As
we reported in the February 2008 issue of Trends, food prices are
spiraling out of control, with global food prices soaring 75 percent between
2005 and 2007.
This
is one of the biggest threats to the stability of the world economy, and to the
stability of the world’s governments. Riots over food prices have already
broken out in several countries.
Among
the reasons for so-called “agflation” are the rising middle classes in
countries like China, which are consuming more meat. According to the McKinsey Quarterly,1 the Chinese middle class quintupled from 7.6 million in 1995 to 42 million in
2005, and is expected to quadruple to 199 million by 2015.
Not
only are there more people in China who can afford to add meat to their diets,
but the per capita consumption of meat is accelerating as well. The
Economist2 reports that the
average Chinese consumer ate 100 pounds of meat in 2007, up from 44 pounds in
1985. Overall, the UN predicts that global meat consumption will double by
2050.
So
why can’t livestock producers simply raise more cattle, chicken, and hogs? The
problem is that, at the same time that consumption is growing, the cost of
feeding livestock is skyrocketing. Ethanol production now consumes 25 percent
of the nation’s corn crop, and the American Farm Bureau Federation expects that
figure to increase to 30 percent by 2009.
In
addition, according to the Associated Press,3 the U.S. government predicted that
farmers would plant only 86 million acres of corn in 2008, which is 8 percent
less than in 2007. However, that estimate did not take into account the impact
of bad weather during planting season. Heavy rains in the Midwest kept 4
million acres from being planted, and flooding in the late spring destroyed
countless acres that had already been planted.
As
a result, corn prices have more than tripled in the past 30 months, hitting a
record price of $6.67 a bushel in July 2008 futures, up from $1.86 at the end
of 2005.4
What
all of this means is that increased demand for meat and high corn prices will
lead to stratospheric meat...
