Contributed Content Part VIII - Population and Food Demand: Growing Appetites and Shrinking Fields

Contributed Content Part VIII – Population and Food Demand: Growing Appetites and Shrinking Fields

January 10, 2020

This is the final article in an eight-part series published by GAI News that examines existing trends set to alter the structure of our global food system. Be sure to read the first seven articles here: Part I, Part II, Part III, Part IV, Part V , Part VI , and Part VII .

By Jeremy Stroud, Bonnefield Investment Analyst

“Economic growth won’t feed a growing population living on this finite planet.” – Phil Harding

GAI-News_series-icon_150x150px_tspt Concerns about population growth have circulated through discourse since ancient times. Philosophers, such as Plato and Aristotle, questioned the sizes of their respective communities and their capacity to nourish additional people when the world had a population of about 162 million.¹ Writers from ancient Carthage had dwelled on population growth when global numbers had reached 200 million people, who were noted as “burdensome to the world which can hardly support us”. As we approach a global population that is fifty times larger than in Plato’s time, the same concerns come to light, albeit with different information.

Productivity improvements have typically remained one step ahead of food demand, allowing the world’s population to grow geometrically over the past two hundred years. Although the population continues to grow, crop yield productivity improvements have slowed considerably in the past several decades.²

While the preceding seven articles of our ‘Agriculture in a Changing Climate and Society’ series focus on secular trends affecting the supply side of the global agri-food system, this final piece delves into the demand side. A multitude of evidence points to a singular fact: nutritional demand is increasing rapidly on a global basis.³ Some experts question the world’s collective ability to nourish this demand in the long term⁴, while others speculate that new technologies will need to be developed and implemented in order to address the supply/demand imbalance. The World Resource Institute (WRI) indicates that while fulfilling nutrient requirements for an additional 2.4 billion people in the next thirty years is achievable, the global agri-food system will have to undergo significant changes in order to adapt.⁵

As external factors, such as urbanization, water scarcity and pollinator loss, are set to reduce global food supply⁶, the earth’s population is projected to continue increasing for the next century⁷. Sub-Saharan Africa is set to foster most of the world’s population growth, an area that is likely to become less suitable for crop production over the next century. In addition to increasing populations, a growing middle class will naturally continue to increase the global appetite for meat, dairy, and high-value fruit crops. These products are characterized by high production and overhead costs compared to other commodities of similar nutrient profiles. While this consumption shift is positive from the perspective of social mobility and will likely foster a period of robust demand growth for farmers in the short-medium term, the increased demand will come at cost to the environment.

Some estimate that we will have to increase arable land by 593 million hectares (more than twenty-four times the size of the United Kingdom) between 2010 and 2050 in order to bridge the gap needed to meet increasing food demands.⁸ The greatest concern lies in our collective food security in conjunction with global environmental sustainability. The socio-ecological trade-offs that arise from developing forested land lends itself to notions that our arable capacity is reaching its peak.

Food Spending and Disposable Income

Spending on food in the United States, as a percentage of disposable personal income, has been sitting near its historic low since 2004. This does not come as a surprise, but as a paradox, as calories consumed per capita in the U.S. reached the all-time high of 3,828 per day in 2005.⁹

Figure 1: Normalized food expenditures by final purchasers and users.¹⁰

expenditure as percentage

Source: USDA, 2019

Food cost compared to relative wealth is historically low throughout the world, largely due to commercialization of value-chains, historical productivity growth, and national subsidies. While consumers in developed countries are currently offered nourishment at relatively affordable prices compared to their historical income levels, these prices generally do not address the ecological externalities involved in producing the food.¹¹ As such, a trend reversal is forecasted to begin in the next twenty years for net food expenditure, predicated on a declining basis of scarce resources, transitioning food demand patterns and a need to account for the environmental effects of food production.

The Malthusian Theory: Cropland Per Capita

Most significant, agricultural producers are losing cropland per capita.¹² A typical Western diet requires about 1.2 acres of cropland per year to supply the types of calories to which we are accustomed. Emerging economies are now consuming similar diets to those of the West with more meat and dairy. This is creating a critical point of increased demand for energy intensive food products. Many areas of the world, namely Asia and Africa, will not have the arable land to produce nearly enough food to nourish its population. Figure 2 depicts each region’s cropland per capita.

Figure 2: Acres of Cropland Per Person, 2016

Acres of Cropland Per Person

Source: History Database of the Global Environment (HYDE)

If every person had the appetite of an average individual in the United States at the current level of production, we would need to convert every acre of forest into farmland and would still be short of calories by about 38 percent.¹³ With current Western food consumption, a diet that is becoming normalized by the world’s middle class, only a select few countries have the capacity to domestically produce more calories than they consume. The burden of production will be left to a handful of agricultural exporters with enough productive cropland to contribute to the global food stores, such as Canada and Australia. Admittedly, the Malthusian model of food supply versus cultivated land does not offer full explanatory power for the planet’s carrying capacity. It does, however, paint a general picture of the planet’s capacity to nourish different appetites at current technological levels.

Calories Versus Nutrients

In assessing the issues surrounding global food demand, a distinction should be made between calories and nutrient-requirements. While about 800 million people globally are suffering from a means-based caloric deficit,¹⁴ over 2 billion do not have regular access to safe, nutritious, sufficient food.¹⁵ The developing world will continue to struggle with food accessibility as its population grows. Further, crop nutrient capacity in equatorial regions especially, is incredibly sensitive to rainfall variability and spells of extreme heat.

