In the new USDA long-term forecasts, rising global meat consumption stands out as a driver of rising food prices, exports.
If you haven’t been following Nestle chairman Peter Brabeck-Letmathe’s speechmaking journeys, here’s the basic flavor.
“Today, 35 per cent of US corn goes into biofuel. From an environmental point of view this is a nonsense, but more so when we are running out of food in the rest of the world. It is absolutely immoral to push hundreds of millions of people into hunger and into extreme poverty because of such a policy, so I think – I insist – no food for fuel.”
That was from an address to the Council on Foreign Relations back in 2011, but it is fairly representative of the Nestle stump speech.
Summed up: biofuels policies — and producers like you — ought to go to the devil. In fact, you might be the devil. You devil.
Now, not everyone takes the Nestle message as gospel, for the same reason that you don’t always buy Coca-Cola’s take on Pepsi, or a Hatfield’s take on the McCoys. Nestle is a major customer of farm products and sweeteners — and they don’t like the high prices. It’s understandable.
But you might ask yourself — in a world where you can find hyperbole linking hunger and biofuels about as easily as you can find eggs in a henhouse, why do policymakers generally stick to their overall goals of diversifying the transportation fuel mix?
Dang the details, full speed ahead
It’s because the “biofuels are the devil” viewpoint rarely squares with the detailed data. Pesky thing, data. The devil is in the details, as they say. You devil.
Let’s look at two charts, to illustrate.
In this one, we are looking at expected farm production, by market, for US corn. And, for sure, you see a buildup for ethanol production. What is interesting is the other two lines. That’s for livestock — and for exports. The food market. Note how they don’t go down.
Same production over the long-haul. So, um — how exactly is that pushing hundreds of millions of people into hunger and extreme poverty?
What we appear to be seeing is rising productivity. And, you might ask, where would all have that corn gone, had there not been a new market to absorb it?
Might have triggered a whole bunch of “don’t plant anything, please” farmer payments. Might have been dumped onto the export market, collapsing crop prices and sending most crop producers in the developing world right to the devil.
So let’s look at this other chart. This looks at farm prices. Sure enough, you see a rising price trendline for corn. Of course, you see the same trend line for wheat, which is not used for biofuels, too. Hmmm.
And — you might ask just yourself, why exactly are there multi-million dollar message campaigns being waged over a crop that has seen a 20% increase in prices over a 25 year period, from 1995 to 2020?
In so asking, you might note that the US minimum wage has increased 116 percent over the past 25 years.
This is just thinking-out-loud, but if US take-home pay only increased 20 percent in 25 years, there’d be a whole bunch of elected leaders we’d be sending directly to the devil. Those DC devils, darn ‘em.
The USDA long-term forecast
It’s a valuable forecast, first of all, for biofuels producers in terms of expectations around feedstock — especially first-generation feedstock (alas, there’s nary a mention of algae anywhere — and nothing on crop residues or forest products).
There’s some good macroeconomic material in there. For example, USDA projects global economic growth at 3.3 percent, with the US growing at a much slower 2.6 percent clip, and sees the dollar continuing to weaken. US share of global GDP is expected to fall from 26 percent to 24 percent. Crude oil prices are projected to increase to $120 per barrel by 2020.
But there’s another reason to read. It gives you a very good look at the drivers for farm product growth. In turn, that gives you some insight into the debate over food versus fuels.
While we have been anguished about land use change, and indirect land use change, and biofuels policy change — a major case of dietary change has crept up on us.
When the Elites Meet to Eat, they Eat Meat
Some key findings from the forecast.
• Global population is expected to rise by 1.0 percent per year, but global meat consumption is expected to rise by 1.8 percent per year.
• The projected growth rates of exports from major exporters of beef, pork, and poultry meat are 2.4, 1.4, and 2.0 percent per year, respectively.
• From the report: “Growth in coarse grain imports is closely linked to expansion of livestock production in regions unable to meet their own feed needs. Key growth markets include China, Mexico, the Middle East, Southeast Asia, and North Africa.”
• Elsewhere in the report, “China’s imports of corn are projected to rise steadily and reach 19.6 million tons by 2022/23. China’s strengthening domestic demand for corn is driven by its expanding livestock and industrial sectors. The increase in China’s imports accounts for 40 percent of the projected growth in world corn trade.” (Note to readers, China does not permit ethanol production from corn.)
• Elsewhere in the report, “Imports by Africa and the Middle East account for about 20 percent of the growth in world coarse grain trade through 2022/23, as rising populations and increasing incomes sustain strong demand growth for livestock products.”
• Elsewhere in the report, “Mexico’s corn imports are projected to rise from 9 million tons in 2012/13 to 17 million in 2022/23. Altogether, the growth in Mexico’s coarse grain imports represents more than one-sixth of the increase in global coarse grain trade during the coming decade. This reflects increased meat consumption, which stimulates an expansion in domestic meat production as well as increased meat imports.”
• Elsewhere in the report, “Southeast Asian corn imports rise 3.6 million tons (49 percent) by 2022 in response to increased demand from livestock producers. The region accounts for 11 percent of the growth in world corn imports.”
You could sum it up this way. Rising incomes in the developing world are leading to rising meat consumption. Or more simply, “elites eat meat”.
Any way you look at it, the trade in coarse grains appears to be driven for the next decade by diet change.
How a meat diet impacts the grain market
Let’s look at how dietary impact changes, say, the grain equation.
According to the USDA, the average US adult daily calorie intake has jumped from 2234 to 2757 calories per day between 1970 and 2003. Aside from the impact on general health — with more than 30 percent of US adults rated as “obese” — consider the impact of those 523 calories on the grain trade.
Put in beef terms, it would take around 5.6 billion bushels of grain, fed to cattle at the feedlot during the final bulk-up period, to provide the average US adult with an additional 523 calories per day, via increased beef consumption.
That’s not to say that the entire rise in calories comes from meat consumption — far from it — but it gives you an idea of how a change in meat consumption can affect the global grain trade.
To put that 5.6 billion bushels in perspective, around 5 billion bushels of corn per year pass through the integrated biorefineries that produce ethanol — and around a third of that, by weight, is converted into ethanol.
The bottom line
You will find that, over the next decade, increasingly wealthy citizens in the developed and developing world will have more control over food prices and hunger via the meat counter than the biofuels pump.
The good news? There’s nothing in the USDA forecast to cause an alarm that there is going to be insufficient production to meet all food, livestock and industrial demand for crops.
But if you really want to do something about food vs fuel — you might re-cast it in your mind as Fat vs Fuel — and re-think that Quarter-Pounder on the menu for lunch. Your health advisor might even salute you in the process. You devil.
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