Got food?

But as much as export growth responds to the number of people who need to eat, income (and not population growth) drives consumption. With more disposable income, consumers in developing economies do two things:

• Buy more food
• Buy more protein-rich food

The Food and Agriculture Organization (FAO) projects a whopping 60 per cent increase in food consumption by 2050, compared to the 2007-2009 average. A lot of that will come from the developing world, projected to see some of the fastest future income growth.

Hence, exporters’ recognition of the importance of emerging economies to global markets - despite the dominance of exports to member countries of the Organization for Economic Co-operation and Development (OECD).

The value of Canada’s primary agriculture exports to OECD countries, which include the world’s richest economies, is four times that of exports to the developing Brazil, Russia, India and China. If there’s an issue for Canadian producers, it’s that the OECD represents mature or in some cases, declining markets.

Diversifying exports to include countries beyond traditional markets makes sense, a practice that’s likely to continue with such current growth hot spots as China – and beyond the era when exports to China start leveling off.

That day will come: the chance to grow exports in response to a country’s income growth doesn’t last forever. Income growth spurs food consumption growth, but only to a certain point. In the early years of income growth, additional dollars of disposable income mean more food purchases (and protein-rich food in particular) in developing countries. But then, the boon to consumption provided by added income starts to fade.

Look at the example of meat. Increased consumption slows when income reaches a threshold of about $10,000 per capita (p/c). In China, red meat consumption grew by 23% between 2002 and 2012 at the same time as an almost 1000 per cent increase in urban households with $9000+ p/c income. The OECD-FAO Outlook projects that consumption will grow a further 15% by 2022 as the number of households with $16,000 household p/c income increase by an additional 25%.

But just as red meat consumption in China picked up as their p/c income rose, the same will happen elsewhere throughout the developing world. With export opportunities appearing as emerging markets reach higher income levels, ensuring a Canadian presence in those expanding global markets may be the bigger challenge.

Look back here for more on the opportunities and challenges of global trade.

Martha Roberts
Economic Research Specialist

Martha is a Research Specialist with a focus on economic performance and success factors for agricultural producers and agri-businesses. Martha has 20 years’ experience conducting and communicating quantitative and qualitative research results to a number of different audiences. She holds a Master of Sociology degree from Queen’s University in Kingston, Ontario.