A growing global middle class will be a major driver of increased grain demand, according to WAFarmers CEO Trevor Whittington
Let me explore the potential of the world’s growing global population to drive the long-term price of cereals from its current price of US$6.64 a bushel to above the magical US$10 mark.
If I were any good at predictions, I would be sitting on a big yacht in Monte Carlo writing this. But if nothing else, the following should be food for thought.
Let’s start by looking back at the history of global grain prices. Adjusted for inflation, from 1960 to today, the prices of the four biggest crops have declined in real terms, meaning the “good old days” were indeed better than today when it came to making a dollar out of farming.
This is counterintuitive, given that in 1960 there were vastly fewer people in the world to feed.
With a rapidly growing world population, why haven’t grain prices risen as fast or faster than the globe’s population? The answer is that farmers got better at farming faster than the world got better at growing its population.
Since 1960, the global population has increased 2.5 times, while food production has increased 3.7 times.
In simple terms, this means per capita food production was nearly 50 per cent higher in 2020 than in 1960.
So where are we today with global population growth, and what’s coming over the horizon? Fortunately, someone is keeping count, because as of August 7, 2024, there were 8,123,315,575 souls on planet Earth—a number that is increasing by 70 million a year, or 192,000 a day.
This is equivalent to adding the population of the combined Wheatbelt and Great Southern in Western Australia to the world’s headcount every single day.
Another way of looking at it is that Australia produces enough food to feed around 70 million people at our standard caloric intake, which happens to be equivalent to one year of global population growth.
All the world needs to do is add Australia’s farm output every year to be able to keep up with the global increase in population.
At this rate, we will need five Australias by 2030, as we are on track to add 350 million people by the end of the decade, which is equivalent to the entire population of the United States.
If we extend this to 2050, that number goes up to 1.7 billion additional people on planet Earth, which is like adding the population of Europe and Africa over the next 25 years.
By any measure something has to give sooner or later. Scientists are smart, but they are not that smart.
Eventually, the race between production and population will swing back towards population growth when the production can’t keep up.
In fact, if the environmentalists get their way with their mad net-zero targets, this shift may happen sooner rather than later, if government climate policies are strictly enforced on farm production systems.
Putting aside climate change policies, there is another factor in the new “population bomb” that is going to help drive up global grain prices beyond simply having more mouths to feed -and that is how wealthy and greedy those mouths are.
Currently, around 115 million people are joining the global middle class each year.
The best part is that most of them seem to be emerging in the right countries for our exports.
Guess what? They are just above us on the map. India, Vietnam, Indonesia, China, Bangladesh, and the Philippines – all within easy sailing distance for our grain and, for a few more years, our livestock ships.
We can already see this happening. A key indicator of what’s changing in the global grain market is the rapid growth in demand for animal feed. From 2010 to 2020, the amount of grain used for animal feed rose from 770 million tonnes per year to 987 million, rapidly catching up to the amount consumed by humans.
According to someone’s calculations, if the world’s pig population were a stand-alone country, it would rank at the very top of the grain-consumption league tables, chomping through as much grain as 2 billion people.
This is good news for us, but not so good news for the climate catastrophists and others worrying about livestock methane emissions.
What’s the split between population growth and middle-income growth as a global driver of demand?
The statisticians tell us that population growth accounts for most of this increase in demand, but only just – at 54 per cent. The rest is due to people getting wealthier and eating more of everything, but particularly meat.
In the 20 years up to 2018, developing countries accounted for around 85 per cent of the rise in global meat consumption, while meat consumption in the developed world seems to have plateaued, thanks to the influence of vegans plus an aging population.
To show how much upside is possible in a developing country, between 1998 and 2018, Chinese meat consumption increased by 72 per cent while their population grew just 12 per cent.
What’s the takeaway? We might have avoided the population bomb, but I suspect we won’t avoid the middle-class bomb.
In fact, let’s hope it goes off with a big bang and drives up the global grain prices to the US$10 a bushel mark.