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Is There Really An Export Market?

October 4, 1999

Since the early 1960s the world’s grain production has doubled and livestock production has tripled. Is that adequate for the people in the world? No. About 820 million people lack the food they need to lead healthy and productive lives. About 170 million children are seriously underweight.

These figures were used in the presentation by Per Pinstrup-Andersen at a joint meeting of the American and Canadian Phytopathological Associations in Montreal, Canada this past August. Pinstrup-Andersen is the Director General of the International Food Policy Research Institute (IFPRI) in Washington D.C.

Pinstrup-Andersen went on to review projections about worldwide food availability by the year 2020. These projections are based on population trends coupled with economic and political analysis of various countries with regard to food production and consumption.

During the next quarter of a century, the world will likely grow by 80 million people a year to go from 5.5 billion to 7.7 billion in 2020. Ninety-five percent of the growth will be in developing countries. The highest absolute population increase will be in Asia while the highest relative increase will be in Sub-Saharan Africa. The urban population in the developing world will double. This rural/urban migration will lead to the use of more rice, wheat, livestock products, fruits, vegetables and processed foods.

The developing world will drive the increase in the world food demand. Food production in developing countries will not keep pace with demand. An increasing portion of this demand will be met by imports from the developed world.

People’s access to food depends on income. Incomes are expected to rise the fastest in China and East Asia while Russia and the former eastern bloc countries will experience the lowest rate of economic growth. Poverty is likely to remain entrenched in South Asia and Latin America while increasing considerably in Sub-Saharan Africa.

As incomes increase, people add meat to their diet. By 2020, developing countries, led by China and East Asia, will increase their net meat imports to 20 times their current levels. Asia will switch from a small net exporter of meat to a large net importer. The per capita demand for meats is projected to increase by 43 percent while per capita demand for cereal grains will increase by only 8 percent. The crisis in the U.S. pork industry a year ago was the direct result of East Asian economic troubles.

Pinstrup-Andersen presents an interesting path for the development of export markets in the developing world. When the United States and other developed countries share their agricultural research and technology with developing countries, the increase in food self-sufficiency frees up economic growth outside of the ag sector. As a country’s general economy and purchasing power improve, the demand for meats, fruits, vegetables and processed foods increase. The country then imports the foods they need to satisfy the rising demand.

Asia’s present export market was originally created by the "green" revolution in agriculture because of the application of western technology and innovation. Rapid growth in agriculture efficiency eventually led to food imports.

I asked Pinstrup-Andersen why China will be an attractive export market for agricultural products? He stated that China is a large country with a huge domestic market. They have had sensible agricultural policies and a stable currency. The rising standard of living in China will create a thriving domestic market for agriculture products as well as demands for imported foods.

The Ukraine has been beset by disastrous ag policies that resulted in a 50 percent reduction of their productivity. If the government has corrects those policies and then the Ukraine could emerge during the next decade as a major food exporter on the world scene.

The situation in Russia is chaotic. The institutions in the countryside are ineffective. There is anarchy and corruption. Pinstrup-Andersen doesn’t see Russia emerging as either a large food exporter or large importer during the next twenty years. Russia can’t afford to buy the food it needs or would like.

India has put several economic reforms in place that are promising for their economy. However, the future food situation in India is complicated because of religious and cultural restrictions on meat consumption.

North Africa, Sub-Saharan Africa and West Asia will continue to need food aid. The best way to provide food aid is to feed the poor children and elderly who do not have purchasing power. Providing food in the schools is an excellent example of how to do this. Food aid complements local agriculture instead of undercutting and competing against it.

Long term projections. Pinstrup-Andersen sees world prices for grains remaining low for the next two years, then recovering to long term stability for the next ten years before being subject to downward pressures again. Long term trends in real food prices are projected to fall slightly. The developed countries have stagnant population growth. Our incomes are not going to rise as dramatically as incomes in the developing world. Our food consumption will not grow at significant levels and will not create appreciable new demand.

Pinstrup-Andersen believes that both the developing world and the developed world need to understand the role and importance of agricultural research and modern technology, including biotechnology. This will play an important part in meeting the food needs of the next two decades. Our investments in the developing world and their economies, especially their agricultural economy, will affect the economic future and health of our own agricultural industry.