\n\tThis price surge translated into a spike in global consumer inflation. Food inflation did not impact greatly on the developed world given the corporate and household deleveraging<\/span> already underway due to the Credit Crisis, which shifted from deluge to torrent after Lehman collapsed. Deflation won out over inflation. In the emerging world however, where food forms a much higher proportion of household budgets, no such deflationary force was in place. Emerging market consumer inflation subsequently skyrocketed.<\/p>\n \n\tBeijing was forced to implement massive fiscal stimulus in late 2008 as its developed world export markets collapsed. The stimulus first helped save the world but subsequently sparked a property market bubble in China, requiring Beijing to flip policy over to tightening rather than easing. However, this was not possible at a time when food inflation in China was running in the double digits, and overall headline inflation not much below double digits. Consumer inflation only peaked out in China late last year and this year has fallen back to the comfortable level of 3%, allowing Beijing to ease policy and potentially save the world once more.<\/p>\n \n\tThere is currently a drought in the US, nevertheless. Corn prices have risen nearly 50% since the beginning of June, with other grains and soft commodity products following closely behind. It's good news in the short term for Australian wheat farmers, who have for once enjoyed solid rains and are looking at another bumper harvest. But if global food inflation takes hold once more, and is again exacerbated in China, Beijing's easing capacity may again be compromised. And that would not be good news for Australia. \n\t \n\tThere is not, however, any need to panic at this stage, according to Steve Wiggins and Sharada<\/span> Keats of the UK's Overseas Development Institute. Fears have been overblown by media reports, the ODI<\/span> suggests. The initial maize (corn) harvest forecast in the US this season was for a “bumper” crop before the drought hit. Not all areas of the US grain belt are in drought, and despite there being a significant drought impact elsewhere the total harvest still looks like outstripping demand, potentially easing price pressures in the longer term. As per usual, speculators can be blamed for a lot of the spot price response.<\/p>\n \n\t“As long as things get no worse,” says the ODI<\/span>, “we're not at crisis point yet”.<\/p>\n \n\tTwo factors, the ODI<\/span> suggests, have put “exceptional pressure” on the global maize market. The most significant factor has been the “unprecedented and unexpected” demand for maize for ethanol production in the US. In 2000, 16mt<\/span> of maize was sent to US ethanol distilleries. In 2011 that figure reached 128mt<\/span>. In the past five years, an average of only 91mt<\/span> of maize has been traded internationally, of which 50mt<\/span> has come from the US as the dominant exporter.<\/p>\n \n\tThe second factor is the small but significant increase over the period of Chinese maize imports. China has succeeded in becoming self-sufficient in direct cereal needs, as a response to its large population and exposure to the whims of an increasingly more volatile global market. Yet this year China is expected to import around 5mt<\/span> of maize. The imports are predominantly used for animal feed.<\/p>\n \n\tIn 1978, China's average annual meat consumption was 12kg<\/span> per capita. In 2009, that figure reached 56kg<\/span>. The more than fourfold increase in meat consumption has been driven by a consequent tenfold increase in average income. Rising meat consumption implies a rising need for grain feed for pigs and poultry. China might be a big country geographically, but it is rapidly becoming industrialised<\/span> and urbanised<\/span>, leaving limited land on which to grow rice, wheat, fruit, vegetables and dairy. Additional maize and soybean required to feed animals is thus likely to be imported.<\/p>\n \n\tThe ODI<\/span> has conducted some “back of the envelope” calculations. By 2020, China's population is predicted to reach about 1,400 million, or another 46 million above the 2010 level. If Chinese meat consumption were to stick at 50kg<\/span> per capita, (and on a conversion of feed to meat at 2.5 to one) another 6mt<\/span> of feed grain would be required in 2020. But raise per capita consumption to 60kg<\/span>, and 40mt<\/span> extra will be required. At 80kg<\/span>, 109mt<\/span> would be required. Recall that the past five years has seen an average of only 91mt<\/span> of maize traded annually.<\/p>\n \n\tLet me put that into perspective.<\/p>\n \n\tStatistics show that in 2009, Australians consumed 117kg<\/span> of meat per capita. This figure is well ahead of the fish-and-chip loving UK, which consumed 84kg<\/span>, but below burger king the US, on 127kg<\/span>. The US came in second to Luxembourg (137kg<\/span>).<\/p>\n \n\tThe ABC's Foreign Correspondent ran an interesting report last week on “Globesity”<\/span>, in which it despaired the rapid growth rate of diabetes across the emerging world, including China, where US fast food is still a novelty. US companies are pushing hard into these new and vast markets, peddling sugar and fat. If China's average income growth can even keep pace with population growth, one can only assume China's meat consumption will rise further accordingly.<\/p>\n \n\tBy contrast, not far away across the Yellow Sea the Japanese consume only 46kg<\/span> of meat per capita. The ODI<\/span> speculates that Beijing is going to have to act sooner rather than later in instituting policies to take Chinese meat consumption towards Japanese levels rather than American levels. If such, presumably, we can then starting worrying even more about fish stocks. If not, global food prices are a major concern.<\/p>\n \n\tWe might also note that India, supposedly the China-in-waiting, consumed only 5kg<\/span> of meat per capita in 2009 – almost at the bottom of the global table. \n\tTechnical limitations<\/strong><\/p>\n \n\tIf you are reading this story through a third party distribution channel and you cannot see charts included<\/span>, we apologise<\/span><\/span>, but technical limitations are to blame.<\/em><\/strong><\/p>\n
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