World's grain prices depend on more than just wealth

Today the world's population is expected to hit a record 7bn, according to the United Nations. Indeed, the global population could double by the end of the century, stoking the old Malthusian cry that we will not be able to provide enough to go around. Conventional wisdom tells us that grain price rallies during the past few years have been caused by concerns over a rising population and rising wealth in the developing world. As people become richer, they eat more meat, and livestock needs significant amounts of grain to fatten up. Indeed, worldwide meat production has tripled over the past four decades and increased 20pc in the past 10 years, according to research from the Worldwatch Institute, the environment organisation. The pressure group noted that industrial countries are consuming growing amounts of meat, nearly double the quantity in developing countries. If this trend continues, then severe food inflation seems certain. However, research from Capital Economics suggests we are all worrying over nothing. They disagree with the conventional premise that meat consumption is responsible for rises in grain costs. A further complication is that different types of meat require different amounts of animal feeds. "According to the US Department of Agriculture, it takes 16lb of grain and soya beans to produce 1b of beef. But the ratio falls to 6:1 for pork, 4:1 for turkey, and only 3:1 for chicken and eggs," Mr Jessop says. There are similarly marked differences in the ratios for other inputs such as water and fuel. The upshot is that if Chinese people increased the amount of protein in their diet by eating less fatty pork and more lean chicken, rather than beef, the demand for animal feeds could actually fall," he says...more