Growth juggernaut: Three billion empowered consumers

Notwithstanding the current global pandemic, global average incomes are projected to rise substantially in coming decades, with the number of people in high-income countries projected to triple by 2050, adding more than 3 billion new consumers to this group (see Figure 1). Rising per capita incomes are the primary driver of this change, with increases in population playing a smaller role. Emerging Asia accounts for the majority of the projected global increase in economic activity and purchasing power, with average incomes across this group increasing by around 150% (to 2.5 times 2015 levels) by 2050, while population increases by a third (see notes to Figure 1). While the precise timing of reaching specific milestones will be sensitive to current and potential future shocks, and policy responses, the momentum of increasing per capita incomes is almost unstoppable.

Increasing trade volumes are both an important driver, and consequence, of global economic growth. Unfortunately, shifts towards increased protectionism appear likely in agriculture markets (see Seven giants will pursue their individual interests and Social concerns will shape competitiveness). This risks slowing the rate of global growth and reducing the extent of new trade opportunities for Australian exporters from this megatrend.

Rising incomes in developing countries will see shifts in food demand, from grains, rice and other starchy staples towards protein-rich animal products, plant-based sources of oils and protein, and fruits and vegetables.

ABARES analysis of food consumption and export opportunities in major Asian countries (Andrews and Gunning-Trant 2013) finds that imports are likely to increase as a share of total consumption across all developing Asian markets. Consumption and total import demand are projected to grow most strongly for fruit and vegetables, red meat, and dairy – with consumption of these commodities projected to double in many markets – along with strong growth in vegetable oils in some markets (see Figure 3). By contrast, only modest growth is projected for coarse grains and rice.

Meat and dairy products currently account for two-thirds of the protein in Australian exports (44% and 20% respectively), with a further 5% from nuts, oilseeds, vegetable oils and legumes, and 4% from fish and seafood (data for 2014 from FAO 2020). Cereal exports provide significant protein (35%) but are generally thought of as a source of calories rather than protein.

Long-term price trends for different commodities and food items will depend on the balance between changes in demand (due to population, income growth and shifts in preferences), changes in productivity per hectare for crops and livestock (including as result of climate and water availability), and the area of land available for agriculture and food production. While real commodity prices (adjusted for inflation) trended down over most of the last century, some experts project trend increases in prices, with strong income growth in emerging economies and increasing competition for arable land outweighing increased yields (see Resources and further reading - Growth juggernaut: Three billion empowered consumers).

Rising incomes, urbanisation, and other changes will shift consumer expectations for food and agricultural products, with increased demand for products that are viewed – and can be verified – as convenient, healthy, ethical and environmentally sustainable (see Information-rich production systems will provide new levels of control, and accountability and Revolutionary connectivity will enable new types and levels of customer engagement).

Health, nutrition and food safety will become increasingly important drivers of food choice and consumption patterns. Many people’s life expectancy, and quality of life, are being undermined by poor diets – resulting in malnutrition in some low-income countries and obesity in many high-income countries. Many of these negative impacts are avoidable through well informed food choices, reinforcing the opportunity for food producers and suppliers to identify and communicate the health benefits of crop and livestock products (see Section 5.2 below). The experience of COVID-19 is likely to reinforce these trends, giving increased weight to food safety, traceability and assurance systems.

Global demand for high-protein foods (including meat, diary, and nuts), fruits and vegetables will grow more strongly than demand for staple crops (such as wheat and rice). But consumer expectations and requirements around animal welfare, Genetically Modified Organisms (GMO), and environmental impacts vary across different contexts and cultures, and so the implications of rising incomes are more difficult to predict.

The same drivers will create new opportunities for diversifying farm income and developing new or expanded non-agricultural rural businesses, particularly around food, tourism, hospitality, and appreciation of nature and rural landscapes.

These shifts will present opportunities for consumer-focused Australian producers, but are also likely to require changes in industry practices and attitudes over time. Challenges can occur, particularly if Australian expectations – and regulations – are out of sync with those in our key export markets, which could threaten our competitiveness and brand positioning.

ABARES analysis of What Asia wants (Andrews and Gunning-Trant 2013, see Fell 2020) presents long-term projections for agricultural consumption and import demand by major Asian countries and regions, as summarised above.

The long-term outlook for agricultural prices is uncertain. Hertel et al. (2017) reviews results from 13 global agriculture models. Projected prices for 2050 range from a 30% fall from current levels in real terms to a 50% increase, with falling prices considered slightly more likely than increases. CSIRO’s Australian National Outlook (2015) found commodity prices were likely to trend up, using the GTEM global model (Hatfield-Dodds, Adams et al. 2015, Grundy et al. 2015). Hajkowicz and Eady (2015) outline how the world might meet rising food demand in a hungrier world. Fukase and Martin (2017) assess the importance of rising incomes in emerging and developing economies, and associated shifts in food demand.

Greenville et al. (2020) explores the case for reducing the emissions intensity of Australian livestock production, to guard against emerging policy and consumer risks. While some high-profile studies argue that dramatic reductions in red meat production could both reduce emissions and improve human health (Willet et al. 2019), the impact of these views on consumer demand is not clear. More stringent climate policies will, however, draw attention to the emissions intensity of different agricultural commodities (see Mayberry et al. 2019, CCC 2019), and the Australian red meat industry has announced it will work towards becoming carbon neutral by 2030 (MLA 2020), with some producers already moving to offer red meat products that are certified as carbon neutral. This highlights the importance of innovation in reducing environmental impacts and improving the sustainability of the food system (Herrero et al. 2020).

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