Two-thirds of world population live in the 16 most populated countries

August 17, 2010

When looking at their respective demographics, economic situations and food security status possible future scenarios can arise from this list.

The most obvious is probably that many countries on this list have little food security. Considering that many of these countries have a young, poor and increasing population, political stability is quite fragile. As long as this remains, the consequences of food inflation must be taken very seriously.

Country

Population

% of world population

China

1,337,320,000

19.6

India

1,180,220,000

17.3

USA

309,199,000

4.5

Indonesia

231,369,500

3.4

Brazil

192,860,000

2.8

Pakistan

169,410,000

2.5

Bangladesh

162,221,000

2.4

Nigeria

154,729,000

2.3

Russia

141,927,297

2.1

Japan

127,530,000

1.9

Mexico

107,550,697

1.6

Philippines

92,226,600

1.4

Vietnam

85,789,573

1.3

Germany

81,882,342

1.2

Ethiopia

79,221,000

1.2

Egypt

78,200,000

1.2

 Total  

4,531,656,009

 

66.7

 

What came to my mind when I saw the list the first time was the following.

The cluster Pakistan-India-Bangladesh represents 22.2% of the world population. This region is very sensitive to climate events, as the current floods in Pakistan demonstrate. The monsoon is the main factor that influences the level of crop production. These countries are below food self-sufficiency, and their agricultural infrastructure (and overall infrastructure in general) is in bad need for further development. However, the quality of agricultural land is good with around 40% of arable land. The task of India is huge. It has about 70% of its population in agriculture, and if the USA had India’s population density, there would be 3 billion Americans, 10 times its current population. In such a situation, the USA would not be self-sufficient, either. Agricultural reforms are necessary to improve yields and economic development is necessary to provide more inhabitants with higher revenue. It will take time, but expectations for the Indian economy are positive. Subsistence is not a good economic model. A good relationship between India and Pakistan is paramount for the stability of the region. A stable Pakistan is essential for the stability of the world.

In North America, I can see dramatic change coming. With two countries, Mexico and the USA, in sharp contrast with each other in the top 16, something will happen. The USA will remain an economic superpower and any events in that country will affect the world economy and politics. Mexico is growing but it needs to improve its economy and achieve better social stability. Poverty is fuelling many issues and the price hike of corn of 2008 has showed that it would not take much to cause food riots. The issue of immigration of Mexicans into the US will not go away, and no wall will stop it, especially with Mexico having a strong population increase. The difference in population numbers of the two countries will shrink. The USA and Mexico will have to develop a joint economic development program for the region to avoid an uncontrollable situation in the long term. I think that we will see more and more Mexicans settling in the USA and become the farmers of the future over there. However, climate conditions will probably affect the geographical distribution of productions. The southwest of the USA is increasingly suffering from water scarcity, and the area spreads. This will affect the distribution of the population over the continent, and it will affect Canada as well.

South East Asia has three representatives on this list: Indonesia, The Philippines and Vietnam. This region shows a strong population increase. From a food production point of view, geography tells that aquaculture has to be a leading, if not the leading, food source for the future. And this is exactly the direction that these countries are following. Rice is essential in this part of the world, and there is no doubt that the South East Asian Emergency Rice Reserve will be tested at some point in time.

Brazil is growing, demographically and economically. It is becoming an economic powerhouse, in particular in agricultural products. However, much still needs to be done to improve infrastructure and performance. In the future, I expect to see joint agricultural policies between a number of Mercosur countries, especially with Brazil, Chile, Argentina and Uruguay as the initiators. Export has led agricultural production of these countries in the past, but I expect to see them to rebalance policies towards feeding the South America market as well in the years to come.

The other thing that jumped out of the list is Africa. I doubt that many people would have expected Nigeria to be ranking #7. Africa will be an important element in the 21st century economy. The continent’s population will double in the coming 40 years and many African countries are attracting foreign investments. If this happens in orderly manner, which is far from sure at this stage, I would expect Africa to experience a boom comparable to the one that China has had over the last three decades. The continent is open for business and the rules of engagement are exactly what adventurous pioneers can wish for. Africa has tremendous potential for food production and foreigners are developing agriculture actively for their own food supply, but neither African countries nor investors should forget to include the Africans in the wealth creation, and help them earn the money to feed themselves. What will happen in Africa, will affect all of us.

Copyright 2010 – The Happy Future Group Consulting Ltd.


Is the food company grab the next step beyond the land grab?

July 12, 2010

In parallel with land tenure deals in developing countries, I foresee a new trend to develop strongly in the years to come.

In order to increase food security, countries in Asia and in the Arab world will invest more aggressively in food and agriculture companies.

In China, the search for acquisitions is gaining momentum. A first attempt, although failed, by China’s Bright Food group to acquire Australia’s CSR sugar is an indicator is this trend to come. But China is not the first country to initiate this.

