50 years and older. Most heavy users are found in the Southern and Western United States, and the fewest are found in the central region. Medium users have the largest proportion of Whites relative to other user groups, while a relatively large proportion of Hispanic consumers belong to the light users' group. In comparison, heavy users are proportionally few among Whites, with the reverse being true for African, Asian, and other Americans.
Summary We used the Nielsen Homescan data from 2001 and 2004 to analyze consumer purchase patterns of fresh organic produce. Our analysis shows that Asian and African Americans tend to purchase organic over conventional produce more than Whites and Hispanics. Households residing in the western region spent more on organic produce on a per capita basis than those residing in other regions. Contrary to popular opinion, we do not find any consistent positive association between household income and expenditures on organic produce. Although certified organic acreage has increased rapidly in boosting the production of organic foods, our analysis suggests that demand appears to be growing faster than the supply so that organic price premiums for most selected fresh produce remained relatively high in 2004, varying from 9% for oranges to 78% for potatoes. Among all fresh produce studied, organic potatoes appear to command the highest percentage of price premiums in both 2001 and 2004. We classified all households into four groups: nonusers, light users, medium users, and heavy users, according to their per capita expenditures on organic fresh produce. The proportion of consumers buying organic produce increased between 2001 and 2004, suggesting an increasing organic penetration. In terms of demographic characteristics, medium and heavy users are represented proportionately more by older households with the age of household head 50 years and older. Heavy users also comprise the largest proportion of the youngest households (household head age < 30 years), while light users have the largest proportion of household head age between 30 and 49 years old. In addition, we find that light users expend a relatively larger share of their organic expenditures on bananas and carrots than both the medium and heavy users. Organic vegetables appear to be the preferred organic produce of light users, while the heavy users seem to prefer organic fruits, especially apples and grapes. For all organic users, organic tomatoes are clearly the preferred choice over other vegetables.
Acknowledgements The views expressed in this study are those of the authors, and do not necessarily reflect those of the United States Department of Agriculture.
For More Information Dimitri, C., & Greene, C. (2002). Recent growth patterns in U.S. organic foods market. Agricultural Information Bulletin No. 777, U.S. Department of Agriculture, Economic Research Service. Food Marketing Institute. (2004). U.S. organic food sales continue to grow. Food Institute Report, Arlington, VA, May 10. Fromartz, S. (2006). Organic, Inc.: Natural foods and how they grew. New York: Harcourt Trade Publishers. Hartman Group. (2002). Hartman organic research review: A compilation of national organic research conducted by the Hartman Group. Bellevue, WA. Hartman Group. (2003). Organic consumer evolution 2003. Bellevue, WA. Hartman Group. (2006). Organic2006: Consumer attitudes & behavior five years later & into the future. Bellevue, WA. Nutrition Business Journal (NBJ). (2004). The NBJ/SPINS organic foods report 2004. Cleveland, OH: Penton Media, Inc. Oberholtzer, L., Dimitri, C., & Greene, C. (2005). Price premiums hold on as U.S. organic produce market expands. VGS-308-01. Washington, DC: U.S. Department of Agriculture, Economic Research Service. The Organic Trade Association (OTA). (May 2004). The Organic Trade Association's 2004 manufacturer survey. Greenfield, MA. The Organic Trade Association (OTA). (2006). The OTA 2006 manufacturer survey overview. Available online: http://www.ota.com/organic/mt.html. Walnut Acres. (2002). Many Americans make eating organic food a top choice to protect health. Boulder, CO, April 9.
Box 1. The Sample Data and Description. The Nielsen Homescan panel data include purchases of both random-weight and Uniform Product Code (UPC) food items. According to Nielsen, the panel consists of representative U.S. households that provide food purchase data for at-home consumption. For 2001 and 2004, more than 8,164 and 8,430 households, respectively, participated in the Homescan panel. In general, panelists report their purchases weekly by scanning either the UPC or a designated code for random-weight (unpackaged) products of all their purchases from grocery stores or other retail outlets. For packaged or UPC-coded food products, organic produce can be identified by the presence of the USDA organic seal or with organic-claim codes created by Nielsen. For random-weight items, the descriptions of designated codes can be used to identify organic produce. Homescan panelists do not report prices they pay for each food; they report total quantity and spending for each food. In addition, the Homescan data include product characteristics and promotion information, as well as detailed socio-demographic information of each household. For our analysis, household spending
on selected fresh produce was calculated as average expenditures on per purchase record basis. Prices for organic and conventional produce were derived as unit values based on the household's reported expenditures and quantities. Average household expenditures on fresh produce were expressed in terms of per capita to control for household size effect. Furthermore, all expenditures and prices were expressed on nominal current dollars for 2001 and 2004, respectively. The Consumer Price Index for food and beverages increased by 7.49% from 2001 to 2004, and this inflation rate is used to calculate changes in real terms. Figure 1
Average per capita spending on fresh organic produce for home consumption by race.
Average per capita spending on organic produce for home consumption by income class.
Average price premiums as % of conventional price for the top 10 most valuable organic produce.
Market shares of selected organic produce by user group, 2004.
Table 1 Selected Household Characteristics by User Group, 2004. Category Nonusers Light Users Medium Users Educational Level (%) Less than high school 1.86 0.86 1.66 diploma High school diploma 19.60 15.80 15.02 Some college 31.49 31.60 30.73 College degree 32.05 35.56 33.61 Post-college degree 15.00 16.17 18.98
Heavy Users Total 1.90
11.53 26.36 32.83 27.38
17.63 30.88 32.75 17.01
Age of Household Head (%) < 30 years 1.44 30—39 years 12.46 40—49 years 24.06 50—64 years 38.72 65 years and older 23.32
0.86 13.59 29.01 35.19 21.36
1.21 9.33 20.38 39.17 29.90
2.15 11.91 19.90 39.04 27.00
1.41 11.93 23.46 38.49 24.70
Region (%) Northeast Central South> West
20.41 18.76 41.36 19.46
22.59 16.79 37.41 23.21
25.24 14.25 34.89 25.62
23.45 10.65 31.43 34.47
21.80 16.98 38.85 22.37
Race (%) White African
Hispanic Asian Other
8.17 2.72 1.60
10.49 3.46 1.72
6.84 2.81 2.04
8.37 4.06 4.06
8.06 2.93 1.92
Number of households 5,266 810 1,565 789 8,430 Note: User groups are classified based on sample distribution of average per capita spending on organic produce per purchase record. The first quartile is defined as light users with per capita spending greater than $0 but less than $0.75, the second and third quartile are defined as medium users (between $0.75 and $3.65), and the fourth quartile is the heavy users (> $3.65). John Stevens-Garmon (firstname.lastname@example.org) is Graduate Research Assistant, and Chung L. Huang (email@example.com) is Professor, Department of Agricultural and Applied Economics, University of Georgia, Athens, GA. Biing-Hwan Lin (BLIN@ers.usda.gov) is Senior Economist, Economic Research Service of the USDA, Washington, DC. This research was supported by USDA-ERS Cooperative Agreement No. 43-3AEM-5-80043.