The developed-world’s farming system, which will likely provide the nourishment for most of the world’s growing population, is largely based on maximizing caloric production rather than nutrient density and diversity. This model has perpetuated throughout agricultural economies, as farmers are incentivized to maximize their yields in response to historic consumer and government interests in driving down food costs. Farmers act as rational participants, naturally responding to the markets they supply.

The developed world’s agricultural system is still incentivized with the same family of subsidies that were legislated at the dawn of the third agricultural revolution. In North America and Europe these subsidies typically offer support for a handful of crops with high caloric density such as feed-grains and oilseeds.

While global needs, production methods, and resource constraints continue to change, the policies surrounding the food system have remained largely unchanged since their inception. National subsidy programs are frequently reciprocated by similar or equivalent programs in countries, leading to antiquated and sticky legislative movement across international value chains. Re-orienting farmer incentives from caloric density to nutrient diversity could be a fundamental step towards solving this issue by producing foods which meet the needs of a growing consumer base.

Solutions, Steps, and Goals

While the difficulties in feeding a growing population are considerable, there remains optimism that it can be achieved. There are 10 steps that would help us to address the challenges related to nourishing the food demands of a growing population. Each topic is complex, worthy of its own article, and many have been listed by the World Resource Institute as keys to “feeding the 10 billion”.

1.) Food Waste Mitigation: Evidence indicates that the most effective mechanisms for supplying accessible and nutritious foods exists in reducing food waste rather than growing greater volumes of crops per acre. In the developing world, most food waste occurs at the production and storage levels, while in the developed world a staggering amount of food is lost at the consumption and market levels.

2.) Investment in Aquaculture & Developing Sustainable Fisheries: Improved fish farming technologies including new genetics, infrastructure, and algae-based feeds have increased the competitiveness and investment merits of the aquaculture industry. Preservation of current fishery stock, alongside sustainable farming methods, will be the foundation from which we can offer omega-3 fatty acids in the future.

3.) Climate-Controlled Agriculture: With so much emphasis placed in farmland per capita and the notion of declining scarce land assets, climate-controlled agriculture is consistently climbing towards profitability, and therefore viability, on a large, commercial scale. Investing in low-cost options such as warehouse conversion may prove to be the next frontier of effectively nourishing urban populations. With this being said, 95 percent of our food, even in the developed world, comes from farmland.

4.) Improved Technology & Genetics: While crop-yield productivity growth has been slow compared to green revolution levels, new advances in crop genetics and molecular biology are remarkably promising. Further public and private investment in crop breeding, biologicals, and AI technology could make all the difference in feeding the next 2 billion people.

5.) Enhanced Water Management: Water depletion in groundwater systems continues to be one of the most alarming aspects of modern agriculture. We will eventually have to shift to a process where crops are irrigated only through sustainable water sources, such as rain-fed reservoirs, rivers, and/or snowmelts. That shift should begin before aquifers are fully depleted.

6.) Soil Health Preservation: Some scientists estimate that we are losing up to 1 percent of topsoil each year, with nutrient availability degrading as well. Nearly two-thirds of this degradation is derived from deforestation and overgrazing. Incorporating techniques such as no-till agriculture, rotational grazing, drill seeding, and certain organic production methods could significantly reduce the rate of soil loss.

7.) Sequester Carbon in Soils: What benefits soil health may also create the opportunity to sequester additional carbon. Maximizing soil organic matter levels offers a multitude of effects, such as enhancing yields, sequestering more carbon, diminishing the required nutrients amendments, and enhancing ecosystem diversity. This can be achieved through the use of cover crops and healthier rotations, as well as no-till and conservational tillage methods.

8.) Shift Diets Globally: While a sensitive argument in agricultural circles, the fact remains that reducing ruminant (beef and lamb) consumption would reduce the number of calories and land needed to produce that food-type by over ten times. If global diets slowly shifted towards plant-based proteins and nutrient-dense fruit/vegetable products, total stress on the environment would reduce. In addition, many farmers have the opportunity to improve pasture productivity with enhanced fertilizers and regenerative grazing techniques, which could increase the output of meat and reduce emissions.

9.) Reforest Inefficient Lands: The second greatest contributor to carbon emissions is land deforestation, particularly in equatorial regions. Investing in direct efforts to bring these fallowed lands back to productive capacity or re-foresting the lands would promote carbon sequestration and a multitude of ecosystem services. Large food companies may also commit to plant trees and sourcing products from tropical deforestation-free value chains.

10.) Re-orient Legislation: It may be time for consumers to take the burden of paying the ‘total price’ for food and water resources, which includes the cost of depletion and the externalities involved in using the resource. Further, subsidies and farm support should slowly start to shift towards food types that dovetail with the nutritional needs of our growing population.

Ultimately, addressing challenges pertaining to population growth and its nourishment will require active collaboration between businesses, policy makers, and consumers. Resources must be used more efficiently, and innovation will need to be spurred by public and private support. The above 10 points are topics that will exist throughout this century and likely beyond it. Many solutions to the nourishment issue are also investable opportunities, underpinned by global demographic trends.

Those who have the opportunity to allocate capital also bear the responsibility to deploy their resources towards environmentally resilient strategies and regions. With investors in all asset classes assessing how they can limit their exposure to the effects of global warming, there are few industries more intertwined with climate change than agriculture. The effects of climate change are relevant to every aspect of the global food system. The long-term issues that affect the world’s agricultural output become opportunities to invest, thereby creating value for investors and society.

About the Author

Jeremy Stroud is an agricultural investment analyst with Bonnefield Financial based in Toronto, Canada. With a background in international food business, he offers insights on global agri-food and water investments, value chain analysis and economic systems. He has volunteered and worked with a spectrum of primary and vertically integrated agricultural groups in North and South America, Europe, and Africa.