For instance, Qatar’s sovereign wealth fund created Hassad Foods to invest in food related projects in Qatar and abroad. The purpose of Hassad Foods is to help Qatar achieve food security. They aim at developing their activities in South America and Africa, with the expressed goal of completing at least six projects by the end of 2010. Their focus is on basic crops such as sugar and wheat, but they look at projects in the poultry and livestock sectors as well. As countries realize the limitations and the political risks of focusing only on farmland ventures, they will diversify their possibilities to improve their food security situation.

As the approach of sovereign funds is to focus on long-term food security, the type of investments in food companies might change as well. This will be a different approach from activist investors, such as hedge funds, that try to influence short-term management decisions purely for share price purposes.

Copyright 2010 – The Happy Future Group Consulting Ltd.


China corn imports forecast to rise 9-fold by 2015

July 8, 2010

Interesting article found on World-Grain.com.

The article is based on a study carried out by Japan’s Marubeni Economic Research. The need for more meat and animal feed will drive the increase.


Are “land grabs” a necessary evil?

May 17, 2010

The large land deals between African and Arab countries or Asian countries, mostly China, have drawn quite some attention.

I mentioned them in an earlier post on this blog (The great unseen land grab).

The discussion has taken an increasing political flavour, but very few people seem to look at the causes of the problem.

The reality is simple: the countries looking for land do so because they have a serious problem to feed their people and to guarantee them access to potable drinking water.

The water problem is obvious in Arab countries. In the past, they tried to grow more food on their land by developing irrigation. Unfortunately, they have concluded that this approach depleted their water reserves, while they also realize that they cannot feed their increasing population. For instance, Saudi Arabia has now turned away from its previous food security strategy and chooses to preserve water and look for other sources of food than their own agriculture. China and other Asian countries also realize that they cannot meet the increasing demand for food.

What should these countries do? Home production will not be sufficient. The first other possibility is to import, but volumes in the current world agriculture will also soon meet limitations. Keeping on buying on the world markets will solve some of the shortage problem, but it leaves the importing countries vulnerable to world market price increases. This is a threat for the domestic social stability as many of their inhabitants can hardly afford food at the current prices. These countries simply cannot remain passive. They needed to take action, and they did.

Why is Africa so attractive? Africa is the only continent where agricultural development has lagged behind. Yields are low. Infrastructure is far from optimal. Africa can increase production if African countries can fund their agricultural development. The main problem is one of money and policies. Africa has huge areas of arable land, but that land is not exploited. The FAO estimates at 700 million hectares the amount of land that could be developed for agricultural production. That area is about the size of Australia. It is twice the size of the current world wheat area. This offers huge potential.

What the importing countries bring to Africa are funds ready for investing in infrastructure and equipment. They could wait for African governments to develop agriculture and then buy from them. Considering how slow agricultural development has been in the past, this solution probably would come down to waiting for nothing to happen and cause serious food shortages in Asia and Arab countries, with all the risks of conflicts that this would generate.

The approach of going to Africa and offering to buy and develop the land makes a lot of sense. By being proactive, the importing countries actually speed up the process of getting investment money at work on the land, and the host countries do not have to worry about how to get the money.

Can these land deals work? In theory, they can. The main issue at stake is how both the importing/investing countries and the host countries set up such deals. The population of Africa is very young and it is growing fast. Africa will see its population double within the next 40 years.  Africa is also a poor continent and the combination poverty and high population increase has the potential to create many problems because of a lack of food security. Developing agriculture in Africa is the way to increase food security, but at the same time, a large part of the food produced on the newly developed land will go abroad, to China and Arab countries. This is why it is utmost important that such deals be set up as win-win situations. The foreign countries must help create agricultural and economic development in Africa in order to feed the local population by developing food production and offering employment so that they also can buy food. Failure to do so will very likely result in riots and violence against the new farms and their staff. This would not feed the local population, and could eventually result in not feeding the foreign countries either. Such land deals must be managed very carefully. The people in charge will have more than just agriculture to look after. Social, cultural and environmental aspects will play a very important role in the execution of these projects.

Africa is the continent where such deals have grown to large proportions, but similar deals are also being made in many Asian nations. It is interesting to see that other regions where large amount of investment money would be useful for agricultural development do not get as much attention from the importing countries. Yet, areas like in Kazakhstan, Ukraine or Russia could use some injection of funds, too. Brazil is starting to attract new money. For instance, the China National Agricultural Development Group Corporation has plans to grow corn and soybeans and it is looking for land in Brazil. The corporation has been allowed an annual budget of US$2 billion to realize the objectives and secure grain supplies to China.

More in my upcoming book Future Harvests.

Copyright 2010 The Happy Future Group Consulting Ltd.


The Great Unseen Land Grab

May 21, 2009

Interesting article from The Economist on how some countries are already organizing and securing their food supplies for the future. Major political-economic chess game in the running.

Buying farmland abroad – Outsourcing’s third wave

It connects quite well with my previous article about Jim Rogers buying land in Canada and Brazil.

And it also connects well with the move made by the Canadian investment firm Sprott Asset Management to secure a land lease of a million acres in partnership with First Nations on the Canadian prairies to grow crops as an investment in agricultural commodities.