The price of everything is determined by the supply and demand for that everything. In the Agri-Food markets demand is increasing more rapidly than supply, causing prices to rise. Given Asian-Pacific economic growth, that will likely continue to be the situation. Chinese consumers, now with higher incomes, wanting to buy more food of some type simply go to nearest grocery store. Those purchases increase the demand for whatever they buy. The producer of that food item cannot increase supply rapidly. Going from sow to pork chop cannot be done any faster than nature allows. Price is the variable that responds when demand changes and supply is inflexible. Food prices are indeed rising and China's demand is part of that development according to "A commodities boom makes itself felt in the supermarket" by J. Wiggins in The Financial Times. "The 6.7 per cent annual growth in food prices tracked in the US at the beginning of this year, if it continues would be the biggest annual increase since 1980. The UK is witnessing comparable increases, as is China, where food is up annual 6.2 per cent in the first quarter of this year. In all these countries, food prices are rising more quickly than overall prices. . . China's total agricultural imports have grown more quickly than anticipated, more than doubling between 2001 and 2004 to $33 billion. (24 May 2007,13)"[Emphasis added] Indeed, food prices around the world are rising faster than most other prices, as indicated by the previous quotation. Demand for agri-food products is pushing prices up. Most economists ignore this situation because they are mired in the economic environment of more than a decade ago. Around two billion consumers, in China
and India, are entering an era of economic prosperity. Not since Europe was rebuilt after World War II has the world experienced such an economic upheaval of such a positive nature. For that reason food prices are rising, and will continue to rise as long as this income miracle is in process. CHANGING CONSUMPTION OF AGRIFOOD PRODUCTS: The U.S. government is not alone in its interest in the production of alcohol. That government wants to put it in cars while others want to put it inside themselves. What brought this subject to our attention was "LVMH soaks up Wenjun" in the Financial Times. "Not content with exporting Don Perignon champagne, Hennessy cognac and Glenmorangie whiskey to China's elite, France's LVMH has taken a majority stake in Wenjun, a Chinese distillery. Its decision to buy 55 per cent of the business for an undisclosed sum highlights the desire of international drink groups to win a foothold in the fast-growing market for Chinese clear grain spirites, known as baijiu or "white alcohol". . . . Company officials declined to comment yesterday but local media have said Wenjun produces 30,000 tonnes of alcohol a year for sale under more than 100 of its own brands as well as a further 2,800 tonnes of raw alcohol sold to other drink companies.(17 May 2007,p.25)" The graph at the upper right is of consumption of alcohol for the world, China, and India. Measurement is in liters per adult, and the data comes from the World Health Organization. One would have to assume that the WHO is not in favor of alcohol consumption as they tend to oppose most of the enjoyable parts of life. The line of red squares is the estimated global per adult consumption of alcohol. That line is fairly flat from about 1995 on, at a little more than 4 liters per adult per year. The solid blue circles are for Chinese consumption of alcohol. Clearly, Chinese consumers like to partake of alcohol. The nation consumes almost 25% more per adult than the world average. LVHM apparently sees this rate of consumption as attractive. As incomes rise in China, consumers will move up the alcohol pyramid to the pricier blends and away from baijiu. LVMH will, as we talked about last month, be able to increase market share in a likely growing alcohol market. The solid green line is for India, and suggests that alcohol consumption is not material in India. Cultural and income factors are the dominant forces in causing Indian alcohol consumption be at such a low level. Will Indian alcohol consumption rise as incomes increase in that country? Lifestyles tend to change with the level of income. Wealthy Arabs, for example, do not fully subscribe to the abstinence advocated by their religious rules. One of those situations that will have to revisited. Have never had the opportunity to consume baijiu, or Chinese white alcohol, but can imagine that it is an acquired taste. Consumers have begun to move up the quality scale for the same article says, "Though much of the baijiu sold in China is still cut-price firewater, the industry's profits have soared in recent years as newly affluent urban drinkers focus on more premium brands." We note too that tequila was not first thought of as a chic drink. LVMH, the acquiring company in the article, is Lymh Moet Hennessy Lou Vuit, a French company. U.S. symbol is LVMU.Y We are going to have to add that name to our "to do research" list for future consideration. We may someday find baijiu in "Ming like" bottles for $40 at local stores. The Agri-Food Value View Philosophy: The consumption of food and agricultural products is a function of the size of the population and the per capita disposal income. These two factors determine Global Agri-Food Revenues. Economic expansion in the Asia-Pacific region combined with the demands for renewable energy sources will greatly increase the growth of Global AgriFood Revenues. Investors that position themselves in front of this growth dynamic are likely to benefit from it. The Agri-Food Trinity, prices of food and agricultural products, the economics of companies involved, and the value of agricultural land, should enhance investor wealth.
Schmidt Base Food Index Components Pricing in U.S. dollars at historic U.S. locations. Cash, spot, prices where possible. Data Sources: wsjmarkets.com; cbot.com; Base for all calculations is 2 Feb 2007 Component
Trend Rank Jun / May
6 / 10
Beef carcass index
10 / 4
11 / 13
12 / 12
13 / 11
Eggs $0.765 $0.895 BASE FOOD INDEX & COMPONENT TRENDS: Our chart on the first page continues to show an interesting story. Admittedly the time period is short, but that time period includes extremely strong performance by the U.S. equity markets. That said, the Base Food Index has performed better than U.S. stocks. When risk is considered, the impressive nature of these results becomes more apparent. The graph to the right is of the ratio of mean return to the standard deviation of return. The Base Food Index gives far superior return per unit of risk than U.S. equities. The covariance of the Base Food Index with U.S. equities is zero, meaning their returns are unrelated. Benefits from diversification into agri-foods are, therefore, significant.
What all this means is that the base source of returns for agri-foods investment is extremely attractive to an investor. Direct investment in the sources of these returns, basic food components, is not easily done. The trick will be to find investments that derive value from these characteristics but do not have other factors interfering with the manifestation of those returns. As can be observed in the table on the previous page, corn price while improving somewhat in the ranking continues to have a negative trend. Expectations that corn will be in ample supply this fall continues to dominate. Corn is one of three prices with a negative trend, while all others are in positive trends. Soybean prices continue to improve on belief that too much acreage has been shifted to corn. Likely ample corn supplies are causing expectations of greater supply of beef which in turn is causing beef prices to weaken. Perhaps we will have cheaper steaks later in the year. Hog prices are probably reflecting the summer demand relative to a supply that had not expanded earlier due to high corn prices.
Note: The pricing data and analysis on the table, Schmidt Base Food Index Components, are intended as an aide to investors in understanding agri-food price trends. This information is not intended to support the trading of futures. Futures and options can be utilized in a conservative manner as part of a portfolio if an individual exercises self control. Most individuals should not trade commodity futures, and we do not recommend that individuals trade commodity futures for short-term profits. The Agri-Food Value View is published monthly, and delivered via email to subscribers. Annual subscription rate is US$199. Make checks payable to Schmidt Management Company, PO Box 846, Boca Raton FL 33429-0846. An internet subscription page is available at http://home.att.net/~nwschmidt/Order_AgriValue.html EXCHANGE TRADED AGRI-FOOD INVESTMENTS: The tables that follow include companies that have exposure to the trends of interest. We are seeking companies that are close to the dirt, but most importantly those that will have rising sales from the positive agri-food cycle that has developed. Firms that sell food products through retail stores are not particularly of interest. An international orientation to a company's operations is preferred to a purely domestic business, whatever domestic might mean. Some of these companies may be niche firms we come across that might be of interest. In these tables and the discussion of them, we will focus on price. The internet today provides such timely information that we cannot possibly provide the most breaking news on these companies. For each company we estimate an investment value based on the fundamentals of the company, and these values are in the column labeled "Value." Each stock's price is then compared to that value, and the potential change is in the final column. Your search for investment opportunity should start with those having the highest potential. Since the table is sorted by the right-hand column, the more attractively priced companies in any one month should be at the top of the table. Prices need to be what drives us to action, not the story. The Tier One companies are more established firms. These names will be ones in which many will be familiar. Fundamentals of these companies do not change dramatically in the short-term or unexpectedly from the immediate trend. Economic shifts do occur over time, but we should be able to anticipate those developments.
