Drivers of Global Meat Demand
Kevin Grier Senior Market Analyst
George Morris Centre
Economic Research into the Canadian Agriculture and Food Industry
Independent • Financially • Structurally • Research Perspective
Areas of Activity • Contract Research • Market Analysis • Education
3 What does Market Analyst Do?
• Information gathering • Analysis • Statistical relationships • Trends • Weighting factors • Projections and Forecasts • Competitive Intelligence (Action) Technology
Practices: doing it better through science Products: using new and better tools, equipment Genetics: improving plants and animals that we grow Science and Technology…in the supply chain
Retailers Producers Packers and Food Consumers Services Animal and Meat Science
Much more than an Integral, pervasive industry and leading role supplier: within the livestock and meat industry Purpose…
Illustrate the drivers of global meat markets and the demonstrate the central role of science and technology. Outline… Resources • Canadian advantages Demand Technology • Market forces • Importance and challenges
Canadian Meat Industry Determinants of demand
Quality
Quantity
Demand (Need) Main Drivers of Food Demand
Population growth •Food QUANTITY is Income growth more important •Food QUALITY becomes more important Population is growing
• World population is expected to reach 9.1 B by year 2050
Source: United Nations World Population Prospects Database Each year…
…there is additional 75 million people to feed
About 2 About 75 Canada(s) Saskatchewan(s)
Source: United Nations after Potash Corp And, each year… …there is a greater need for agricultural products
World Domestic Use of Wheat, Corn and Soybean Source: USDA Foreign Agricultural Service, PSD On-line Dietary shift is real
90%
80% Meat Consumption Population 70%
60% Change Since1980 Change
50%
40%
30% Global Cumulative Cumulative Global 20%
10%
0%
Source: FAO, UN World Population Estimates When Incomes Rise…
Source: FAO, IMF
… demand for different types of food increases (e.g., meat) Demand for (more) meat
Meat Consumption Growth Since 1995 30
25
20
% Change Change % 15
10
5
0 Global Developing Countries Population and Incomes Rise
Demand for Meat Strong and Growing
Think…
…Markets and Technology Constraints of Resources
Pollution
Land and Water Resources (Limited) 12% (AT MOST) more arable land available worldwide
R. Thompson, University of Illinois Land is a huge constraint…
…in areas with high demand With diet shift… Kilograms of Feed Grain to Produce 1 Kilogram of Meat
…greater land demand Water is limiting, too…
Source: International Water Management Institute, 2009 Agriculture uses
>70% of all fresh water use
Pacific Water Inst. With diet shift…
Liters of water per kilogram of product
…greater water demand Pollution
With agricultural intensification has come disease and pollution Think…
…Markets and Technology Power of Technology
Technology Why technology?
Technology increases efficiency . . .
Efficiency drives abundance and affordability . With limited and or
“shrinking” resources… … and with INEVITABLE Demand growth…
Food and feed demand will require an increase of global food production of 70 % by 2050
FAO projection Food, Choice, Sustainability
Technology…
In the year 2050 70% 70% World More food, and Of this food must come population from efficiency-improving will require technology3
Sources: 1. Green, R., et al. January 2005. “Farming and the Fate of Wild Nature.” Science 307: 550-555. 2. Tilman, D., et al. August 2002. “Agricultural sustainability and intensive production practices.” Nature 418: 671-677. 3. “World agriculture: toward 2015/2030.” 2002. United Nations Food and Agriculture Organization, Rome. Accessed December 2, 2008.
