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The Truth About the Global Demand for Food
A new report from the FAO blows the myth about increased grain consumption from developing countries leads to higher global demand and higher prices
Ever since the global food crisis of 2007-08, a perception has persisted in many parts of the world that one of the main underlying reasons for the price spikes in major food items – especially food grain – is the increased demand from countries such as China and India. If anything, this perception has become even more widespread since prices started rising again, especially since early 2010.
On the face of it, such a perception seems quite reasonable. After all, China and India both have huge populations, accounting for nearly 40% of the total world population between them. Their economies have both been expanding very rapidly, much faster than most of the rest of the world, so per capita incomes have been rising from relatively low bases. It is well known that as incomes rise from low levels, people tend to consume more food grain – not necessarily directly, but indirectly through the consumption of livestock products that require more grain in the form of food. 
"Speculative forces are still allowed to run amok in global commodity markets and global food prices are kept so high as to increase the deprivation of the millions of hungry people in the world." (photo: dreamX)
So it is only to be expected that the increased incomes in China and India would translate into more demand for food grain, and this could certainly affect the global supply demand balance in ways that would cause food prices to rise. Expected, yes: but did this actually happen?
It turns out that there has been barely any change, and if anything a slowdown, in the rate of grain consumption in these two large countries. And the global consumption of grain for all food purposes has actually decelerated in recent years compared with previous periods.
This is very evident from an important new report from the high level panel of experts set up by the FAO to study commodity price volatility and its relationship to food security. The report contains a careful assessment of both the actual trends and the various attempts to explain the price changes. In the process, it blows the myth about increased consumption from developing countries leading to higher global demand and, therefore, higher grain prices.
Consider the evidence it provides on rates of change of global cereal consumption, as shown in the chart. The growth rate of total cereal consumption was considerably slower in the period since 2000 than it was in the 1960s and 1970s, and only around the same as it was in the 1980s. It did increase relative to the 1990s, but not by very much. And, contrary to the general feeling, feed consumption for livestock actually increased more slowly than direct (or non-feed) consumption.
In fact, the report notes that even the apparent acceleration of feed use in the last decade was essentially because of the recovery of feed use in the former Soviet Union after the 1990s. So, despite all the booming demand for meat in fast-growing Asia, the growth of feed consumption in the rest of the world outside the former Soviet Union was not accelerating. Rather, it has actually been slowing down.
As it happens, FAO food balance sheets show that both direct and indirect demand for grain in China and India barely increased between 2000 and 2007, and cereal imports were actually lower. Why this has been happening, and why the economic growth has not translated into more aggregate demand for grain, is obviously a fascinating question on its own and one that deserves more study. It is likely that the worsening income distribution in both countries may have had something to do with it, so that increased demand from high-income groups is counterbalanced by reduced demand from poorer sections. But this needs to be explored further.
The relevant point is that it is not increased demand from China and India that is driving up grain prices. This does not mean that there are no other demand forces at work, however. Financial speculation in commodity markets is clearly significant, but it is also true that even such speculation must be based on some assessments of changing global balances. What could that be based on?
The report from the FAO has a convincing response to that as well: it notes that the biofuel boom has had a major impact on the evolution of world food demand for cereals and vegetable oils. According to page 32 of the report "there is a real acceleration of non-feed uses boosted by biofuel development. Excluding use for biofuel, the growth rate for non-feed use is stable compared with the 1990s and markedly inferior to its historical performance. Without biofuel, the growth rate of world cereal consumption is equal to 1.3% compared with 1.8% for biofuel".
This massively increased demand from biofuel is largely determined by the very large subsidies provided in many western countries, which have, ironically, been increasing their subsidisation of biofuel at the same time that they have reduced subsidies on food cultivation. Aside from a few producers, such as Brazil and Cuba, biofuel production in most locations would be completely unviable without these large subsidies.