TIER ONE COMPANIES COMMENTS: PRICE ROTATION & OBSERVATIONS: Both DAR and CQB advanced nicely during the month. Those strong moves pushed the stocks up relative to their value estimates, and that pushed down the potential gain. In the case of CQB, the Street seems to have suddenly become enamored with bananas. The company has also recently developed some new packaging and bananas that allow for longer shelf life. You may notice in the stores these new packages of bananas. Some believe that this effort will increase the consumption of bananas. Maybe, and maybe not. KUB released latest financial report which included an estimate for 2007 that was rather conservative. Street, with its growth fetish, wanted stronger forecast, and pushed the stock down. KUB now likely undervalued. ADM slid on some fund selling and is now offering somewhat greater opportunity. As price declines, the future potential of a stock should rise. AGCO CORP.(AG) is being added to the Tier One List. Many of the divisions of this company have a long history of producing farm equipment, though the company as it is today is relatively young. AG was created out of what was the old Allis Chalmers farm machinery company. Along the way, AG has collected a stable of product lines, each with a customer franchise. They include Massey Ferguson, Valtra, Fendt, AGCO Tractors, Challenger, Farmhand, Gleaner, Glencoe, Hesston, LOR*AL, New Idea, RoGator, Spra, Coupe, Sunflower, TerraGator, Tye, White Planters, Willmar, SisuDiesel Engines. Traveling through "farm country" without coming across one of these brands would be difficult. Information on regional distribution of company's sales is in following table. South American sales, with a 27% increase in fourth quarter of 2006, are clearly attracting investor attention. Brazil is attractive because of its agriculture and economic potential. Asian & Pacific sales exist, but like most foreign companies are a small percentage and volatile. The attraction to these companies is not what sales were but what they will be in the future. AG has 3200 dealers in 140 countries that
represent their product lines. Headquarters for the East Asia & Pacific region is in Melbourne, and the company has a sales office in Beijing. AGCO REGIONAL SALES % OF TOTAL FOR 2006 Europe, Africa & Middle East
East Asia & Pacific 3% The investment theme for the companies like DE and AG is popular on the Street. They are conceptualized to be "agriculture service" companies like in "oil service" companies. That means such stocks are not cheap relative to their financial histories. AG's financial history is not one that would necessarily draw investor attention if it were not for the favorable environment ahead. In other words, when we look back on AG's financial history in years ahead the history will look far better. While owning the company longer term would be desirable, due to the high institutional ownership we want to be particularly sensitive to price. Recommend a visit to the company's website, www.agcocorp.com TIER TWO COMPANIES: The companies in Tier Two tend to be younger and smaller companies. Prices of these stocks will be more volatile than those in Tier One and stocks in general. However, they may be more exciting over time. Do not buy these stocks expecting them to double in "two" weeks. Treat them as an investment that must be planted and reaped over time. They do seem, though, to have fundamentals that may be rewarding when viewed over time.
TIER TWO COMPANY COMMENTS: Zhongpin, Inc.(ZHNP) is an addition to the Tier Two list this month. ZHNP specializes in pork and pork products in China. The company is an integrated pork producer in that it is involved in pig production though slaughter to distribution. The intent of this approach is not only to capture profits in whatever segment they might exist, but equally important to control the quality issues, such as hygiene and sanitation. As the company exports pork, such issues are important. The customer base in China includes Lianhua Supermarket Group, Carrefour, Metro AG, McDonald's and Kentucky Fried Chicken. These customers are not likely to tolerate quality issues of any kind. Chinese revenues for pork and related products were estimated at $84 billion in 2004 and are projected to reach $120 billion in 2010. ZHNP's revenues for the year ending March 2007 were about $169 million. Those numbers suggest that ZHNP's market share has substantial potential to grow. Across the entire spectrum of products in China a shift away from fragmented production to larger integrated companies is developing. ZHNP operates in a market niche that has significant growth potential. Small companies operating in foreign countries, especially in a nation going through dramatic change as is the case with China, offer potential but also the obvious risks. Always keep that in
mind when looking at companies in the Tier Two list. Caveats aside, the sales per share for ZHNP for the year ended March 2007 were 17% above the year ago level. ZNHP trailing twelve month return on equity is 15.4%. Since the company pays no dividend, the internal growth rate is approximately 15%. While we want to always be cognitive of risk and price, ZHNP is a company with which becoming more familiar is likely to be worthwhile. The company's website is www.zpfood.com PRICE-TO-SALES PER SHARE RATIOS FOR COMPANIES: As an aid in selecting companies, the following table on the ratio of price-to-sales per share is included. Of the various measures of a stock's value, this ratio has been shown to be most reliable. The lower the ratio the more under valued the company is likely to be. Sales is the financial statement line with the least accounting judgement. The further one moves down the income statement and onto the balance sheet the greater the level of accounting fantasy and creativity.
The Agri-Food Value View is published monthly, and delivered via email to subscribers. Annual subscription rate is US$199. Make checks payable to Schmidt Management Company, PO Box 846, Boca Raton FL 33429-0846. An internet subscription page is available at http://home.att.net/~nwschmidt/Order_AgriValue.html AGRI-FOOD EXCHANGE TRADED FUNDS: Agri-Food Exchange Traded Funds FUND
STRATEGY WEBSITE ETF attempts to replicate returns from an
SIZE US$Milli ons $338
DB Agriculture Fund
equal weighted portfolio of corn, wheat, soybeans, and sugar, using futures and Treasury securities. See www.dbfunds.db.com AGRI-FOOD EXCHANGE TRADED FUNDS: Still not having a great deal of success finding ETFs that fit the desired investment style. For example, DBA, shown above, only has exposure to three grains and sugar. Where is the beef? A popular mistake made by many of today's rocket scientists is the fallacy of correlation. They run a statistical analysis that produces a high correlation. Statistically the two series appear to move together, and an assumption is made that one is a substitute for another. In the case of the above ETF, the creators of it apparently found a relationship between these four commodities and the index they are trying to replicate. However, insufficient effort was placed on the theoretical part of the exploration. While a high correlation might have been found over the period of time explored, the resulting four commodities do not adequately cover the spectrum of basic food commodities. Again, where is the beef? We will have to continue looking for more desirable choices. If one is interest in exposure to the four commodities in which DBA invests, it may be suitable for one's purposes. If one is interested in broad, diversified exposure to the basic food commodities, it does not satisfy that desire. EXPLORING FOR BROWN GOLD: The Brown Gold discussion is now going to turn to exploring the diverse nature of agri-land. Agri-land has different purposes for which each type is best suited. Additionally, a variety of forces influence the use and value of agri-land. This discussion is not going to be completed in one issue, several will be required. The types of agri-land would include the following: 1. Crop land - natural : Land used to produce annual crops such as corn and soybeans which does not require irrigation to produce a normal crop. 2. Crop land - irrigated: Land used to produce annual crops which requires man-induced irrigation. For reasons discussed later, this category is not of interest. 3. Pasture: Land that is used to graze animals, such as cattle, or land that is used solely to produce hay, or other forage, to feed to animals. For investment purposes, little difference exists between these two uses. 4. Timber: Land that is planted primarily in forest intended to be harvested for use in construction or for the fibers of the tree for some other purposes, such as making paper. In general, this classification is of little investment interest. Funds, pension and endowment for example, have been active investors in this sector. We will describe in a later issue the implications of this group of investors on values, and their general misunderstanding of present value techniques as they apply to timberland. 5. Tree & Vine: Land best suited for planting as orchards to produce fruit, in trees to produce nuts, or vineyards. A major differentiation in this classification is that of current producer or future producer. The time between "installation" of the crop generator, the orchard or vines, and the production of a cash crop can take considerable years.
