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Tuesday, April 28, 2015

Population and beef demand – it’s all bullish

By Jonah Bowles  |  Source: World Bank, USDA

Key points

  • World population to grow to 9 billion in next 20 years
  • This will underpin beef demand in the long term
  • Beef & dairy to receive 20% of additional spending
  • Australia well positioned as an exporter of beef to benefit


2015-04-28 J Bowles Article FIG 1

Feeding the world is a function of population and the ability to grow or purchase a food supply. Therefore, as populations grow it is assumed that demand will grow accordingly. What is the likely effect on beef demand and price?

Figure 1 shows the percent of income that is received by the portion of the population. The top 20% of the US population earns 45.8% of the income, while the bottom 20% of the population earns 5.4% of the income.  Black numbers indicate above the average and green numbers indicate below the average of the eight nations listed.  Potential for growth in food demand with better diets will come from those in the lower two groups of earners as long as their individual and national economies improve.

Per capita consumption of beef globally is 5.5kg.  If the US Census Bureau forecasts are accurate, the population of the world will increase from 7 billion people currently to 9 billion in 20 years.  If beef consumption remains constant, it will take approximately 51 million beef cattle to feed just the increase in population. 

The January 1, 2015 beef cattle inventory in the US was 29.7 million. So a valid question to be asked is ‘Who will feed the world?’,  From a statistical perspective, Brazil, India, Australia, US and New Zealand will share this challenge as they are the leading beef exporters today.

What does this mean?

Many consumers have a finite amount of disposable income, and each of the items that are considered for spending must be prioritized.  Even something as necessary as food has latitude in selection. Some of the food groups are forecast to account for similar spending by consumers throughout the world – meats and dairy will account for over 20% of increased spending in the future (figure 2).  This suggests that beef prices will remain strong, primarily a result of the increased demand by the growing world population.  

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 

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