The changing face of global food demand

Changing population sizes and improving economic affluence in emerging markets are going to be the key drivers of global agricultural market developments over the next decade.

That’s according to the latest United Nations Food and Agriculture Organisation (FAO) and Organisation of Economic Co-operation and Development (OECD) agricultural outlook for 2024 to 2033, published in recent days.

The report says that total agricultural and fisheries consumption will grow at around 1.1% per year, with nearly all of the additional demand coming from low- and middle-income countries.

FAO director general Qu Dongyu said: “The report confirms the need to implement strategies that bridge productivity gaps [in those countries] to boost domestic production and boost farmers’ incomes.”

On global production, the FAO/OECD say that while some of the growth in production from livestock will be driven by increasing numbers, a significant proportion of that growth globally will come from productivity improvements.

Price outlook

The underlying causes behind the peaks in international agricultural prices experienced in 2022 continue to subside and the report says that reference prices for the main agricultural commodities are projected to resume their slight decline trend (when corrected for inflation) over the coming decade.

The report notes that this trend may not be reflected in retail food prices.

As we can see in Figure 1 and Figure 2, the price for beef in Europe is forecast to fall slightly to 2025 before slowly picking up. Brazilian beef is forecast to maintain its price advantage over European production.

There is a similar picture in milk price for Europe, with prices expected to slowly increase from the middle of the decade.

That projection, however, is based on the rather optimistic scenario that there is no deviation from stable weather conditions, no major economic or policy changes and that technological improvements continue.

The report cited analysis from the International Energy Agency, which says that global demand for oil, coal and gas peaked in 2023 – due to the increased use of renewables – meaning a supply overhang of fossil fuels should keep a lid on costs there in future.

Demand outlook

China has been a major source of increased global food consumption since the turn of the millennium, accounting for 28% of total demand growth over the last decade.

However, that country’s outsize role in driving international trade in agricultural commodities is set to slow over the coming 10 years, with it accounting for 11% of additional growth over the period.

The good news is that other countries in Southeast Asia and India are going to take over from China as demand drivers, with the FAO/OECD projecting that they will account for 31% of additional demand between now and 2033.

The report says that an increasing urban population and rising wealth will be the main drivers of this increase in consumption.

The overall global demand increase of 1.1% per annum will be entirely driven by low and middle-income countries, with demand in high-income, developed nations projected to be flat across the next decade.

Crucially, the growth in calorie demand will come from increased consumption of staple crops such as rice, wheat and corn.

As the report says, the transition from staple foods to more high-value proteins remains slow as food baskets around the world only evolve gradually.

By 2033 the share of dietary energy – that is, actual calories consumed – from nutrient-rich animal products is only expected to increase by 1% in middle-income countries.

In high-income countries in North America and Europe, where animal sources supply the bulk of protein needs, consumer preferences are expected to shift away from red and processed meat towards leaner and, allegedly, more environmentally friendly alternatives such as chicken, fish and plant-based protein.

The report said there has already been substitution of meat types in many industrial countries where a noticeable increase in per capita consumption of poultry has occurred at the expense of beef.

Overall, across the entire world, the share of household income spent on food will continue to decline over the next decade. In low-income countries that will fall from around 28% currently to about 18% in 2033.

In high-income countries spending on food will only account for 6% of household expenditure in a decade.

Increased efficiency

Total global livestock numbers are forecast to increase by 10%, while total protein output is projected to increase by 14%.

This will be achieved by the continued intensification of production systems, which in turn will lead to increased global demand for animal feed.

This trend is projected to be most pronounced in Southeast Asia, where expanding pig and poultry production will raise demand for (mostly imported) protein meals and cereals.

Again, China stands out in the region, with feed demand growth expected to slow considerably due to improvements in efficiency, which will lower protein meal shares in livestock rations. The country’s declining population and relatively stable consumption pattern will also curtail animal feed demand.

In high-income countries greater production efficiency will result in herd reductions, the report says.

The area of land used to grow crops is expected to increase everywhere in the world except in North America and Europe. The report forecasts that Europe will be the only region globally where both the land area under crops and pasture will fall.

Land use changes in Ireland

The drop in area under pasture and crops in Europe will be driven by land use, land use change and forestry (LULUCF) policies in the region.

Last week, the Environmental Protection Agency (EPA) published a bulletin on greenhouse gas (GHG) emissions and sequestration from land use changes in Ireland.

It states that Ireland’s LULUCF sector is a net source of GHG.

The report says that increased peatland restoration and a much greater area of forestry is necessary if Ireland is to reach its 2050 objective of climate neutrality.

It notes that due to very low afforestation rates in Ireland in recent years forestry will actually become a net emitter of GHGs in either 2024 or 2025, as harvested wood is not replaced fast enough by new plantations.

The EPA refers to this scenario as a “carbon cliff” and calls for urgent action to rectify the situation.

On the other hand, the Agricultural Science Association (ASA) this week warned that the many demands being put on Ireland’s land from multiple Government policies means the country faces the potential loss of up to one million hectares of food-producing farmland.

It says that the reduction could have far-reaching consequences for the rural economy and for the country’s ability to continue to export sustainably produced food around the world.

Separately, the latest EPA report on the GHG emissions showed that there was a 4.6% drop in emissions from agriculture in 2023 to 20.8mt carbon equivalent. The drop was driven by reduced fertiliser use, reduced lime use and a 2.1% reduction in methane production from livestock.

Last year methane accounted for 72.1% of agriculture’s total GHG emissions.

While other sectors of the economy have seen larger percentage drops in GHG emissions, agriculture is the joint best performer when it comes to sticking to its targets for the 2021-2025 period.

In the first three years, agriculture has used 61% of its sectoral allowance, putting it on pace to meet the 2025 target. Electricity production, at 68%, and industrial emissions at 67%, both risk overshooting the 2025 goal set in Ireland’s carbon budget.

Comment

While every forecast about the future has to be taken with a generous pinch of salt, the FAO/OECD agricultural outlook, running to over 300 pages, is certainly a thorough study of the prospects for the industry.

The major trends identified show a richer world wanted higher quality proteins.

While much of the increased demand is centred in Southeast Asia, it still should lead to considerable opportunities for Irish exporters.

This scale of those opportunities will be governed to some extent by the amount of demand that can be met by domestic production in Asia – something we are already seeing in the changing face of Chinese dairy output which has rapidly risen in the last couple of years.

But Ireland’s ability to take advantage of those markets will also be governed by our own ability to continue to produce sustainable food on a cost-effective basis.

The competition for land in Ireland over the coming years will prove to be a significant factor here.

If the ASA projections for a one million hectare loss are correct then it will be immaterial where global demand is in 2033 – we will not be in a position to supply much of it anyway.