6. Vegetable: Land used to produce annual vegetable crops such as tomatoes, lettuce, etc. 7. Other: Land of a unique nature producing a specialized crop that does not fit in one of the other classifications. Within any classification, the marginal profitability of land under discussion is an issue. By marginal profitability we mean the incremental profits created by taking the land from being idle to producing a crop. Those marginal profits are the incremental revenues from the crops minus the incremental costs of production. All land is not equal. In a previous issue we discussed the spring report on crop planting intentions in the U.S. Corn planting were expected to rise significantly. Much of that incremental land being devoted to corn in that report is not best suited for corn. The expected incremental production from that land is less than the average production of the land normally planted in corn. The reason for this discussion is that when looking at a brown gold investments taking into account the marginal productivity of that land is extremely important. One of China's problems in the production of food is that about a quarter of their land used for agricultural purposes is marginal. That means that inordinate amount of fertilizer and other inputs are necessary for the land to produce. Over the centuries that situation was tolerable because little value was placed on the labor necessary for the land to produce. In the modern era, the value of labor is rising as well as is the value of fertilizers and other inputs. Importing food will increasingly become more economic than producing food. RANDOM ITEMS: This section is intended to be a collection of information from articles and news releases. As news is a random variable, so will be this discussion. Comments will be immediate rather than a long discussion, and we may change our mind later. Stimulation of thought and reflection is the goal. To stimulate your thinking: Part of the motivation for these items of randomness is to stimulate your thinking and expand your understanding. As that happens the potential rewards from investments that you may come across will be more readily apparent. "India's GDP expanded at fastest pace in 18 years" by V. P. Kumar, marketwatch.com, 31 May 2007. "India's economy expanded at its fastest pace in 18 years during the financial year ended March 31, led by robust performance of its manufacturing and services sectors, according to official data released Thursday. But economists expect growth to moderate this year due to higher interest rates and a strong rupee. . . expects India's GDP growth to moderate to between 7.9-8.4%." From AFVV: That level of economic growth should allow India to achieve the all-important goal of raising per capita disposable income. As of yet Indian capitalism is still in infancy. Economic growth still takes a second place to other factors. However, as the taste of the better life spreads, the joys of capitalism will become more popular. As that happens and economic prosperity gains momentum, the "religion of consumption" will take hold. "World Bank raises China growth forecast" from China Economic Review, 31 May 2007. "The World Bank raised its forecast for China's economic growth this year from 9.6% to 10.4%, indicating the country's GDP expanded 11.1% from a year earlier . . . The projection for China's
current-account surplus was also raised to US$340 billion, or 10.8% of GDP, from an 8.3% share of GDP in the previous forecast." From AFVV: That kind of economic growth should raise the all important determinant of consumption, disposable personal income. Additionally, the size of the current account surplus should mean that China can import any agri-food product it consumers might want. Chinese consumers, and those that supply their wants and needs, should surely enjoy the coming decade. "Cadillac Floors It In China" by D. Roberts, Business Week, 4 June 2007, p.52. "The Cadillac charm offensive starts at the front door. . . Cadillac is counting on its brash brand of American luxury to differentiate it from the pack. . . it has more than doubled the number of showrooms on the mainland in the past year. And it offers five models in China, ranging from the $46,000-plus CTS sedan to the $140,000 Escalade SUV and the $160,000 XLR convertible roadster.(Sticker prices run higher than in the U.S. because China slaps a 25% tariff on imported cars.). . . Then in February, Cadillac introduced a China-designed and -built version of its SLS sedan. The car is four inches longer than the U.S. model, a nod to Chinese customers, who like a roomy backseat since they tend to have chauffeurs. The model powered a 62% jump in Cadillac's sales in the first quarter, compared with a 19% increase for all of 2006." From AFVV: When incomes rise, the demand for higher quality goods also rises. This is the phenomenon about which we are writing. Just as the Chinese are demanding luxury cars, they will also demand agrifood products higher up the chain. A graph in the article shows luxury car sales rising from less than 40 thousand units in 2002 to 160 thousand units in 2007. The Chinese consumer, with rising income, is preferring Cadillacs and "steaks" to a bicycle and "bowl of rice" of days and year past. This pattern of shifting buyer preferences in China is the motivation for LVMH buying the baijiu, "white alcohol", producer, as mentioned earlier. As Chinese trade up in automobiles so will they trade up in their adult beverage preferences. "Pumping Cash, Not Oil" by C. Palmeri, Business Week, 28 May 2007, p. 34-5. "With gas prices hitting record highs, Exxon Mobil Corp. ought to be drilling like mad and refining more of that black gold, right? As it turns out, the world's largest oil producer thinks it is smarter to use more of its resources to buy back stock. The indirect result: increased pain at the pump for consumers. . . . CEO Tillerson[of Exxon] has also indicated publicly that he won't build a new refinery in the U.S. . . . So, Exxon is partnering with two companies, one Chinese and one Saudi Arabian, to build a $3.5 billion refinery in China, where demand seems more assured." From AFVV: Ethanol producers benefit from the high price of gasoline which, along with tax benefits, provides a pricing umbrella that may help to maintain profitability. If petroleum companies such as Exxon are unwilling to invest in refineries within the U.S., the U.S. gasoline markets will likely remain supply constrained. Importation of refined products will become increasingly the norm. Transportation costs of the gasoline to the U.S. will have to be born by the gasoline consumer. U.S. gasoline prices, like all prices, are set by the cost of the marginal, or next barrel, of gasoline. As a consequence of this situation the price of gasoline in the U.S. is likely to remain high and move higher. A situation that is beneficial to ethanol producers and corn prices. Second, note Exxon's decision to opt to build a refinery in China. Gasoline demand in China is going to grow far faster than demand in mature markets like the U.S. Gasoline demand is influenced strongly by economic and income growth. Economic growth consumes gasoline just to move the "widgets" around. As incomes rise, the Chinese consumer is buying cars, and once one has a car a person wants to drive it. Exxon has identified in gasoline the same demand drivers on which we are
expecting to enhance agri-food profits. "Consumers set to feel the bite as fears grow over food price inflation" by J. Wiggins, Financial Times, 24 May 2007, p.1. "Retail food prices are heading for their biggest annual increase in as much as 30 years, raising fears that the world faces an unprecedented period of food price inflation. Prices have soared as the expanding biofuels industry, climate change and the growing prosperity of nations such as India and China push up the costs of farm commodities including wheat, corn, milk, and oils." From AFVV: As the saying goes, "Ain't no free lunch." That reality is becoming more obvious as prosperous Asia-Pacific consumers bid up the price of agrifood products. The situation described in this article is exactly the trend we hope to exploit. Could the price of producing biofuels be what keeps the price of oil high? "China Investigates Contaminated Toothpaste" by D. Barboza & W. Bodganich, The New York Times, 22 May 2007. "Chinese authorities are investigating whether two companies from this coastal region exported tainted toothpaste as more contaminated product, including some made for children, has turned up in Latin America. A team of government investigators arrived here Sunday afternoon and closed the factory of Danyang City Success Household Chemical Company, a small building housing about 30 workers in a nearby village, according to villagers and one factory worker. The government also questioned the manager of another toothpaste maker, Goldcredit International Trading, which is in Wusi, about an hour's drive southeast of here." From AFVV: Under the totalitarian regimes in China and the Soviet Union, consumer and environmental concerns were not high priorities. Since the demise of "old Communism" in China some individuals and firms have pursued profits at the peril of consumers. The recent stories on tainted wheat glutton from China that was used in pet food was another recent example of this problem. First, the Chinese government does appear to be moving on such threats to consumer health. The manager of the wheat glutton firm was arrested by Chinese authorities. Now all we know is stories, but being arrested in China probably has some dire consequences. That manager's situation is likely to be an example to others that might be tempted to cross the unhealthy line. Second, brand recognition and brand quality are going to become important issues with the Chinese consumer and consumers of Chinese exports. The instant news environment in which we now live will not tolerate quality questions that threaten consumers' health. Those companies that can establish high quality brand names will take the market share from the undesirable firms. That is, those the Chinese government does not put in jail. The Agri-Food Value View June 2007 The Agri-Food Value View is published monthly,
Long-term Perspectives The outlook for agriculture The rate of growth in world demand for agricultural products has slowed, because population growth has declined and fairly high levels of food consumption have been reached in many countries. Growth in demand will slow still further in the future. The world as a whole has the production potential to cope with demand. However, developing countries will become more dependent on agricultural imports, and food security in many poor areas will not improve without substantial increases in local production.
