News and analysis on the global poultry
and animal feed industries.
on August 19, 2009

Global recession impacts on buying behaviour

Demand for food to grow along with population

While the global recession will have a marked impact on what people eat, the demand for food worldwide will continue to increase as the human population expands towards some 9.2 billion in 2050. The rate of population growth is slowing and according to a Chatham House report, on current trends, it will stabilise in the year 2200 at around 10 billion.

Economic growth in advanced economies is contracting to between 1.5 and 2.0%. Slower growth is also evident in emerging and developing economies, falling to less than 7% in China and around 5% in India. However, according to an International Monetary Fund report, global growth is expected to recover in 2010.

Poverty pangs

Faster growth in the developing economies is reducing poverty rates and slowly closing the income gap with high-income countries. However, economic growth must be shared amongst everyone to make lasting improvements.

According to the latest edition of the World Bank’s Atlas of Global Development, the proportion of people in developing countries living in extreme poverty has fallen from 42% in 1990 to slightly more than 25% in 2005. Nevertheless, about 1.4 billion people live on less than US$1.5 a day. Recent rises in food and fuel prices will likely increase the number of poor people.

In the current recession, even developed countries have seen many consumers change their meat buying behaviour by not eating out as often and/or trading down in their meat choices. This has benefited poultry meat uptake to the detriment of sales of competitive meats. In developing nations, where the demand for meat is primarily driven by economic growth, some consumers are likely to have stopped buying meat, returning to a vegetarian diet.

Gross National Income is considered a good measure of a country’s ability to provide for the well being of its people. The World Bank classifies countries according to their average income or GNI/person, converted to US dollars using three-year average market exchange rates (see Atlas method data in accompanying table). However, when measuring differences in welfare any comparisons of income among economies should take into account differences in domestic price levels, by using a purchasing power parity (PPP) exchange factor. This is the number of units of a country’s currency required to buy the same amount of goods and services in their domestic market as a US dollar would buy in the USA. Hence, PPPs take into account differences in price levels, as developing countries usually have lower costs for services and non-traded goods.

Population pros and cons

In the industrial world, increasing life expectancy has coincided with income growth and healthier lifestyles. But with a fertility rate of 1.7 births/woman - well below replacement level - the average age of the population will rise and the population size may fall in the absence of immigration. In developing countries life expectancy has increased steadily from 41 years in 1950 to 66 years in 2006. Fertility rates have declined but at 2.7 births/woman they remain well above those in high-income countries, fuelling population growth as births exceed deaths. A failure to slow population growth in the poorest countries is likely to mean a lower quality of life for millions of people.

As the global economy has become more integrated the importance of trade has increased.

Reductions in tariff and non-tariff barriers have helped spur trade but many sanitary and phytosanitary barriers to trade remain. These are costly to both consumers in developed countries and producers in developing countries.

Consumption and change

By 2050 the population will total nine billion, almost three billion more than today. The demand for food will continue to grow because of population growth, increasing incomes and changes in dietary habits and the industrial demand for commodities such as corn and soybean. Food consumption patterns in developing countries are changing as incomes rise. More input-intensive and higher priced meat products are replacing traditional meals, which were based on cereals and vegetables.

Producing more food will require more efficient use of agricultural inputs – land water and soil fertility.

Fresh water supplies are declining. With the projected growth in population and economic activity, the share of the world’s population facing water shortages will increase more than fivefold by 2050, according to the Atlas.

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