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Assessing agriculture’s mega trends

By Staff | Dec 30, 2011

Chad Hart, an Iowa State University Extension ag economist, told an audience on Dec. 21, he foresees a long-term bullish market for all ag products, based primarily on growing foreign demand.

By Darcy

Dougherty

Maulsby

Farm News staff writer

Storm Lake – As Chinese consumers’ appetites increase for McDonald’s cheeseburgers, KFC chicken and Pizza Hut pizza, it’s all good for Iowa farmers and U.S. ag exports.

“Cheese and dairy products are not traditionally part of the Asian diet, but this is changing as Asian consumers develop a taste for cheeseburgers, ice cream and pizza.” —Chad Hart ISU agriculture economist

“Exports are crucial to Iowa farm income,” said Chad Hart, an ag economist and grain marketing specialist from Iowa State University, who spoke in Storm Lake during a recent Mega Trends in Agriculture seminar. “I’m a long-term bull in agriculture, because I’m looking at the export markets.”

Since 95 percent of the world’s population lives outside of the United States, foreign countries offer U.S. farmers a number of opportunities, including:

  • A growing customer base. As the world’s population is projected to reach 9 billion people by 2050, some of the largest population growth will occur in Asia and Africa.

Look for emerging markets in Bangladesh, Nigeria and Pakistan, Hart said.

Ironically, China’s projected population growth towards 2050 is negative, added Hart, who noted that the nation’s one-child policy, combined with many families’ desire to have a boy rather than a girl, is curtailing the nation’s future population growth.

  • Economic growth. Not only are populations growing outside the United States’ borders, but incomes are also rising in other nations around the globe.

The growth of the middle class is occurring in South America, North Africa and Asia Pacific. India’s middle class, for example, already outnumbers the total U.S. population, Hart said.

“These trends mean we’ll have more customers with more money to buy our goods,” said Hart, who added that Walmart sees its future growth in China.

“This economic growth will also be a challenge for U.S. agriculture, however, because these growing economies will compete with us for resources, from energy to crop fertilizers.”

  • Improving diets. As developing countries benefit from economic growth, one of the first areas people improve is their diet.

This means more demand for meat protein and dairy products, said Hart, who noted that this will drive more demand for U.S. feedgrains to feed cattle, hogs and poultry. He cited the strong growth of fast food restaurants in China.

While there are already 1,300 McDonald’s restaurants in China, with 700 more on the way (including many that will be open 24 hours a day and provide delivery service), McDonalds is a slow-growing company by KFC’s standards.

There are already 7,000 KFC restaurants in China, said Hart, who added that chains like Baskin Robbins, Subway (with 264 restaurants) and Pizza Hut (with 560 restaurants) are also gaining ground in China.

“Cheese and dairy products are not traditionally part of the Asian diet, but this is changing as Asian consumers develop a taste for cheeseburgers, ice cream and pizza,” Hart said.

To supply all these meat and dairy products, nations like China are investing in new livestock facilities to improve their ability to produce their own meat.

“They will also need more feedgrains to raise this livestock, and they’ll get it from the world’s leading feedgrain area, which is right here in Iowa,” Hart said.

Where’s the beef?

Exports have already become big business for U.S. producers. The United States exports approximately 20 percent of its pork and 20 percent of its dairy production, said Hart, who added that milk exports have soared in the past three years.

Foreign markets are also buying a record amount of beef at high prices. The U.S. Department of Agriculture expected 2.7 billion pounds of beef to be exported in 2011, representing a record 10 percent of domestic production.

A new record is expected to be set in 2012, with 11 percent of domestic beef production moving to foreign consumers. In sharp contrast, only 5 percent of production was exported in 2007 when the U.S. was still in the grips of lost exports, due to bovine spongiform encephalopathy discoveries beginning in late 2003.

Ironically, India offers big opportunities for beef exports.

“Beef consumption in India has doubled in recent years, and U.S. beef is taking advantage of this,” Hart said. While 80 percent of India’s population is Hindu and views cows as sacred animals, the remaining 20 percent of the population follows a variety of faiths, including Islam. “While the Muslims are a minority at 13.4 percent of India’s population, this still equates to 150 million people, and they eat beef,” Hart said.

Exports pay off for Iowa

These export trends are good news for Iowa, which is the second leading U.S. ag exporting state, behind California. Iowa’s ag exports total $7 billion, including more than $3 billion of soybeans. “Iowa’s exports are worth about 30 percent of our total cash receipts,” said Hart, who added that free trade agreements are usually good for agriculture.

Iowa is fortunate to have a fourth of the best farmland in the world, Hart added. “Ag exports are our competitive advantage against nations like India and China that don’t have a lot of arable land.”

You can contact Darcy Dougherty Maulsby by e-mail at yettergirl@yahoo.com.

SIDEBAR

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Chad Hart, an ag economist a

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