The news in recent weeks that the world’s population has passed the seven billion mark caught everyone’s attention. The first question that springs to mind is how did we get here so fast? Since hitting three billion in 1960, the number of people on the planet has increased by a further billion more or less every 13 years.
The second obvious question is double-barrelled – where is the global population going and can we manage it? The UN Food and Agriculture Organization predicts that the world population will reach 9.1 billion by 2040, at which time the demand for food will be 70% higher than it is today. Food demand will grow twice as fast as the population over the next 30 years, as incomes and appetites for protein-rich foods increase.
A new study by the US Grains Council entitled “Food 2040” highlights how the increasingly sophisticated food demands of newly affluent consumers in China and other developing nations are set to bring major changes to world farming and production, regional food policies and international logistics.
As the developing countries with the fastest growing middle classes, China and India will be the principal drivers of the changes about to take place in global food demand and distribution. In China the number of households with incomes greater than USD 20, 000 is set to climb to 335 million by as early as 2020, from 100 million today. India’s total population is set to pass that of China in 2020 but its middle class will still be only about one-quarter that of China’s. The number of Indian households with incomes greater than USD 20, 000 will reach 85 million in 2020, compared to 25 million today.
The Food 2040 report outlines a number of other developments inherent in the fundamental changes sweeping through the world food industry. For a start, China is embarked on a path to global bioscience leadership, driven by major central government investments to meet the country’s own food needs and a desire to be an export leader. This is underpinned by a commitment to develop a sophisticated food safety and inspection system on a par with those in the west.
The US Grains Council expects that by 2040 some 70% of consumer food expenditures in Japan will go toward foods prepared outside the home, up from 40% today, and that China is likely to adopt the same stance as Japan. The proliferation of speciality markets and product differentiation in Asia will follow the standards established in the US and Europe where the average supermarket carries almost 40, 000 different items.
When it comes to logistics and distribution systems, the patterns already established in the West will increasingly be adopted in Asia. In the US and Europe containerised freight has continued to win increased levels of business at the expense of bulk shipments. Containers have long been used to transport high-value foodstuffs such as dairy products, meat, processed goods, fruits and vegetables.
In addition, over the past 10 years containers have increasingly been used for transporting feed and food grains and oilseeds. As an example, 5% of US grain exports in 2010 were containerised. The growing requirement for the containerisation of crops is driven by the market demand for speciality/customised crops and supply chain assurance; the increased interest in processed versus unprocessed products; and the changing supply chain economics of bulk and containerised transport.
Having said that, there will still be a major demand for the carriage of undifferentiated/ generic crops and these will remain in the bulk distribution system. Furthermore, the opening of the new Panama Canal locks in 2014, with their ability to accept vessels with beams of up to 49 metres, will enable the use of even larger bulk carriers in the transport of grains. Five major ports in Japan, for example, are already being redesigned to accommodate the new generation of larger Panamax vessels.
For Asia’s rapidly expanding middle-class consumer base the key foodstuff considerations will be those already well-established in the US and Europe, i.e. convenience, quality, consistency and compliance with recognised health and safety standards. Containerised freight is acknowledged to be integral to the maintenance of such quality assurance programmes and rapid delivery systems.
Amongst the developments that the international shipping community is gearing up for is the need for China to import more meat and dairy products as the country is not expected to be able to meet its own meat demand via domestic production, due to water, land, demographics and environmental issues. Near neighbour Korea is similarly expected to increase containerised meat imports significantly in the future.
Repositioning – a key feature of global container movements – is set to benefit the trend towards increasing Asian imports of processed foodstuffs in containers. Traditionally, the Asia-Europe and Asia-North America container trades have featured high levels of empty boxes on return voyages following the discharge of Asian goods at their destinations. Foodstuff exporters would like nothing better than to fill these empty units with their produce for the return journeys.
China’s government recently added logistics to its Top 10 priority industries for the years ahead. Significant capital investments are necessary to modernise and extend highway networks, railway systems and seaports across the country, although at certain locations China already has some of the world’s most advanced port infrastructure. The government recognises that sophisticated transport networks, incorporating traceability and condition monitoring technologies, are a prerequisite for improved food quality and safety for both domestic consumption and exports.
Realisation of these goals is being supported by progressive government policies, not least a liberalisation of the logistics sector which is allowing wholly owned foreign firms to become established in the Chinese market to help facilitate the rapid development of a world-class distribution network. The creation of a cost-effective inland transport infrastructure based on a nationwide intermodal transport system with modern river transport operations, road and rail links and Worldscale port facilities is making it possible for the country’s inland farms to compete for consumer food dollars in China’s coastal cities and abroad.
Other developing countries with fast-growing middle classes, notably Brazil, Indonesia, Russia, Egypt, Thailand, Mexico, Turkey, Vietnam and The Philippines, have some appreciation of the extent to which a sophisticated transport infrastructure facilitates the realisation of the enhanced expectations of their citizenry when it comes to the food that they eat.
The big challenge going forward is India. The country that will be the most populous in the world within a decade has some major issues to contend with going forward, not least those in the transport logistics sector. The Chinese model currently being developed on a fast-track basis will be there to provide a lead. If the obstacles can be overcome, India is in a position to realise not only the largest middle class population in the world but also one of its most elaborate food distribution networks.
*Mike Corkhill is a technical journalist and consultant specialising in oil, gas and chemical transport, including tanker shipping and chemical logistics. A qualified Naval Architect, he has written books on LNG, LPG, chemical and product tankers and is currently the Editor of both LNG World Shipping and LPG World Shipping.