So far, world agriculture has been able to respond to the rising demand for crop and livestock products. Although the world's population doubled between 1960 and 2000 and levels of nutrition improved markedly, the prices of rice, wheat and maize - the world's major food staples fell by around 60 percent. The fall in prices indicates that, globally, supplies not only kept pace with demand, but even outstripped it. Although global demand for agricultural products has continued to rise, it has done so less rapidly in recent decades. Between 1969 and 1989 demand grew at an average of 2.4 percent a year, but this fell to only 2 percent in the decade from 1989.
Apart from temporary factors (foremost among them a decline in consumption in the transition economies in the 1990s), there were two more enduring reasons for the slowdown: â€˘ The growth rate of world population peaked in the late 1960s at 2 percent a year and slowed thereafter. â€˘ A rising proportion of the world's population had reached fairly high levels of food consumption, so the scope for further increase was limited. By 1997-99, 61 percent of the world's population were living in countries where average food consumption per person was above 2 700 kcal per day.
Demand for agricultural products will continue to grow more slowly These factors will continue to influence trends in demand over the next three decades. For example, world population will go on rising, but less rapidly, growing at an average of 1.1 percent a year up to 2030, compared with 1.7 percent a year over the past 30 years. As a result, future demand for agricultural products is expected to slow further - to 1.6 percent a year for the
By 1997-99, 61 percent of the world's population were living in countries where average food consumption per person was above 2 700 kcal per day.
period 1997-99 to 2015 and to 1.4 percent for 2015 to 2030. In developing countries the slowdown will be more dramatic, from 3.7 percent for the past 30 years to an average 2 percent for the next 30. The forces underlying this slowdown can be seen in the example of China, which has been one of the major engines of growth in the demand for food and agricultural products in the world and in the developing countries over the past few decades. By 1997-99 the Chinese had reached an average daily food consumption of 3 040 kcal - only 10 percent short of the level in industrial countries. Over the next three decades the country's aggregate food consumption is expected to grow at only a quarter of the rate seen in the past three decades, while its population will grow at a third of its past rate. Given the sheer size of China's population, these shifts alone will have a huge effect on the global situation. Many other countries, including some of the largest ones, will be undergoing very similar shifts that will further lower the growth of demand. India's daily average food energy intake per person is still below 2 500 kcal, a level at which there is considerable scope for further increases, while her population will be growing at an average of over 1 percent a year over the next 30 years. Could India take over China's role as a major engine of growth in world agricultural demand? This is not expected, because India's cultural traditions favour vegetarianism, which will hold back the country's demand for meat and animal feeds at rates well below those seen in China.
Agricultural trade deficits of developing countries will worsen Traditionally, the developing countries as a whole have had a net surplus in agricultural trade. In value terms this peaked at US$17.5 billion in 1977. The trend since then has been for their imports to grow faster than their exports. The agricultural trade balance of the developing countries has gradually dwindled until, by the mid-1990s, it was more often negative than positive. The highest recorded deficit was US$6 billion, in 1996. This overall trend masks a complex picture which varies from one commodity to another and from one country to another. The drastic decline in developing countries' net surplus in sugar, oilseeds and vegetable oils, for example, reflects growing consumption and imports in several developing countries and the effects of protectionist policies in the major industrial countries. For commodities produced almost entirely in developing countries and consumed predominantly in the industrial countries, such as coffee and cocoa, slow growth in demand prevented the trade balance of the developing countries from improving. Fluctuating and, on balance, declining prices further contributed to the problem. The projections to 2030 show the agricultural trade deficit of developing countries growing still further. In particular, net imports of cereals and livestock products will continue to rise quite rapidly. World market prices for agricultural commodities, 1960 to 2000
Source: World Bank (2001a)
Production will keep pace with demand, but food insecurity will persist Detailed analysis shows that, globally, there is enough land, soil and water, and enough potential for further growth in yields, to make the necessary production feasible. Yield growth will be slower than in the past, but at the global level this is not necessarily cause for alarm because slower growth in production is needed in the future than in the past. However, the feasible can only become the actual if the policy environment is favourable towards agriculture. Globally, producers have satisfied effective market demand in the past, and there is every likelihood that they will continue to do so. But effective demand does not represent the total need for food and other agricultural products, because hundreds of millions of people lack the money to buy what they need or the resources to produce it themselves. Thus, even if there is sufficient potential for production in the world as a whole, there will still be problems of food security at the household or national level. In urban areas, food insecurity usually reflects low incomes, but in poor rural areas it is often inseparable from problems affecting food production. In many areas of the developing world, the majority of people still depend on local agriculture for food and/or livelihoods but the potential of local resources to support further increases in production is very limited, at least under existing technological conditions. Examples are semi-arid areas and areas with problem soils. In such areas agriculture must be developed through support for agricultural research and extension and the provision of credit and infrastructure, while other income-earning opportunities are created. If this is not done, local food insecurity will remain widespread, even in the midst of global plenty. Net agricultural trade balance of developing countries, 1984 to 1999
Source: FAO data
Prospects for food and nutrition Global progress in improving human nutrition will continue, but in numerical terms it will be slow. Even by 2030, hundreds of millions of poor people will remain under-nourished unless local food production is given higher priority and inequality of access to food is reduced. However, the lower incidence of undernourishment will make the problem more tractable through national and international policy interventions.
Progress in improving nutrition has been significant Freedom from hunger is not only a basic human right: it is essential for the full enjoyment of other rights, such as health, education and work, and everything that flows from these. The world has made significant progress in raising nutrition levels over the past three decades. These levels are most commonly measured in terms of kilocalories per person per day. People in developing countries need between 1 720 and 1 960 kcal per day for basal metabolism and light activity.
World average food consumption per person has risen by almost a fifth, from 2 360 kcal per person
per day in the mid-1960s to 2 800 kcal per person per day today. The gains in the world average reflect predominantly those of the developing countries, given that the industrial and transition economies had fairly high levels of food consumption already in the mid-1960s. Over the period to 1997-99, average daily per capita food consumption in developing countries rose from 2 050 kcal to 2 680 kcal (see Annex Table A3). The proportion of the world's population living in countries with low average food energy intakes has declined dramatically. In the mid-1960s, no less than 57 percent were living in countries with average intakes below 2 200 kcal per day. India and China both came into this category. By 199799, although world population had almost doubled to nearly six billion, this proportion had fallen to just 10 percent. Even the absolute numbers - which decline more slowly because of population growth - fell by over two-thirds, from 1 890 million to 570 million. At the other extreme, the share of the world's population living in countries with average food energy intakes above 2 700 kcal per person per day has more than doubled, from 30 percent to 61 percent. Rapid gains in some of the largest developing countries, including China, Brazil, Indonesia and Nigeria, account for much of this progress. India, however, has yet to move into this category. Over this same period, world annual consumption of cereals for both food and feed has doubled to 1.9 billion tonnes, while that of meat has more than doubled - no mean achievement considering popular fears that the world was running out of potential to increase production. The main forces driving this achievement have included higher in-comes, which have increased effective demand, increased supplies, owing to improvements in productivity, and the growth of trade and transport links, which have allowed food deficits in some areas to be covered by surpluses from other areas.
