The United Nations Food and Agriculture Organization published estimates last week of their 10-year expectations for global agriculture production. This report is published annually and includes all key commodities. Prices, trade and production estimates were given.
As I scanned these forecasts, I considered my model of forecasting 10-year global meat and poultry DEMAND. It is fairly simple model based on the relationship between global GDP (economic output) and global meat and poultry consumption. When comparing these two data points annually, the last 50 years of data show a 0.99 correlation. Translation: More money equals more meat and poultry consumption, with an uncanny correlation.
I then take the IMF 10-year forecasts for global GDP and trendline the 50 years of GDP data out another 10 years. This shows that over the next 10 years, global GDP will increase by US$25 trillion. And running that through my model predicts that meat and poultry combined consumption will rise by 78 million metric tons globally in the next 10 years. Using actual data, the last 10 years saw growth of 58 million metric tons (beef, pork and poultry).
My model does not consider supplies, resources, or production, but only the expected demand from rising global incomes. I have long believed that production will be unable to supply the expected demand shown from my model.
This chart compares the 10 year change in global meat and poultry production (from the FAO report) against my expected demand over the next 10 years (GAT demand forecast). It suggests some very wide gaps between the FAO production estimates and my demand estimates.
So, IF global GDP projections are accurate, AND the 50-year relationship between GDP and consumption holds, AND the FAO projections are correct, higher meat and poultry prices will be the mechanism to ration supplies over the next decade. – Brett Stuart