Horizons #49 – Demographic change unleashes opportunities for Australia’s grains industry

11 September, 2020

by Professor Ross Kingwell – AEGIC Chief Economist

Key message: Structural change in the size and composition of countries’ populations offers further grain export market opportunities for Australia

The Story:

Typically as nations grow wealthier, families have fewer children, people live longer and spend more on food, including grain-fed foods like pork, chicken and dairy products. China is a notable exemplar. China’s annual economic growth rates have surpassed those of many other nations over many years; raising living standards in China and boosting per capita incomes and wealth. China is on track to surpass the USA as the world’s largest economy (in GDP terms) by 2030.

Yet towards 2050 China’s population, like those in several other advanced economies such as Japan and Germany, will lessen and a growing proportion of its population, particularly the elderly, will become dependent on a smaller proportion of the population in the workforce (Table 1). This shift in demography places increased internal demands on these economies, constraining their economic growth as their workforces gradually shrink and more of their workers’ incomes need to go towards caring for retirees as well as young people not yet in the workforce.

Number of workers per non-worker (NWPN)

Change in NWPN

Population change

 

2020

2050

2020 to 2050

(2050 vs 2020)

China

2.37

1.57

-34%

Less

Japan

1.45

1.05

-28%

Less

Germany

1.81

1.35

-25%

Less

South Korea

2.43

1.92

-21%

Less

Brazil

2.3

1.83

-20%

More

Ukraine

2.04

1.62

-20%

Less

Viet Nam

2.22

1.79

-20%

More

Russia

1.95

1.61

-17%

Less

Canada

1.95

1.64

-16%

More

France

1.6

1.36

-15%

More

Australia

1.82

1.64

-10%

More

United States of America

1.86

1.68

-9%

More

Indonesia

2.11

2.05

-3%

More

Argentina

1.79

1.93

8%

More

India

2.05

2.37

16%

More

Philippines

1.81

2.3

27%

More

Table 1: Demographic change in major economies. (Note: Workers are defined as those aged between 15 and 65. Non-workers are those aged under 15 and older than 65)

By 2050, against the backdrop of a shrinking population, each working age person will be required to help support more people not in the workforce; with those people increasingly being an aged retiree. China, Japan, Germany, South Korea and Russia are all examples of wealthy nations that will experience the combination of population decline, population ageing and a greater financial burden on those remaining in the workforce to assist the aged in their societies.

Yet there are other countries whose populations are growing, as is their wealth. Indonesia, India and the Philippines have growing populations with either little change or growth in the number of workers per dependent (Table 1). India’s population growth is such that it will exceed China’s population in 2024, as will its workforce.

Growing populations and wealth signal important potential upsides for grain trade. As personal wealth increases people generally spend more on food and diets typically become more dependent on feed grains. Plus in very wealthy nations, the quality, safety and health properties of food grains becomes more important.

Australia has benefited from the growth in wealth and population in China over the last two decades. Fortunately for Australia, nearby nations like Indonesia, the Philippines and India have the twin drivers for grain consumption of growing populations and increasing wealth. This creates opportunity for Australian grain traders to strategically pivot away from marked dependence on grain exports to China towards a greater focus on south east Asian and South Asian countries (and beyond).

The march of time that delivers demographic change is once again favouring Australia, as countries in its vicinity like Indonesia, the Philippines, Vietnam and India are increasingly emerging as strategic or opportunistic markets for Australian grain.

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