By Kate Mei Lam Lai, Editor
While unpredictable events such as the COVID-19 pandemic and the Russian invasion of Ukraine have had huge impacts on the agriculture sector and disrupted the world food supply chain, global food demand has been increasing every year. We have also seen an aggravation of food insecurity and inflation, among other issues. So, how can we be prepared to weather any coming unforeseeable storm?
As a speaker at Trouw Nutrition’s AgriVision 2023, Brett Stuart, President of Global Agritrends, talked about the current and upcoming megatrends in agriculture that will greatly influence agriculture producers, as well as consumers. To understand what these megatrends mean for stakeholders in the animal food production supply chain, Feedinfo reached out to Stuart for more insights.
The President of Global Agritrends said that there are four megatrends in agriculture. He first discussed continued population growth: “We went from under 1 billion people in 1800 to 8 billion people within 223 years.”
With the global population continuing to increase every year, “some people might say that we cannot produce enough food. Today, nearly 1 billion people are considered food insecure; but it is not because we can’t produce enough food. The challenges with food insecurity are generally centred around corruption and distribution issues,” he added.
He went on to say that the key to feeding the continually growing population is efficiency. “The US and Europe combined have 12% of the world’s dairy cows and produce 45% of the world’s milk. That is very good productivity. Brazil, India, and China together have 76% of the world’s dairy cows and produce only 29% of the world’s milk. So, if you allow the US and European dairy productivity to spread to Brazil, India, and China, we will have far more milk that we could consume.”
“If we increase global productivity, we can easily feed 10 billion people,” Stuart believes.
Besides population growth, a reason for the increase in global food demand is more money, which is another megatrend. “Global GDP growth has created a surge in the global middle class, which is set to rise from 2 billion in 2014 to 5 billion by 2030. There is a very direct correlation between global GDP and global meat and poultry consumption,” Stuart explained.
While there is a growing demand for meat, “we have climate policies that are reducing our supplies,” he added.
“There are two ways to reduce greenhouse gas emissions in livestock. One way is to legislate emissions and reduce the herd; the other way is ‘the carrot’. If you try to get an animal to move, you can poke them with a stick or give them a carrot and get them to move. Legislation is ‘the stick’, and we need to focus on ‘the carrot’. Legislation has had a major backlash. The ‘carrot’ option is to create incentives for livestock producers to reduce their greenhouse gas emissions,” Stuart commented.
He then gave some examples where ‘the carrot’ option is chosen, including US dairy producers in California being able to offset their methane emissions through manure management, in which farmers capture methane from manure and sell their methane to corporations which use it as an energy source.
“I think that the solution lies in finding more carrots and fewer sticks. We can do it through feed additives, manure management, or by simply increasing productivity, more pounds per animal. Suddenly, we have smaller carbon emissions per unit. One of the challenges for livestock with carbon emissions is that carbon emissions are measured in absolutes in the total amount per year. We are being asked to not just freeze footprint, but to reduce it, even while increasing production. The reality is maybe we just need to increase productivity and reduce our per-unit carbon emissions,” he elaborated.
Moving on to the third megatrend, which is China, the President of Global Agritrends said that “China is now the largest agriculture importer on Earth, and its rising middle class has increased demand for almost everything in terms of agriculture.”
Thus, China is losing self-sufficiency in most major commodities, such as poultry, pork, corn, and beef. “Now China is one of the major importers of all these commodities. Five years ago, China was not at the top of the list; and so that has a big impact on the global commodity markets,” he added.
Asked what it means for stakeholders in the animal food production supply chain, Stuart believes that China is a huge opportunity: “China has improved significantly over the past 20 years and Chinese consumers are changing their diet. For example, 10 years ago, beef consumption in China was very low. Beef is not a traditional protein in China, pork is much more traditional. In the last 10 years, Chinese beef imports soared, driven by rising incomes, mostly in the bigger cities. People want to consume more beef and it just goes to show that consumers’ diets are not set and the Chinese demand for beef is driving global beef markets today.”
“That is a demand that was not there before. The Chinese Government is trying very hard to maintain self-sufficiency, but their incomes have grown so quickly over the last 20 years that they have been forced to become bigger importers. So, it is a unique situation now with China being the largest importer of most major commodities, their influence is going to be very big in our commodity markets. That is a challenge, especially in a time like now where countries like the US do not have a good relationship with China; and so, it lends to more uncertainty in global commodity markets, but it also creates more opportunities,” he elaborated.
As for the fourth megatrend, which is livestock and agriculture policies, Stuart explained: “Some of those policies are driven by climate legislation, and some driven by animal welfare. But those policies are making it much more difficult to feed the growing population because most policies are restricting productivity and yield. So, the challenge in agriculture today is that all farmers are seeking to maximise yield because that is how they get to profit, yet when we look at consumers, the buzz words on the rise with consumers are ‘organic’, ‘carbon neutral’, ‘antibiotic-free’, etc.”
Stuart believes that it is very easy to reconcile that between farmers and consumers: "Just allow all products in the retail space and let consumers vote with their dollars. We have to keep choice in the retail space and if someone wants organic, that is fine; but put everything in the retail case and let consumers choose. That is the key to reconciling this because then the incentive is still with farmers to increase productivity, which we need to feed the world.”
“It is socially irresponsible to legislate yield-reducing practices because when we pass laws, we just raise the cost for everyone and reduce productivity for farmers. It is not the time to reduce output or force high-cost production. It is a time to give free choice to everyone… we must be very careful with legislation because it can increase the cost for everyone, for the world’s poor; and today 84% of the world’s population lives in what is termed a developing nation. They are not worried about organic milk, they just want safe, affordable food,” he went on to say.
Asked how companies can be best prepared for unpredictable future trends, he said: “We have seen the COVID-19 pandemic, the Russian invasion of Ukraine; there are still animal disease issues and there will be more surprises ahead. I think the COVID-19 pandemic has been very eye-opening for companies to say that they cannot depend on a single source supplier.”
“They have to better secure supply as well as upstream and downstream logistics. There cannot be just-in-time inventory because although it is very efficient and low-cost, it is also very risky. So, I think what companies need to do is to have bigger inventories. If supply gets disrupted, they can continue to operate. It involves more risk management and not just futures contracts. Bigger inventories are a little more expensive to manage, but that is what we have to do when we have uncertainty and volatility; it is going to cost us more money to manage,” he added.
Stuart concluded: “Things are different today than they have been in the last 20 years. The next 20 years will be very different; we have rising demand and at the same time, we have strong opposition – we need to be able to deal with climate policies and be aware of animal welfare issues. I think the key to it all is adaptation. You don’t have to be the biggest or the smartest, but you better learn how to adapt and adjust as the market changes.”