The impact of these on diverting production and affecting price has been even more significant in the case of edible oils. The report shows that "the use of vegetable oils for food slowed down between the 1990s and the 2000s (from 4.4% a year to 3.3%), but industrial use of vegetable oil soared, pushed by the booming European biofuel industry. As a result, the share of industrial use in world consumption of vegetable oils jumped from 11% to 24% between 2000 and 2010".
The surprising conclusion from all this is that, leaving out the impact of the biofuel boom of the 2000s, global consumption of both cereals and edible oils is actually slowing down. All the more tragic, then, that speculative forces are still allowed to run amok in global commodity markets and global food prices are kept so high as to increase the deprivation of the millions of hungry people in the world.
16 Comments so far
Show All"So it is only to be expected that the increased incomes in China and India would translate into more demand for food grain, and this could certainly affect the global supply demand balance in ways that would cause food prices to rise. Expected, yes: but did this actually happen?
It turns out that there has been barely any change, and if anything a slowdown, in the rate of grain consumption in these two large countries. And the global consumption of grain for all food purposes has actually decelerated in recent years compared with previous periods."
How dare you apply material analysis of the what actually happens in the real world (ie scientific method) to food consumption?
What you should do is rant about overpopulation based on thought experiments and specious reasoning and how it is the fault of those non-westerners.
Look out, rfloh, your prejudices as well as total lack of attentive reading & rigorous thought are showing.
Prof. Ghosh made these points: That consumption of grains in India & China has gone down while biofuel demand, subsidies & speculation have increased thus pushing prices up. Nothing in your outburst addresses his points.
There were many comments to another article on the fact that enough food can be produced to feed everyone in the world, but that its production and distribution are used for political ends.
Hope some of those people who contributed before will chime in here. However, it is understandable if they are preoccupied with what is presently happening in this country.
Look out, salwa, your prejudices as well as total lack of attentive reading & rigorous thought are showing.
I agree with Prof Ghosh. That is the point of my (sarcastic) post.
My comments are directed at those, including on CD, who whine that not enough food is being produced, those who whine about "geometric exponential population growth".
"There were many comments to another article on the fact that enough food can be produced to feed everyone in the world, but that its production and distribution are used for political ends.
Hope some of those people who contributed before will chime in here."
Guess what? I'm one of those making those comments.
My apologies, rfloh, the sarcasm of your remarks slid right by me. Glad you cleared this up, so no one else will misunderstand your intent.
Salwa, you had better pay attention yourself. The author did not say consumption in those countries has gone down. He said it "slowed down" There is a big difference.
Good post!
everyone and i do mean everyone should read these 2 books
seeds of deception: http://www.seedsofdeception.com/Public/Home/index.cfm
"Monsanto's controversial past combines some of the most toxic products ever sold with misleading reports, pressure tactics, collusion, and attempted corruption. They now race to genetically engineer (and patent) the world's food supply, which profoundly threatens our health, environment, and economy. Combining secret documents with first-hand accounts by victims, scientists, and politicians, this widely praised film exposes why Monsanto has become the world's poster child for malignant corporate influence in government and technology."
there is a movie as well on the site
Seeds of Destruction: The Hidden Agenda of Genetic Manipulation
"This skilfully researched book focuses on how a small socio-political American elite seeks to establish its control over the very basis of human survival, the provision of our daily bread. 'Control the food and you control the people'. This is no ordinary book about the perils of GMO. Engdahl takes the reader inside the corridors of power, into the backrooms of the science labs, behind closed doors in the corporate boardrooms. The author reveals a World of profit-driven political intrigue, government corruption and coercion, where genetic manipulation and the patenting of life forms are used to gain world-wide control over food production. The book is an eye-opener, a must-read for all those committed to the causes of social justice and World peace."
