What Will the World Eat in the Next Decade?

 India will eat more butter and drink more milk. Africa’s sweet tooth will grow bigger. But China’s appetite for pork is on the wane. Each of these trends will reshape global trade flows in agriculture, creating new winners—and forcing companies to adjust their food chains to serve shifting tastes.

Here is how the world will eat in the next decade, as projected by a forecast from the United Nations and the Organization for Economic Cooperation and Development.

China Steps Back

Demand for agricultural commodities from grains to meat has boomed since the beginning of the century—a period roughly coinciding with China’s full entry into global markets. That, together with supply disruptions, helped send a gauge of food prices to a record in 2011. As people in China and other emerging economies grew richer and moved to cities, they stepped up spending on pork, chicken and fish, leading to an explosion in sales of soybeans, corn and other grains used as animal feed. That’s helped companies such as Tyson Foods Inc. and commodities traders that include Cargill Inc. and Archer-Daniels-Midland Co., which have overcome stagnant demand in developed economies by serving the appetites of emerging ones.

Combined with government policies encouraging conversion of corn, sugar cane and other crops into biofuels, the 21st century food boom has enriched players all along the food chain and globalized agriculture. It’s benefited farmers from Ukraine to Uruguay and sent U.S. and Brazilian farm incomes to new heights. And China has driven demand throughout.

Nearly two decades in, that driver is slowing down. Growth in demand for meat and fish is fading as China ages and economic expansion slows, according to the OECD and UN. The world’s most populous nation will no longer add as much to global food demand, the two organizations said in a 10-year-outlook report published last month.

“We really are looking at a fairly sharp slowdown in the pace of demand growth,” said Jonathan Brooks, head of the agro-food trade and markets unit at the Paris-based OECD. “We don’t see that Chinese consumption over the next 10 years has the potential to grow the same way.”

India and Africa’s Moment

Population growth will largely determine demand gains as income growth slows worldwide. But new mouths aren’t being added as quickly as in the past, with Africa and India the largest exceptions. Their tastes aren’t the same as China’s.

While the developed world frets about health concerns from diets heavy in processed foods, African nations, some emerging from high levels of poverty, are expected to embrace them, a boon to companies such as Nestle SA and Coca-Cola Co. Sugar and vegetable-oil sales growth in Africa will outstrip a slowdown in richer nations. Still, Africa’s rise won’t have the same effect on meat purchases as China’s did. That’s because of where African nations are in their development: Incomes in Africa won’t grow as fast as China’s did earlier in the century. In fact, sub-Saharan Africa will even experience declines in per-capita meat, dairy and fish consumption, according to the report.

India’s Separate Path

Of all the world’s regions, India would seem to hold the most promise for China-like growth. It is expected to outstrip China in population by about 2022 and become the world’s second-biggest economy by 2050. But a nation with a dominant religion that encourages vegetarianism won’t quickly be expanding animal-protein consumption. India’s growth will instead be a boon to dairy producers.

India’s dairy consumption may rise by more than a third by 2026. While this could provide an opportunity for global producers such as Fonterra Cooperative Group Ltd. and Danone SA, much of the demand will be met by domestic suppliers.

Still, imports may be necessary due to an inefficient agriculture sector characterized by a lack of water and sufficient feed. The sector, dominated by small farmers with less access to capital than developed-world counterparts, will also drive imports of vegetable oils, given the lack of industrial capacity.

Conclusion

This tepid decade, with its slower growth, may be good for consumers worldwide. Food prices should stay under control. But it isn’t great news for agribusiness companies, which increasingly may need to come to grips with the idea that China and ethanol were one-time-only demand drivers. In richer nations such as the U.S. and more mature markets like China, companies may need to compete more on quality than quantity, while India and Africa will still provide opportunities to gain on volume. With new drivers and shifting diets, the winners will be those best able to adapt.