The hot regions of the future

September 18, 2009
Food strategies for the world

Food strategies around the world

In this article, the term hot does not refer to climate, but to strategic and active food producing regions. Not only is the population growing, but also the demographics vary greatly between regions and this will change deeply where from and where to the trade is going. Here are, briefly, the main changes as I see them happening as we go forward.

The aging and increasingly health-conscious West will not show any increase in consumption per capita, and very likely it even will drop, as older people need less food than the youth and also because the shift from quantity to quality will continue. Of course, immigration policies in these countries might offset this somehow. The direct consequence of this is that suppliers are going to have to look for alternative markets for agricultural products. They should not have to worry too much, as there will be plenty of people to feed in other regions.

Asia, with about half of the world population is definitely a huge market, although it presents a great variety of conditions and situations.

The largest economy in the region, China, is developing a middle class with more disposable income. This results in a change of diet, with relatively more protein, especially animal protein than by the past. Although being the largest meat producing country in the world, China is struggling to feed its population, and I expect that it will remain a net food importer. Further, the country has major challenges to overcome when it comes to availability and quality of water. However, in the long run, the past one-child policy will affect the Chinese demographics and influence their need for food, as well as the dynamism of their economy at large, by the way.

The second largest economy, India, is very dependent on the monsoon for its food supplies, and climate will remain a challenge. They seem to struggle to be able to secure their self-sufficiency, rural development is still a challenge and poverty remains a concern to reach prosperity.

Emerging South Asian countries, on the other hand, for instance Vietnam, show a different picture. They have a young population and want to benefit of the economic momentum coming from China. They are actively developing agricultural and aquaculture production for export purposes, and they keep on this policy. Aquaculture is very active, as some of these countries have a very extensive shoreline, like for instance The Philippines.

Although food security in the region remains uncertain, and the scare of last year’s food price increase, some countries are trying to establish structures to protect from such risks. For instance, a number of ASEAN countries are trying to set up a rice cartel, some sort of an OPEC for rice, in order to have more control on the market and the prices. Of course, we will have to see if this will work as planned.

Another region that is showing booming demographics is the Arab world and the Middle East. Many countries in the region are wealthy thanks to oil, but also have the disadvantage to be located in desert areas. Attempts to increase food production have met their limits, and they do not guarantee food security. The main reason is the shortage of water and trying to grow more food would create a drinking water crisis. This is why some Arab countries are developing other strategies to “outsource” their food production like mentioned in the article “The Great Unseen Land Grab”. Other countries, like Qatar, are considering investing in food companies in order to secure their food supplies.

Some players are already making their moves

Some players are already making their moves

I expect stronger ties between the Middle East and former soviet republics. Russia, Ukraine and Kazakhstan are joining forces in the “Black Sea Wheat Pool”, another agricultural OPEC. Although we will see how this combination works. Another area that I see booming in the future is the Mediterranean region, which is the interface between Africa and Europe. Although immigration has been a hot issue in the past, there is a great potential for a win-win situation for both sides if managed properly. The idea of creating an Economic Zone around the Mediterranean has already been brought forward and considering the demographics of the region, it makes quite a lot of sense.

Africa, although plagued by many problems, be it natural, social, political, humanitarian or health, as a huge untapped potential. The plans of Arab and Asian countries to lease land on this continent and develop agriculture for their needs, could give the necessary impulse to develop African economies. I also believe that South Africa has the potential to be the driver of the economic surge for the continent.

Last but not least. South America and Brazil in particular, is going to play a major role in agricultural production. They have an amazing potential, but also many issues to solve, especially on the environmental and political level. Their position of producers of basic commodities as well as high value products like meat gives them a strategic role in the international food trade, and the upcoming merger between JBS and Pilgrim’s Pride in the US and between JBS and Bertin is another step in the creation of agribusiness giants, following the merger between Perdigao and Sadia.

Copyright 2009 The Happy Future Group Consulting Ltd.


Ownership of food: the seeds of future conflicts

August 21, 2009

From an agriculture that mostly was producing locally for a local market with a straight forward production chain, the organization of food production has become more complex and structured over time. As we moved towards always more integration, traceability and globalized markets, the roles and bargaining positions of the different actors has changed.

bargaining power evolves

Facing the possibilities of more food riots in the future, if we are not in a position to make food affordable for all, we certainly can expect to see new power struggles emerge.

If we place ourselves in a scenario of food shortage, it is normal to assume that the power would be in the hands of whoever owns the food. But who is the owner, or better said who is actually in charge?

Is it the retailer? Is it the farmer? Is it the owner of the land on which the crops are grown? Is it the futures contract trader? Is it the seed supplier? Because without farmers, there is not much food in the stores; and without seeds, farmers cannot grow much food, and without food, no futures contracts to negotiate.

In the same way, who should decide where to the food would go? Does it belong to the country and the people who produce it, or does it belong to a corporation that prefers to sell it abroad? In a situation of shortage, this could lead to serious conflicts.
Corporations look primarily at markets and try to maximize their profit. That is their mandate.
Governments have a different look at things, as politicians want to have happy citizens, so that their position of power can continue. All they want is avoid social unrest.
Potentially, this can lead to new regulations and even to the possibility of nationalizations if companies and governments do not agree.

To get back to the example of seeds and genetics, there is a growing responsibility resting of the shoulders of breeding and genetic engineering companies. Not so long ago, let’s say a bit more than a century, there was much more genetic diversity in agricultural crops and farm animals. This diversity has shrunk quite significantly and we face the potential risk of not having the right genes available if we were to face a natural situation that would eradicate plants or animals as a result of inability to resist and to adapt to the new conditions these organisms must deal with. The genetic pool used to be a collective asset, but it has moved more and more into a private asset. About this, too, one can wonder who is in charge and who has ownership, and what could the consequences be.

As long as we are not facing any severe supply unbalance, the current situation will probably linger as it is a bit further, with the players having the most power trying to grow their position and influence other deciders to their advantage, but this kind of consensual vagueness about who is the owner of food will sooner or later cause some major shake-up.

Copyright 2009 The Happy Future Group Consulting Ltd.


Asia faces food shortage by 2050 without major water reforms

August 18, 2009

Here is an article from Science Daily illustrating very clearly the issues I brought up in my earlier article “Managing water is paramount for the future of food production“.

According to Colin Chartres, Director General of the International Water Management Institute: “Asia’s food and feed demand is expected to double by 2050. Relying on trade to meet a large part of this demand will impose a huge and politically untenable burden on the economies of many developing countries. The best bet for Asia lies in revitalizing its vast irrigation systems, which account for 70 percent of the world’s total irrigated land”.