U.S. consumers face a potential “nightmare” scenario in coming years as China’s growth pushes meat and grain prices higher, signaling an end to a cheap food era for Americans, agricultural economist and writer Lester Brown said.
Already one of the world’s biggest grain users, China’s appetite for corn, wheat and other farm commodities is poised to expand significantly over the next decade as the country’s people “move up the food chain,” adding more meat and dairy products to their diets, Brown said in a March 23 conference call with reporters.
While China produces much of the corn and wheat it consumes, the world’s most populous nation will increasingly rely on U.S. imports to feed its livestock herds and keep pace with a population that’s adding 8 million people a year, Brown said. Intensifying food competition from China will eventually hit U.S. consumers in the pocketbooks, he said.
“Having to depend on the U.S. for its grain would be a nightmare for the Chinese,” said Brown, who is president of the Earth Policy Institute in Washington, D.C. “It’s sort of their worst-case scenario coming true, but I don’t think they can avoid it any longer.”
“Ironically, their nightmare could become our nightmare, for U.S. consumers,” Brown said, “Because what we’re looking at is the prospect of competing with 1.4 billion Chinese with fast-rising incomes for our grain harvest, driving up our grain prices and our food prices.”
For more on Brown’s presentation, click here.
Food inflation has become a growing concern over the past year, fueled by drought in Russia and a smaller-than-expected U.S. harvest that pinched global grain supplies as economies recovered from recession. In February, worldwide food costs rose to an all-time high, based on an index tracked by the United Nations Food & Agriculture Organization.
In the U.S., food inflation this year is on track for one of the largest increases in the past two decades. The USDA, in a March 25 report, said prices for food consumed at home are expected to rise 3.5 percent to 4.5 percent in 2011, up from a projection last month for a 3 percent to 4 percent increase. In 2010, food at home prices rose just 0.3 percent, the lowest reading since 1967.
China’s demand growth for grain, as well as soybeans, is expected to be “very rapid,” Brown said. Last year, China became a net buyer of corn for the first time, importing 1.3 million metric tons while exporting 150,000 tons, according to U.S. Department of Agriculture data. By 2015, China may be importing up to 25 million tons, Brown said.
“We can anticipate substantial, further rapid growth in China’s grain consumption, most of it to expand beef, dairy and poultry production,” Brown said. “Turning to the market for grain is in the eye of most analysts inevitable for China.”
China has “huge potential” for growth in beef and dairy products consumption, Brown said. While China’s milk consumption tripled over the past decade, it’s still less than one-tenth that of the U.S., on a per-capita basis. Beef consumption is also about one-tenth of U.S. levels. Chinese pork consumption this year is expect to equal that in the U.S.
“The Chinese are developing an appetite for dairy products, importantly, ice cream,” Brown said.
Brown said the outlook for rising food prices, combined with increasingly expensive oil, is looking similar to the inflationary times of the 1970s, when the U.S. temporarily restricted grain exports.
Americans, Brown said, have an unprecedented “cost crunch” in the making that will “reshape our economic future in ways that we may not have fully anticipated.”
“For Americans, cheap food is almost our birthright,” Brown said. “We’ve never had a food crisis. We’ve always had an abundance of cheap food, and we’ve come to take it for granted. But that period may be about to come to an end.”
For more on Lester Brown, click here.