Business | Markets
The world's changing diets provide food for thought
Increasing wealth and urbanisation are fuelling consumption of higher-end food products, especially meat, the production of which requires great volumes of grains, particularly soybean
- By Suranjana Roy Bhattacharya, Special to Gulf News
- Published: 00:00 October 18, 2010
By the end of 2009, at least 3,400 KFC outlets had opened in 650 cities of China. This means more than 20 per cent of the American chain's locations are well-entrenched in this once Communist bastion.
This also means that Chinese dietary habits have undergone a change large enough to affect global agriculture commodity movements.
China has 20 per cent of the world's population, consuming 29 per cent of its milk and meat. Now, increasing wealth and urbanisation are fuelling consumption of higher-end food products, especially meat, the production of which requires great volumes of grains, particularly soybean.
According to the US Department of Agriculture, the Chinese are eating more meat and less rice.
China's 1.3 billion people consumed nearly half the world's annual pork production of around 106 million tonnes in 2009, whereas the absolute demand for rice remained basically the same as it was 10 years ago.
The consumption of feedstocks such as corn and soybeans used to fatten livestock has jumped, with soybean consumption doubling in the past 10 years.
Soybean imports
Soybeans are crushed to make soymeal, a key ingredient for feeding chickens and fish.
China is expected to import between 4 and 5 million tonnes of soybean a month in the last quarter of 2010. Analysts say a key driver for the rising corn and soybean imports this year has been this dietary shift and rise in high-end food demand.
Last week, soybeans rose to a 16-month high as China increased purchases from the United States. It bought 297,500 metric tonnes for delivery in the year that began September 1.
Imports are expected to jump 35 per cent in the fourth quarter to 13.8 million tonnes. Soybean prices are up 32 per cent since the end of June.
China has just 7 per cent of the world's arable land. Vagaries of the crops and the overnight shift in food habits have strained its self-sufficiency in grains.
In order to address the gap, China needs to expand its imports. The agriculture commodity sector has long term growth prospects, thanks to Chinese demand and even a slight movement can have a big impact. A country which yields and consumes a huge proportion of the world's grains, can tip the markets anytime.
Also, with the dollar steadily weakening, investors are looking at companies which trade in commodities and ‘hard assets' and agricultural products are much sought after, especially corn, beans and wheat, whose prices have rebounded sharply and are moving higher.
Market watchers have speculated China will buy more to feed not only its huge population but also its 450 million livestock.
The country became a net importer of agricultural products in 2004, and imports grew by 32.8 per cent in 2008. Imports reached a new high of 40.16 million tonnes in the first nine months of this year, almost equivalent to the total figure of 42.55 million tonnes in 2009.
Foreign produce
Soybeans from the United States and palm oil from Malaysia top the list of foreign produce. China is now a heavyweight factor in American grain markets, next only to Russia.
The rise in corn and soybean imports has raised questions over whether Beijing's primary policy of grain self-sufficiency will be sustainable as demand rises and agricultural land shrinks due to urbanisation.
Corn imports are at levels not seen in 15 years, even as soybean imports have doubled in the past five.
The overseas purchases of corn and rice — staples that Beijing considers key for its food security — have revived fears of Beijing's potential to influence global agricultural commodities markets, while maintaining strict curbs on its own food exports.
The World Trade Organisation, in a report this year, said Beijing's restrictions on its own exports are distorting world commerce more than helping balance the country's trade.
The export curbs are a major issue with China's largest trading partners. China currently prohibits the export of cotton, rice, maize and tobacco, except by state-owned trading enterprises.
The writer is a journalist based in China.
More from Markets
More from Business
Business Editor's choice
-
China breaks West's solar monopoly
Some countries in the world, especially Germany and the United States, have made considerable efforts to invest in developing solar energy cells
-
Burberry store spree will cut profit
Trenchcoat maker forges ahead with investment strategy targeting emerging markets
-
Laws needed to spur region bond markets
UAE Central Bank calls for creation of a centralised Sharia board to facilitate the sale of sukuk