Yet hundreds of millions remain undernourished This remarkable achievement has nevertheless left out a massive number of people, who continue to fare badly. In 1997-99 there were still 777 million undernourished people in developing countries about one person in six. This represents only a modest decline from the figure of 816 million for 1990-92. In China, huge reductions in poverty raised national average food consumption substantially - and this had a strong effect on the global picture. If China is removed from the picture, it becomes clear that the number of under-nourished people actually increased in the other developing countries, by almost 40 million. The region with the largest number of undernourished people in 199799 was South Asia, where 303 million or just under a quarter of the population remained undernourished. The region with the highest proportion was sub-Saharan Africa, where over a third of the total population, or 194 million people, were undernourished.
In 1997-99 there were still 777 million undernourished people in developing countries about one person in six.
In 1997-99, some 30 developing countries still had average per capita food consumption of below 2 200 kcal per day. War and civil strife were significant factors in no less than half of these countries. In most of them, food consumption today stands at levels below those attained in the past. Some 23 of the 30 are in sub-Saharan Africa, while only 7 are in other regions.
Populations and incomes will continue to grow Future food consumption patterns are deter-mined by growth in population and in incomes, and by changes in dietary preferences. The latest projections by the United Nations (UN) show a continuing slowdown in the growth of the world's population. In the medium UN projection, the 6.1 billion people of 2000 will grow to 7.2
billion in 2015 and 8.3 billion in 2030, heading towards 9.3 billion in 2050. Global progress in nutrition: energy intake levels by percentage of the world's population, 1964-66 and 1997-99
Source: FAO data Perceptions of a continuing population explosion are false. In fact it is more than 30 years since the world passed its peak population growth rate, of 2.04 percent a year, in the late 1960s. Since then the growth rate has fallen to 1.35 percent. This is expected to fall further to 1.1 percent in the period 2010 to 2015 and to 0.8 percent in 2025 to 2030. There will be a corresponding slowdown in the growth of demand for food. The absolute numbers added each year are also past their peak of 86 million a year, reached in the late 1980s. Even so, current annual additions of around 77 million still amount to almost a new Germany each year. The yearly increments will taper off only slowly during the study period: even by the period 2025 to 2030 they will still be running at 67 million a year. It is only by the middle of the century that these increments will have fallen significantly, to 43 million per year in 2045 to 2050. Almost all of these increases will be in the developing countries. By 2030 there will be substantial differences in population growth rates among the developing countries. While East Asia's population will be growing at only 0.4 percent a year, that of subSaharan Africa will still be growing at 2.1 percent. By 2030, every third person added to the world's population will be a sub-Saharan African. By 2050, this will rise to every second person. The second major factor determining the demand for food is growth in incomes. The latest World Bank assessment of future economic growth is less optimistic than its predecessors, but it still projects a rise of 1.9 percent a year in per capita incomes between 2000 and 2015, higher than the 1.2 percent seen in the 1990s. What will happen to the incidence of poverty under this overall economic scenario is of great importance to food security because poverty and hunger are closely associated. The World Bank has estimated the implications of its economic growth projections for poverty reduction by the year 2015. They are that: • It is possible to achieve the goal of halving the proportion of people living in absolute poverty - defined as an income below US$1 per day - by 2015, over the 1990 level. • However, it is unlikely that the number of poor people can also be halved. This will decline from 1.27 billion in 1990 to 0.75 billion in 2015. • Much of the decline will be due to development in East and South Asia. Indeed, about half of the decline of 400 million projected for East Asia has already occurred. • Only in sub-Saharan Africa, where incomes are expected to grow very slowly, are the numbers living in poverty expected to rise, from 240 million in 1990 to 345 million in 2015. By then, two out of five people in the region will be living in poverty.
Average nutrition will improve, but under-nourishment will fall only slowly In the light of these changes in population and incomes, progress in improving nutrition is expected to continue, though more slowly than in the past. Average per capita food consumption in developing countries is projected to rise by 6.3 percent, from 2 680 kcal in 1997-99 to 2 850 kcal in 2015. This is a third of the rise achieved between 1974-76 and 1997-99. The slowdown is occurring not because of production limits but because many countries have now reached medium to high levels of consumption, beyond which there is less scope than in the past for further increases. Huge countries such as China, where per capita consumption rose from 2 050 kcal per day in the mid-1970s to over 3 000 kcal per day today, have already passed the phase of rapid growth. More and more countries will be attaining such levels over the projection period. By 2030, three-quarters of the population of the developing world could be living in countries where less than 5 percent of people are undernourished. Only 1 in 13 live in such countries at present.
The World Food Summit of 1996 set a target of halving the numbers of undernourished in developing countries by 2015, compared with the base period of 1990-92. FAO's study has found that the proportion of undernourished people should fall significantly, from 20 percent in 1990-92 to 11 percent by 2015 and 6 percent by 2030. However, in numerical terms the World Food Summit target is unlikely to be met. The total number of undernourished people will probably fall from 815 million in 1990-92 to some 610 million by 2015. Not until 2030 will the numbers fall to 440 million, thereby approaching the 2015 target.
The proportion of the world's population living in countries with per capita food consumption under 2 200 kcal per day will fall to only 2.4 percent in 2030. The reduction in the number of undernourished people will be impressive in some regions: in South Asia, for example, it could fall from 303 million in 1997-99 to 119 million in 2030, while in East Asia the number could halve from its current level of 193 million. In contrast, in sub-Saharan Africa and the Near East and North Africa, there is likely to be little or no decline in the numbers of undernourished people, although the proportion will approximately halve. By 2030, all regions except sub-Saharan Africa should see the incidence of undernourishment decline to between 4 and 6 percent, down from the range of 9 to 24 percent today. In sub-Saharan Africa, 15 percent of the population or 183 million people will still be undernourished by 2030. This will be by far the highest total for any region, and is only 11 million less than in 1997-99. The fate of sub-Saharan Africa is therefore cause for serious concern. As incomes rise, access to food should become more equal. This is because poor people spend a high proportion of increases in their incomes on food, whereas there is an upper limit to the amount of food that rich people want to eat. This greater equality will have a significant effect on the numbers of undernourished people. For example, in the 44 countries that will have average per capita food intakes of over 2 700 kcal per day in 2015, the number of undernourished people is expected to be 295 million. But if inequality of access to food were to remain unchanged at today's level, this number would be 400 million. Number of undernourished people by region, 1990-92 to 2030
