Back From Asia: Where Is That Food Demand?

As I write this I almost can’t believe what the last couple of days have brought.  Yesterday, I was sitting in the Dubai airport waiting for a flight back to Toronto.  Today, I’ve got snow up to my neck here in Ontario.  In between was a 13.5-hour plane ride across the top of the world.

For readers of this column over the last 15 years on DTN, it was that time again.  I spent the last two weeks in Bangladesh, my fourth trip there in the last 16 years.  On January 15th, I spoke to International Business students at United International University in Dhaka Bangladesh on global agricultural markets.  The rest of the time was taken up touring.  If you want a full recap, you can go to my website, and click on “Phil’s News.”

Asia is one interesting place.  When I’m there I do a lot of things, but one of them is I measure the place.  That’s measuring the place in economic terms.  Simply put we’ve all drank the modern agricultural economic cool-aid pre ethanol gold rush.  That is Asian incomes are rising and with that so is their diet, boosting demand for North America’s agricultural commodities.  So all we have to do as agricultural producers is “ride that wave.”  Our Asian friends will take care of growing demand.

I am guilty of promoting that kool-aid just like many agricultural economists across North America.  Admittedly, much of that theory has to do with China.  However, increasingly the same agricultural economists group in India too.  With 1.3 billion people in China and 1 billion in India, its pretty obvious if their incomes are rising its good for “food demand.”

However, regardless of how sound that argument is, I’ve always had trouble with it.  Having spent quite a bit of time in Bangladesh, I’ve never thought increased income had that much effect on “food demand.”  Based on what South Asians eat, I couldn’t quite buy the argument.

Let me clarify.  Typically when we talk about India, we’re referring to the greater sub-continent, which includes Pakistan and Bangladesh.  In Bangladesh and the vast majority of India, people sit down and eat rice, dhal and chicken every day.  In the Muslim parts of the sub-continent they eat beef too.  However, the diet is partly cultural.  That’s why I’ve always had a hard time equating increased income with suddenly two t-bone steaks on every plate.  I’ve always felt that increased income on the Indian sub-continent doesn’t necessarily mean anything for increasing “global food demand.”

Of course in our current economic climate musing about “global food demand” is a bit of a non-starter.  With the global economy contracting, we might have to take a hiatus from some of this past talk.

Still, consider my diet over the last few weeks.  At almost every meal, I ate rice.  Along with rice was dhal (bright yellow lentil soup), a staple on the Indian sub-continent.  Vegetables are included along with chicken or fish, all done with curry.  In Bangladesh all of this food is extremely hot.  In fact at some dinner tables I eat as slow as I can partly because I take water with almost every bite.

In my mind, I have always felt, this wouldn’t change with increased incomes.  I questioned my research colleague and good friend, Dr. A.K. Enamul Haque about this and he concurred.  In fact he said as incomes rise on the Indian subcontinent, actual food intake might decrease.  He has to be convinced. For him, in actual fact he eats less even though he makes more money.  Much of it has to do with the cultural tradition of food in South Asia.

Of course much of the conventional wisdom has to do with population growth projections.  For instance even if my colleague and I were wrong, the population increases in China and the Indian sub-continent might surely stir demand.  Any incremental change in Asian tastes and preferences might add to that too.  Of course all of us here in North America farm country want to make sure that demand reaches right back into our grain bins and barns.

Even without this 2008/09 global contraction, I think we need to take a grain of salt with all of this.  There is no question when you are “on the other side of the world”; you get the feeling that this place is exploding.  For instance in Bangladesh there are people everywhere, 140 million within a space half the size of Ontario.  The population projections for that country alone are said to be ready to top out at 300 million people in 2050.  Ditto proportionally for India, Pakistan and parts of East Asia.

Economic growth rates in China and India are about 10%.  Places like Bangladesh come in at about 7%.  Yes, the global economic contraction is clawing much of that back, but still the numbers are impressive.  It means the Asian economy is doubling about every five to seven years.

On January 15th, one Bangladeshi student asked me what agricultural opportunities I thought Bangladesh should engage in looking ahead?  Knowing that Bangladesh produces almost enough rice to feed themselves, I stammered out something about producing different premium rice brands.  However, I really didn’t know.  I’ve always thought North American farmers were poised to supply these countries.  I’ve never quite considered their own domestic production being so dynamic.

In our current agriculture economic climate we’ve certainly heard some analysts talk about Asian food demand drying up based on lower economic growth rates.  What you don’t hear is that maybe “Asian food demand” was never quite as dynamic as advertised.  I dunno.  Needless to say, if you get the chance to go someday, you should go.  I hope the next time I make that journey; there is a hamburger stand on every corner.  If that’s the case, it’ll mean North American farm country will benefit long into the future.