http://www.amazon.ca/Seeds-Destruction-Hidden-Genetic-Manipulation/dp/0973714727
and let's not forget kissinger
Kissinger’s 1974 Plan for Food Control Genocide
by Joseph Brewda
Dec. 8, 1995
On Dec. 10, 1974, the U.S. National Security Council under Henry Kissinger completed a classified 200-page study, “National Security Study Memorandum 200: Implications of Worldwide Population Growth for U.S. Security and Overseas Interests.” The study falsely claimed that population growth in the so-called Lesser Developed Countries (LDCs) was a grave threat to U.S. national security. Adopted as official policy in November 1975 by President Gerald Ford, NSSM 200 outlined a covert plan to reduce population growth in those countries through birth control, and also, implicitly, war and famine. Brent Scowcroft, who had by then replaced Kissinger as national security adviser (the same post Scowcroft was to hold in the Bush administration), was put in charge of implementing the plan. CIA Director George Bush was ordered to assist Scowcroft, as were the secretaries of state, treasury, defense, and agriculture.
The bogus arguments that Kissinger advanced were not original. One of his major sources was the Royal Commission on Population, which King George VI had created in 1944 “to consider what measures should be taken in the national interest to influence the future trend of population.” The commission found that Britain was gravely threatened by population growth in its colonies, since “a populous country has decided advantages over a sparsely-populated one for industrial production.” The combined effects of increasing population and industrialization in its colonies, it warned, “might be decisive in its effects on the prestige and influence of the West,” especially effecting “military strength and security.”
http://www.schillerinstitute.org/food_for_peace/kiss_nssm_jb_1995.html
Bless your heart, medmedude. It seems everything & anything can be a "threat to national security." You have made many important comments & given us many references. The internet is rife with articles on the points you brought up. For those who don't want to buy books, one particular site will keep them busy reading for quite a long time: www.globalresearch.ca
Yes! Why would Monsanto create a corn the seeds of which are infertile? So farmers will have to go back to Monsanto for all their start up seed forever. Especially when Monsanto owns the genetic Copyright on the infertile seeds that are impervious to Roundup. Eventually they will spray enough Roundup to kill all other seeds except theirs. If their seeds blow on to your farm, they sue you on copyright infringement and take your farm. After all they are a person (as per the Supreme Court Clowns.)
About 6-7 years ago I read something about the US reaching "Zero Population Growth." It was in an article about fears regarding the Social Security system. How come that changed? China has restricted their families to one offspring. Maybe that's why they are stable in their food demand. In my family (cousins) out of 9 couples we only had 8 children - 4 couples having 0 children. We're less than 0. Most of the friends I know have 0-2 children. Where are all the babies in the US coming from?????
Public benefit vs. private profit
Cruelty is an indispensable characteristic of capitalism.
Capitalism + free market = able to produce and distribute a product at the lowest cost.
We do not have capitalism nor free markets.
Free markets don't work, they don't self correct to balance supply and demand, for farm commodities like corn, wheat, rice, and cotton. There is abundant evidence of this price inelasiticity, or lack of price responsiveness on both supply and demand sides. We don't eat 4, 5, 6 meals, nor do farmers stop planting all of their land when prices are low. There are good reasons to explain all of this. Also, countries don't view food for their populations in capitalistic ways, also for good political reasons and other, more important reasons. The US addressed these realities in the New Deal with nonsubsidy price floors and ceilings and supply management. This limited the markets, but allowed them to operate within those limits. We can do this again, and assure that we always make a fair trade profit on farm exports. What we've been doing is usually losing money on farm exports, as a country, while multinational corporations made record profits on our losses. (The US is the world's dominant farm commodity exporter, but unlike OPEC in oil, we chose to lower our prices and lose money.)
Depending on the crop - you would get any-where from 5-6Xs to 25-30Xs to amount of protein per acre if people ate grains, legumes, beans & [non GMO] soy directly [IE: plant based diet]- instead of feeding it to & then eating live-stock [which naturally should be basically eating grass & leaves anyway]- without the cholesterol & most saturated fat [health consequences of the SAD diet].