Source: FAO data and projections The decline in the numbers of under-nourished between now and 2030 will be slow, for several reasons: • Rapid population growth means that, although the proportion of undernourished may fall, the absolute number will fall much less and may in a few cases even rise. This is an important factor in sub-Saharan Africa and the Near East and North Africa. • Economic growth will not be fast enough. In the Niger, for example, 3.3 million people or 41 percent of the population were under-nourished in 1990-92. To achieve the World Food Summit target, the number of under-nourished will need to fall to 1.65 million or 9 percent of the population by 2015. To bring this about would require growth rates far above what the Niger has seen over the past two decades. • Several countries start from highly adverse conditions, namely low national average food consumption, high incidence of under-nourishment and high projected population growth. For example, nine developing countries had proportions of under-nourishment in 1990-92 of over 50 percent (Afghanistan, Angola, Burundi, Democratic Republic of Congo, Eritrea, Ethiopia, Haiti, Mozambique and Somalia). In these countries the proportion of undernourished is expected to fall to 39 percent by 2015 and to 25 percent by 2030. However, because of the relatively high growth rate of this group's population, the absolute numbers affected will rise to 115 million in 2015 and may still be 106 million in 2030. Even these figures are based on projections for growth in food consumption that are much faster than the fastest seen in any comparable period in the past. • In countries where average food intake is currently low and the majority of people are hungry, reducing inequality of access to food has only a small impact on levels of undernourishment. This is because few people are on diets that are more than barely adequate, so redistributing their food "surplus" does not greatly improve matters. By 2015 there will still be 41 countries with average food intakes of 2 500 kcal per day or less. • In the future the threshold for defining under-nourishment will rise, as ageing reduces the proportion of children in the population. Since children's food energy requirements are lower than those of adults, the average calorie requirement in developing countries will rise by around 3 percent by 2030. If it were not for this rise in the threshold, the number of undernourished estimated for 2030 would be 370 million instead of 440 million. Dietary changes in developing countries, 1964-66 to 2030
Source: FAO data and projections The number of undernourished can be reduced more rapidly by affording increased priority to agriculture, increasing national food production and reducing inequality of access to food. These three measures should be combined with continuing interventions to cope with the consequences of local food crises, until the root causes of under-nourishment have been removed. It is possible for countries to raise nutrition levels even in the absence of significant economic growth. Mali raised average food consumption by almost a third in the 1980s, although per capita household expenditure fell over this period. Other countries, such as Benin, Burkina Faso, Ghana, Mauritania and Nigeria, achieved similar quantum leaps at times of slow income growth. The common characteristic seems to have been rapid growth in the production of food staples (cereals, roots and tubers), leading to improved self-sufficiency, at least in cereals. Because most agriculture was at or below the subsistence level, increased production led directly to improved food consumption in rural populations. How diets will change Just as world average calorie intakes have increased, so also people's diets have changed. Patterns of food consumption are becoming more similar throughout the world, incorporating higher-quality and more expensive foods such as meat and dairy products. This trend is partly due to simple preferences. Partly, too, it is due to increased international trade in foods, to the global spread of fast food chains, and to exposure to North American and European dietary habits. Convenience also plays a part, for example
the portability and ease of preparation of ready-made bread or pizza, versus root vegetables. Changes in diet closely follow rises in incomes and occur almost irrespective of geography, history, culture or religion. However, cultural and religious factors do explain differences between countries with similar income levels. For example, Hindus abstain from beef or meat in general, Moslems and Jews from pork. Despite similar income levels, Japanese people consume far fewer calories from non-starchy foods than do Americans, as do Thais compared with Brazilians. Dietary convergence is quite high among the high-income countries of the Organisation for Economic Co-operation and Development (OECD), where food consumption patterns show a 75 percent overlap with those in the United States, meaning that 75 percent of processed food products are based on the same raw materials. Even Japan has been moving closer to other OECD countries, with the overlap rising from 45 percent in 1961 to about 70 percent in 1999. Convergence towards North American dietary patterns is also occurring in other groups of developing countries, though only slowly in some cases, especially in landlocked or politically isolated countries where international influences permeate less easily. However, cultural factors appear to limit convergence to an upper ceiling of around 80 percent, at least for the time being. These changes in diet have had an impact on the global demand for agricultural products and will go on doing so. Meat consumption in developing countries, for example, has risen from only 10 kg per person per year in 1964-66 to 26 in 1997-99. It is projected to rise still further, to 37 kg per person per year in 2030. Milk and dairy products have also seen rapid growth, from 28 kg per person per year in 1964-66 to 45 kg now, and could rise to 66 kg by 2030. The intake of calories derived from sugar and vegetable oils is expected to increase. However, average human consumption of cereals, pulses, roots and tubers is expected to level off.
The problem of under-nourishment should become more tractable The projections imply that the problem of under-nourishment should become more tract-able in future. This will work in two major ways: â€˘ As the incidence of under-nourishment diminishes, more and more countries will find it easier to address the problem through national policy interventions. By 2030, three-quarters of the population of developing countries could be living in countries where less than 5 percent of people are undernourished, compared with 7.7 percent at present. This dramatic change will occur because the majority of the most populous countries (Brazil, China, India, Indonesia, Islamic Republic of Iran, Mexico and Pakistan) will shift to the "under-5-percent" category. â€˘ The number of countries with severe problems of under-nourishment will become smaller over time. International policy responses will tend to become more feasible and effective, as the total effort need not be spread so thinly. For example, if the projections come true, the number of countries with under-nourishment of over 25 percent will fall from 35 at present (accounting for 13 percent of the population of the developing countries) to 15 in 2030 (accounting for only 3.5 percent).
U.S. Commodities: Sugar Rises to 30-Year High on Asian Demand By Stephen Morris and Debarati Roy - Dec 23, 2010 11:51 PM GMT+0200 Sugar jumped to a 30-year high as Pakistan said it may import 700,000 metric tons to ease domestic shortages, adding to concerns that global consumption will outpace supplies. Production in Pakistan “will reach 3.3 million tons” in the year ending June 30, short of demand at 4.2 million tons, Farm Minister Nazar Muhammad Gondal said. Record rainfall in Australia, the world’s third-largest exporter, will curb output and shipments next season for a second year, Queensland Sugar Ltd. said. “The fundamentals have given the market direction this year, so any sort of news like that coming out of Pakistan is icing on the cake,” said Connor Noonan, an analyst at Castlestone Management Ltd. in London. “When we see countries are going to need to import, there is a fear that we’re struggling to find the actual physical” sugar, he said. In other markets, crude oil rose, extending a rally to a 26-month high, as confidence among U.S. consumers increased, signaling prospects for fuel demand will improve. Cotton tumbled. The UBS Bloomberg Constant Maturity Commodity Index advanced 0.3 percent to 1,625.43. Raw sugar for March delivery climbed 0.85 cent, or 2.6 percent, to settle at 33.98 cents a pound on ICE Future U.S. in New York. Earlier, the price reached 34.06 cents, the highest for a most-active contract since November 1980. Crude Oil Oil futures for February delivery advanced $1.03, or 1.1 percent, to $91.51 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 3, 2008. The price has gained 15 percent this year. The Thomson Reuters/University of Michigan final index of consumer sentiment for December climbed to 74.5, a six-month high, from 71.6 in November. Americans increased spending in November for the fifth straight month, and companies stepped up orders for equipment, signaling that the economic recovery is accelerating.