Feed Water • 34% less for beef and 90% less for Land • 14% less per milk pound of beef • 20% less for beef and 65% less per and 76% less for gallon of milk milk Resulting in …
Smaller carbon footprint: •18% for beef •63% for milk High-yielding agriculture …
Has spared 7 million square miles of wildlife habitat; equal to… Think…
…Markets and Technology What about Canada, Canadian Meat Industry and…
The Role of Animal and Meat Science Canada and Resources Abundance
Fresh Arable water Land Animal Health
• Absence of common problems…a MAJOR strength for Canada Animal density and human contact
Map source: riverthreat.net
• …a non-issue in Canada Other North American Strengths Extraordinary Base to grow and prosper relative to the ROW
Access to and adoption Logistics and Relatively Feed grains of Infrastructure free markets technology Canada and Food Demand Trade and Exports Are Crucial
Canadian Beef Supply and Demand 1,600 1,400 1,200 Canada: 1,000 800 Stable, not growing 000T 600 400 200 0 00 01 02 03 04 05 06 07 08 09 10 11 12e
Production Beef Exports Consumption Beef Imports
Canadian Pork Balance 2,000
1,500 Production Consumption Pork Exports Pork Imports
1,000000t
500
0 00 01 02 03 04 05 06 07 08 09 10 11 12e US increasingly export oriented
US BF Supply and Demand 14,000
12,000
10,000 Consumption 8,000
Imports 000T 6,000 Exports Production 4,000 USA:
2,000 high but not growing
0 00 01 02 03 04 05 06 07 08 09 10 11 12
US Pork Balance 12,000
10,000
8,000
000 T 000T 6,000 Production Imports Exports Consumption 4,000
2,000
0
00 01 02 03 04 05 06 07 08 09 10 11 12 Ample Meat and Poultry Supplies
Total US Red Meat and Poultry Production 96 94 92 90 88 86 84
BillionPounds 82 80 78 76 00 01 02 03 04 05 06 07 08 09 10 11 12
48 North American Pork Demand: Struggling
24.0 94 23.5 PCC Deflated Price 23.0 92 22.5 90 22.0 88 21.5 21.0 86
20.5 Deflated PorkCPI 84 PCC KGs Retail Basis 20.0 82 19.5 19.0 80 00 01 02 03 04 05 06 07 08 09 10 11 12
49 Production and Price: Theory
• Higher production, lower prices Price of meat: What is with the theory? US Pork Supply vs Live Price 95
90 '11
85 12
80 90 96 75 97 '10 91 '04 70 93 '05 US$/cwt US$/cwt hog carc 65 8988 '06 '08'07 9295 '01 60 '00 94 '09 55 '03 50 14 16 18 20 22 Domestic US SupplyBillion Pounds
• Production is high AND prices are high US Beef Pricing: An Exceptional Story
US Beef Supply vs. Live Price 130 12 120 11 110
100 10 '08 '07 90 '05 '06 '09'03 '04 80 90 919392 '01 70 94 '00 Live Live PriceUS$/cwt '02 959796 99 60 98
50 23 24 25 26 27 28 29 Billion Pounds
52 ?
How can there be high prices, huge production yet weak domestic demand?
53 54 Global Economic Growth and Demand
• And Growing demands from a hungry world 55 Leading Beef Exporters 1,800 1,600 1,400 1,200 1,000 800
600 000Tonnes 400 200
0
India Brazil Australia United Zealand Uruguay Canada EU-27
States New
Leading Pork Exporters 3000
2500
2000
1500
000Tonnes 1000
500
0 EU United Canada Brazil China Chile States Important…
US Pork Exports and the USD 3000 120 Pork Exports 2500 110 USD Index 2000 100
1500 90 000Tonnes
1000 80 USD Index
500 70
0 60 00 01 02 03 04 05 06 07 08 09 10 11 12
• Large, efficient industry responding to global demand • Aided by a depreciating currency The unknown cards
Will domestic demand hold up with increasing consumer prices?
Will global demand and the weak USD continue to be the pricing engine?
58 But where is the Meat Industry going?
Meat industry has exhibited an uncanny ability to hurt itself Canadian differentiation…
Different… Different…
Different… Different…
What is next? Majority of Consumers Trust the Food Production Process
Activists: Tiny fraction
Lifestyle buyers of local, gourmet, organic/local: Small minority
General Population that buys based on taste, cost and nutrition: Overwhelming majority Yet Industry Reacts to Fringe
64 And Seeks to Differentiate Based on the Lifestylers
65
Evolution of Society and Industry creates new problems
Paradox of Perception Progress gets worse
Industry gets better
Peter Davies BVSc, PhD University of Minnesota Solution…
Transparency •Do not abandon •Build trust, advancements instead
Technology Transparency and Technology
North American Meat industry needs to embrace and extol the virtues of technology
Extraordinarily positive message and the only hope for a hungry world
Consumers will be satisfied if we are transparent The Need in the Future
Reduce stress Address food on safety environment concerns
Double the Enhance food disease production in control 50 years TECHNOLOGY Summary
Growing global demand for meat
Canada is uniquely positioned to prosper
Technology and Science are the only ways for Canada to meet that demand
Huge reasons to be open and transparent about meat science and technology Request
Please get the taste back into the chops Thank You