Global Demand, Global Supplies?

The earth’s population will grow by an average of 70 million people per year over the next decade, down from 77 million per year over the past decade. Population growth will add only 37 million to high-income nations while adding 471 million to middle income nations; low-income nations will see 192 million added. These rising populations depend on increased agriculture production each year, a bet that has been answered over the past 2 centuries.

Add to the growing human population the second factor driving food demand: more money. Global GDP (in real 2015 dollars as reported by World Bank) averaged US$2.2 trillion the 10 years before COVID (2020). The next 10 years are forecast to average US$2.7 trillion.

Years ago I developed a model to estimate demand for global meat (beef, pork, and poultry) based on GDP. The model shows a strong correlation between total meat production (and thus consumption) and global GDP. In fact over the past 52 years of data, the two are correlated at 0.989 (1.0 would be a perfect correlation). While “correlation is not causation”, there are two possibilities: either the more wealth increases, the more meat       consumption rises, or the more that meat consumption rises, the wealthier the world gets. I think we can safely guess the correct assumption.

I have calculated that model separately as well for beef, pork, and poultry.   Using World Bank GDP forecasts, I can forecast estimated meat demand 10 years out. I then compare these “consumption” estimates to the United Nations / Food and Agriculture Organization (UN/FAO) global production estimates over the next 10 years. This chart shows that comparison. Note my 10-year consumption forecasts include other adjustments based on current global trends and expectations.

This chart shows that my model’s    estimate of 10-year beef consumption matches the UN/FAO 10-year production estimate. However, my 10-year beef production estimate is well below the UN/FAO numbers as we now have confirmed cow herd liquidation in the U.S., Brazil, and other key cattle nations. The chart comparison shows expected deficits in pork and poultry production over the next decade.

With our estimates of beef production growth in the next decade below these UN/FAO estimates, our analysis  suggests that global production gains for all three species will fail to keep pace with the levels of consumption    forecast by our GDP model (with a 50-year correlation of 0.98). Our analysis suggests rising prices for meat and livestock producers in the decade ahead. – Brett Stuart