“Today’s data supports the economy and is boosting the oil market,” said Peter Beutel, the president of Cameron Hanover Inc., a trading-advisory company in New Canaan, Connecticut. “All week we’ve wanted to move higher, either because of the rising stock market or the improving economic outlook.” Cotton Cotton tumbled the most allowed by ICE Futures U.S. for the second straight day on signs that India, the world’s second- largest grower, is resuming exports that were limited by the government to ensure domestic supplies. India said Dec. 21 it would allow exports of 2.5 million bales after sellers and merchants failed to secure supplies during an earlier shipment authorization of 5.5. million bales. An Indian bale weighs 375 pounds, or 170 kilograms. Prices have almost doubled this year, heading for the biggest annual advance since 1973. “India saying that it will allow export of the remaining amount of the quota ensures an increase in supply,” said Keith Brown, the president of Keith Brown & Co., a brokerage in Moultrie, Georgia. Prices also are under pressure “after rising too quick, too soon,” he said. Cotton for March delivery slumped the exchange limit of 6 cents, or 3.9 percent, to settle at $1.4812 a pound at 2:30 p.m. on ICE in New York. Yesterday, the price declined by the maximum of 5 cents. The most-active contract reached a record $1.5912 on Dec. 21. U.S. markets will be closed tomorrow for the Christmas holiday. Commodities settled as follows: Precious metals: February gold down $6.90 to $1,380.50 an ounce March silver down 5.7 cents to $29.328 an ounce April platinum down $8 to $1,727.80 an ounce March palladium up $2.95 to $758.10 an ounce Livestock: February live cattle up 0.025 cent to $1.07575 a pound March feeder cattle up 0.050 cents to $1.23675 a pound February lean hogs down 0.15 cent to 78.725 cents a pound February pork bellies unchanged at $1.06 a pound Grains: March soybeans up 20.25 cents to $13.60 a bushel March corn up 5 cents to $6.14 a bushel March wheat down 0.5 cent to $7.83 a bushel March oats up 1.75 cents to $3.935 a bushel Food and Fiber: March coffee up 5.7 cents to $2.359 a pound March cocoa up $50 to $3,020 a metric ton March cotton down 6 cents to $1.4812 cents a pound March sugar up 0.85 cent to 33.98 cents a pound March orange juice up 1.2 cents to $1.6395 a pound Energy: February crude oil up $1.03 to $91.51 a barrel January natural gas down 6.9 cents to $4.083 per million British thermal units January heating oil up 1.23 cents to $2.5408 a gallon January gasoline up 1.81 cents to $2.4426 a gallon Others: March copper down 1.65 cents to $4.2585 a pound March lumber down 30 cents to $319 per 1,000 board feet
Agri culture and land u s e: Dem and for and s upply of agri cultural c o mmoditie s, characteritics of the farming and food indutries, and implications for land use in the UK A. Angusa,∗, P.J. Burgessa, J. Morrisa, J. Lingardb a Cranfield University, Cranfield, Bedfordshire MK43 0AL, United Kingdom b School of Agriculture, Food and Rural Development, Newcastle University, Newcastle upon Tyne NE1 7RU, United Kingdom
journal homepage: www.elsevier.com/locate/landusepol
Agriculture is the largest type of land use in the UK, accounting for about 77 per cent of the total area, compared with an average 50 per cent for the EU27. But in common with most high-income countries,agriculture’s contribution to UK GDP and employment is low, at about 0.5 and 1.8 per cent, respectively,although the regional importance of the sector (and its associated food and farming industries) varies considerably. Of the 17.5 million ha used for agriculture, about 28 per cent is allocated to crops, and 67 per cent is grassland. The grassland includes 4.4 million ha of sole-owned rough grazing and 1.1 million ha of common land in mainly upland “disadvantaged areas,” primarily used for beef and sheep production. This has a major influence on land use, especially in the northern and western parts of the UK. From the 1930s until the mid-1980s, UK policy promoted increases in agricultural productivity to feed the nation from its own resources. An array of income and production support measures encouraged intensive farming, including a relative switch to arable farming in eastern areas. Since the early1990s,policies have sought simultaneously to makeUKagriculture internationally competitive and environmentally benign. These policies, evident in the Agenda 2000 Reforms of the Common Agricultural Policy, point the way forward for the future. It is likely that a greater distinction will emerge between policies to protect natural resources and enhance the flow of non-market ecosystem services from rural land, and agriculture and food policies intended to encourage an appropriate proportion of national food requirements to be met from domestic sources. It seems likely that over the next 50 years, the UK’s land area will be required to deliver an increasingly diverse range of private and public goods to meet growing human needs and aspirations. This will require a balance of policy-driven goals and market forces. It will also need a much improved understanding of the trade-offs between food production and environmental goals and of the institutional arrangements required to achieve a balance of economic, social and environmental outcomes. © 2009 Queen’s Printer and Controller of HMSO. Published by Elsevier Ltd. All rights reserved. Conclusions This review has argued that future land use in the UK is likely to be shaped by two main forces: agricultural and environmental policy and the market for agricultural and food products. There may in future be a clearer distinction between agricultural policy and rural environment policy. It seems likely that future policy will be mainly directed to nonmarket issues of natural resource and environmental protection and the provision of environmental services. Future food production and its associated land use pattern will be largely determined by economic forces operating in the food market and the price signals they send. Given reform of the CAP and the decoupling of support from farm production, additional food production in theUK and elsewhere in Europe will probably be stimulated by the market rather than by policy. In this respect, EU farmers will respond to changes in product prices, input prices and profitability opportunities, and the aggregate impact of their behaviour will determine whether crop and livestock outputs increase, fall or remain constant. Policy will primarily be directed to environmental impacts, including the need to meet demanding targets for improved water quality, atmospheric pollution containment and biodiversity. The key contemporary concerns of climate change, sustainability, maintenance of the natural resource base and future food security should be seen in this context. Food security, self-sufficiency and import penetration will be driven by forces operating in
global food and agricultural markets. Environmental targets will be achieved by largely non-market, EU and UK government policy. Policy will also affect land use via the technologies used in future agricultural production (see Burgess and Morris, in press). Future farming will be determined in part by technology which, in turn, depends upon Research and Development (R&D). Investment in R&D will continue to be made in both the public and private sectors. The former is mainly driven by public interest in topics such as environmental protection, food quality and food safety, and the latter by business opportunities. Decisions made today in private- and publicly-funded research organisations have an important influence on the technologies which will be available to farmers in the future. It will probably continue to be a valid use of public funds to maintain and develop the knowledge and technological capacity thatUK. A. Angu s et al. / L a nd U s e Poli cy 26 S (2009) S 2 3 0– S2 42
S e a C u c umberA Promi sing Main st ay C ommodity By: Reina A smedi, Programme Assistant and Media Officer – Sustainable Livelihood Programme O G B Indonesia Office
ndonesia has around 17,000 islands and roughly 81,000 km of coastline. With the natural and
climatic conditions varying little the year round, its coastal waters are home to an abundance of biota of economic importance. Like other coastal communities, those in Buton- Southeast S ulawesi, rely on marine resources as their main source of income. One of these resources is sea cucumber. This marine commodity has good prospects and a high economic value on both the local and international markets (Europe, Japan, Singapore, Malaysia and the United States). These elongated, cylindrical soft-bodied animals are also known as teripang, suala, beche-de-mer (in Fr en ch), and on the international m arket ar e known by the nam e teat fish . Type*) of sea cucumber (teat fish)*) local name S T R (low quality mix) Duyung C RDI (medium quality mix) Susu Polos Susu Bintik Gamma
Price fishers receive per kg dry weight
Price on the international market (average)
(average) Rp 7,000/kg (US$ 0,8) Rp 10,000/kg (US$ 1,2) Rp 20,000/kg (US$ 2,4) Rp 27,500/kg (US$ 3,3) Rp 32,500/kg (US$ 3,8) Rp 130,000/kg (US$ 15,3) Rp 130,000/kg (US$ 15,3)
Rp 42,000/kg (US$ 5) Rp 60,000/kg (US$ 7) Rp 120,000/kg (US$ 14) Rp 165,000/kg (US$ 20) Rp 195,000/kg (US$ 23) Rp 780,000/kg (US$ 92) Rp 780,000/kg (US$ 92)
S S I (good quality mix) *) local name S ource: JPKP Buton and Yayasan Lintas
Average annual income of target fishers Rp 1,400,000 (US$ 164) Rp 2,000,000 (US$ 235) Rp 4,000,000 (US$ 470) Rp 5,500,000 (US$ 647) Rp 6,500,000 (US$ 764) Rp 26,000,000 (US$ 3,058) Rp 26,000,000 (US$ 3,058) U S $ 1 = Rp 8,500
Average income of sea cucumber fishers from this project:Example of a minimum harvest from an investment of Rp 6,000,000 (US$ 706). • 4,000 gamma sea cucumber juvenile • 160 kg of dried produce • Selling price for dried gamma sea cucumber = Rp 130,000/kg (US$ 15.3)
• 160 kg x Rp 130,000 = Rp 20,800,000 (US$ 2,447) per harvest (cultivation period of 6 – 7 months, harvest twice a year).
Economic Research Service April 2009 U.S. Department of Agriculture U.S. Department of Agriculture’s Economic Research Service and other research organizations China will continue to increase production of fruit, vegetable, and livestock products, with most of this production consumed by the more prosperous consumers in China—so long as they can be assured of its safety and quality. Exports of these products will also grow if China effectively addresses those same safety, quality, and consistency issues. China will continue to be a major importer of oilseeds to meet the growing domestic demand for high-quality vegetable oils and high-protein livestock feed additives and may also become an importer of corn as domestic demand for livestock products grows. Demand for cotton and hide imports has boomed as China’s exports of textiles, clothing, and shoes have expanded, but future export growth may be dampened by appreciation of China’s currency, rising labor costs, and slower growth in world demand.
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