The idea of using corn & soy -or- good farm-land &/or clearing cutting forest to grow palm trees & sugar cane - to produce so-called 'bio-fuels' & ethanol - rather than feeding people - In the NAME of FIGHTING 'Climate Change'?! - Is dubious at best & probably out-right FRAUDULANT!
Farmers in Africa & the so-called 3rd World have either been driven off their lands where they were traditionally growing food locally for their families & communities, into over-crowded cities & slums.... -OR- They have been encouraged to grow so-called cash-crops [generally using expensive industrialized mono-cultural methods] instead of food.
YET- The entire World's average yearly total out-put of grains is about +2billion metric tons- which is enough to feed 7 billion people- 2 meals per day FOR 6 YRS!
THUS- There should be plenty of food to adequately feed all 7billion people [if it is even is 7 billion] - The problem is mis-management, waste, neglect & ill-intent - NOT potential ability & capacity...
This article itself indicates the key problem in the world driving mass hunger. The author clearly is a member of a global network of ekonomists, all thinking the same thoughts, assuming the same assumptions, all completely disconnected from the people and the people's priorities.
It's great that the author pointed at the global casino royal and the speculators who haunt it but he could have also reminded us that the great majority of people want food self-sufficiency and don't want to be force-fed frankengrain by das kapitalists. I guess if the people want a vision that works for them, they will have to visualize it themselves. And turn off das kapitalist media to avoid the distraction. Many already understand that localism is where it's at.
Jayati gives us something less than "The Truth." It's a very important topic, and she gives us some very important information, but other factors (that are widely misunderstood,) are (also) misrepresented here. This is true in spite of the fact that Jayati has claimed that she understands these issues (to me via email, regarding her Common Dreams article 1/9/09, on the food crisis, and see my similar comments there). 1. Basically, she makes the common mistake of only mentioning recent higher farm and food prices. 2. She gives no standard of what fair farm and food prices would be (fair trade), except to suggest that higher is bad. 3. She makes no mention that the hungry are mostly farmers (ie. 80% of the "undernourished are rural," 70% of the population in the poorest or "Least Developed Countries" are rural, or sometimes 75% are small farmers). 4. She demonstrates no understanding, therefore that the issue is a dilemma, where increasingly low (not high) farm prices over a quarter century (and more than a half century,) caused rural poverty (food poverty) and hunger, contributing heavily to such extreme poverty that many can't even afford export dumping price levels, let alone fair trade levels. That's the dilemma. 5. She emphasizes volatility, pointing us toward a need to regulate speculation (through some sort of regulation of commodities exchanges, perhaps), but makes no mention of farm policies like our upcoming farm bill, where we need price floors and ceilings plus supply management (reductions as needed to prevent oversupply, low prices and rural poverty, plus reserves for emergency shortages and to address real price spikes). She mentioned such policies in her email to me, but I've never seen her write about them. In fact, the recent higher prices to which she referrs have not reached the level of the traditional standard of fair trade or living wage prices. That standard is farm parity, and for corn it's about $10, and I think the highest (marketing) year-ly average corn price is about $5.40 (well below the record corn price of $17+ in today's dollars). $10 corn would be great for corn farmers in Africa and Mexico, creating much wealth and jobs there, and leading toward an end to food poverty and hunger. It would stimulate much needed infrastructure development in Africa, Mexico and similar places. It would also put a damper on the use of corn for livestock and ethanol, and give a great boost to grassfed livestock. The same holds for cotton, rice, wheat, soybeans, etc. In the short run, of course, there's still that dilemma, that fair trade prices, or even the higher-but-sub-fair-trade prices we've had lately, cause more people (people who are already in deep rural and other poverty) to face serious hunger. In January 2009 Jayati wrote to me regarding a very similar list of criticisms, stating: "I agree with your points." (See them at the location given above.) Apparently she doesn't think this additional analysis is valuable enough to share with progressives in the US. I disagree.