The USDA’s Economic Research Service (ERS) released their Global Food Assessment last week, which projects food demand and availability across 83 countries that are classified as low or middle-income over the coming decade. The report utilizes variables such as gross domestic product, food prices, and population growth to assist in their long-range estimates.
While the report contains a large amount of data regarding food insecurity and general economic conditions, it also holds relevant information to commodity markets. An estimate for each country’s domestic grain production and demand is provided in the report. The difference between the domestic demand and production is defined as the “implied additional supply required” (IASR), or in simpler terms, the amount of grain that is likely to need to be imported to meet demand.
Since the U.S. is a large producer and exporter of feed grains, the potential demand in these emerging markets can serve as a tailwind for commodities as a whole in the long-run when the right conditions come together.
The agency’s estimates forecasts total grain demand in the 83 studied countries to rise at a 2.1 percent annual pace through 2036, while grain production will rise 1.6 percent, resulting in an increasing need to import grain.
The largest increase in supply required to meet demand is found in South Asia, where countries are experiencing a combination of demographic and economic changes that increase demand. Population continues to grow across the region and incomes are also rising at the same time. Higher population counts obviously correlate to an increased need for food staples like rice and flour, and the rise in incomes also leads to changing food preferences as consumers are able to afford more options.
Across the globe, as incomes rise, consumers tend to seek out more expensive animal proteins compared to their previously carb-heavy diets. With arable land competing for other uses needed to satisfy a growing population, these countries are likely to turn to the U.S. or other large exporters to either supply those animal proteins directly in the form of meat imports or indirectly through feed grains that will be fed to their own livestock herds.
Sub-Saharan Africa is also expected to see an increasing need of imports that is largely driven by population increases. Across all countries in the dataset, IASR is expected to rise 116.1 million metric tons over the coming decade to 441.7 MMT. Nearly all regions are expected to see an increase in IASR, with the former Soviet Union being the lone exception as grain production is expected to remain consistent.
The full report can be accessed here.