Asian Bird Flu Worries push up Food Prices

May 13, 2007 · Filed Under Threats to Food Supply 

The rising price of food worldwide was the subject of an article in Money Week by Jody Clarke and Tim Bennett entitled ‘Harvesting Profit.’ They write about the way that investors might profit from tightening supplies of food in the future and also some of the reasons for those shortages.

They write “……..in agriculture, the three economic giants are the US, China and India. Yet in America, despite 26 years of favourable growing conditions in the mid-west, the supply of feed grains is at near-record lows. That is in a large part because consumers from a host of emerging markets are now joining Western countries at the table. BAM says, “From 1600 calories a day… 20 years ago, three quarters of the world’s population now has enough money to eat just like us ; and they are.” It is this demand from India and China’s growing middle classes in particular that is driving much higher levels of global food consumption and pushing up prices worldwide.

As people get richer, they tend to switch away from a predominantly vegetable-based diets to one that includes meat. Lots of it. The most protein efficient meat is poultry…..a bushel of corn produces 19.6 pounds of retail chicken, but just 13 pounds of pork and a mere 5.6 pounds of beef. The trouble is, demand for beef and pork has been strengthened by fears about poultry following avian bird flu outbreaks, which have hit Asia hardest. Today’s emerging market preference for red meat is driving up the corn price.

It’s a similar story in Inida. A 13.7% annual rise in white-collar salaries is creating huge demand for everything from houses to beer. Despite being the second largest wheat producer on the planet at around 70m tons, India is now a net importer; local prices have risen by 12% in the past year. Domestic supplies simply can’t keep pace with a triple whammy of higher southern region consoumption, rapid population growth and rising incomes.

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