Who can feed the ravenous hunger of the beasts in the east?
03.01.2014

The Farmers Guardian, 3 January 2014 - With countries such as China, India and Russia growing their economies and their populations, there are great opportunities for British agriculture and food producers. Joel Durkin takes a global view.

WITH growing middle-class affluence and a proposed relaxation of its one-child policy, China is single-handedly redefining world food supply.

The extreme growth the country has seen over the past decade is set to be mirrored by other countries which have traditionally served Western markets.

Over the past decade the Chinese economy has grown consistently at more than 10 per cent as its inhabitants have moved from rural areas to cities.

The past five years have seen its population growth slow to 0.5 per cent, but a burgeoning middle class in the country has developed an appetite for high quality food, and agricultural imports have grown from £30 billion to £96bn in the past five years.

Allan Wilkinson, head of agriculture at HSBC, claimed China’s influence on world markets was only in its infancy.

“China has 1.35 billion people and its economy is growing at 7.35 per cent per year,” he said. “It will be having a much bigger influence on world trade than other nations because of the sheer scale of the country.”

“China’s rate of growth is slowing but we would still like the rate of growth. If it is 7 per cent that is still quite amazing. There will be an impact of the slowing economy but I still think there are some big positives from the growth of China.”

Dairy products

One of the most prevalent examples of Chinese consumption influencing world supply is the country’s current demand for dairy products.

UK industry chiefs had forecasted a potential slump in prices in spring 2014, but as two million Chinese dairy cows have been culled for an unknown reason, the country’s dairy production of 35m tonnes is short of the 40m tonne demand.

Robert Newbery, the NFU’s chief dairy adviser, highlighted how the demand could affect the UK as well as the rest of Europe.

But one of China’s biggest growth in imports has been soybeans. The country is currently the world’s biggest importer, buying 60 per cent of all imports.

Mr Wilkinson highlighted a ‘restructuring’ of global supply to meet that demand. The US now plants more soybean than wheat, which will inevitably have an effect on world wheat supplies, and therefore prices.

Mr Wilkinson claimed that on the way to becoming the world’s biggest economy, China would continue to influence world food supplies. But he noted how other emerging economies would potentially mirror China’s influence and demand.

He said: “With regard to the other emerging economies, I think they will start to exhibit many things China exhibits in terms of wanting to eat more meat.”

Although the UK does not currently have an export agreement for beef and lamb to China, exports to Hong Kong grew 186 per cent between January and September compared to the same period last year.

Clive Brown, senior regional manager at AHDB/ Eblex, said: “Some of that will make its way to mainland China as well. Hong Kong is the world’s freest economy and because of the large amount of tourists, mainly from China, there are potentially import links.”

James Withers, chief executive of Scotland Food and Drink, highlighted the booming worldwide market for Scotch whisky.

“The growth in food and drink exports has been unprecedented. Up 50 per cent in the last five years. Whiskey alone was up 50 per cent,” he said.

“Dubai, Qatar, United Arab Emirates, Bahrain and Oman are all potential growth areas.

“It is due to a rising middle class which is driving people to be much more aspirational in what they buy and what they will spend. That is right across Asia, India, China and the Middle East.”

India

Mr Wilkinson claimed in the coming years India would be second only to China as the world’s biggest economy, but differing cultures meant it would be difficult to anticipate the country’s demand for Western products.

“There will be a different attitude to meat consumption because of the country’s religious beliefs but that does not stop them eating more chicken and more lamb.”

Jean-Pierre Garnier, export manager at Eblex, signalled the importance of meeting Indian demand.

“India is a potentially massive market in terms of population and it’s a huge market for meat. We are not looking at the export of beef to India but we are looking at pork and lamb.”

This feeling was underlined by Deanna Leven at Hybu Cig Cymru, who said despite a lack of access to India in the short-term, there was huge potential within the country.

But with increased affluence in the East driving demand for British produce, supply issues are becoming a concern for British export bodies.

“The biggest issue for beef is supply,” claimed Mr Withers. “It is something we have to get the farmers to understand. The

opportunities are there. The days when farmers produced more and therefore the price went down are over.”

But despite a demand for Western products, Eastern emerging economies are also moving to become self-sufficient, something which could turn the demand issue on its head in years to come.

Russia

Jake French, grain marketing consultant at ODA UK, said: “Russia has gone from being one of the biggest importers of wheat to one of the biggest exporters. That is because of a lot of land coming into production on the black sea.”

And despite a demand for British beef and lamb, secured by a £100m export deal signed off by Owen Paterson in September, the country has ambitions to become self-sufficient in food production.

Andrey Oleynik, managing director of Russian agribusiness firm Basic Element, said the country’s ascension to the World Trade Organisation last year, and its Western technology, can improve Russia’s competitiveness in food production on a world scale.

“In 10 years Russian agribusiness will be very profitable. If we implement the continent’s technology across Russia we could increase production to 150 million tonnes of cereals including 50m tonnes of exports, and we could export 50m tonnes of pork.”

Acquisition

China has already made moves to secure its own food demands with its acquisition of Smithfield Foods, America’s largest pork producer and processor. But the confirmation of a £45m UK deal to supply porcine semen to the country could signal the continued reliance of Eastern economies on Western agricultural technology and practices.

Mr Garnier said: “We are competitive against other countries in supplying genetics. It is an important industry, it is part of what we do and if we do not another country will do it. We are building a good relationship with China in that market.”

CHINA

Population: 1.35 billion

GDP: £5.1 trillion

Agricultural imports: £96.02 billion

Agricultural exports: £40.52 billion

*Figures for 2012. Source: World Trade Organisation

RUSSIA

Population: 143.53 million

GDP: £1.23 trillion

Agricultural imports: £25,682bn

Agricultural exports: £19.35bn

INDIA

Population: 1.2 billion

GDP: £1.12 trillion

Agricultural imports: £25.96bn

Agricultural exports: £15,715bn

http://www.farmersguardian.com/home/business/who-can-feed-the-ravenous-hunger-of-the-beasts-in-the-east?/60830.article