by Professor Ross Kingwell – AEGIC Chief Economist.
Key message: A huge spatial change in the global distribution of middle class incomes is underway. By 2030 five countries will be the source of over half of the world’s middle class. Four of those countries are geographically close to Australia; and its grain producers.
The global population is set to increase to 9 billion by 2050, so global food production will need to increase to satisfy this greater global demand for food. In addition, on average, people across the world are getting richer. As people become wealthier, their per capita expenditure on food increases (Figure 1).
Often more calories are consumed. People eat more dairy products, fruit and vegetables, and where culture and religion permit, more meat (e.g. – pork, chicken, beef) is consumed. Often dairy and meat production becomes increasingly based on feed grains.
Figure 1: Per capita expenditure on food versus the percentage of consumption spent on food in various countries (Note: the size of each bubble is that country’s population and a ‘goodness-of-fit’ equation (dotted line) is fitted to the data.)
Table 1: Top 10 countries ranked by their middle class consumption expenditure in 2030
Larger, richer populations will place increased demands on agricultural and trade systems to deliver the required volumes and qualities of food products. Already China imports massive volumes of feed grains and Indonesia is currently the world’s second largest importer of wheat. India’s ability to be self-sufficient in agricultural products may be challenged in coming decades as its population grows in size and wealth, and climate change impacts unfold to weaken the reliability of its agricultural production.
Growing populations and wealth signal important potential upsides for grain trade. As personal wealth increases, people spend more on food; and diets often become more dependent on feed grains. Plus among the middle class, the quality, safety and health properties of food grains consumed become more important.
Australia is fortunate as the rise of the middle class is on its doorstep. Economic prosperity that comes with the rise of the middle class will favour Australia’s grain industry as a source of quality-assured, safe grain preferred by middle class consumers.