Wheat trade to double by 2050

by Arvin Donley
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Global wheat demand in 2010 reached an estimated 666 million tonnes. If the demand rate were to remain constant, global wheat consumption would surpass 880 tonnes by 2050, a 40% increase that will mirror population growth over that 40-year period.

Without question, international trade will play an essential role in meeting this increase in consumption. In fact, an analysis released in January by Chad Weigand, market analyst for the U.S. Wheat Associates (USW), found that the rate of world wheat trade will likely grow much faster than overall consumption, doubling to 240 million tonnes or more by 2050. That’s because the regions where the biggest population gains will take place over the next 40 years — mainly in the mid-latitude countries — are not where most of the world’s wheat is grown.

According to Weigand, the purpose of the study was to examine the potential growth in trade toward 2050 by forecasting demand in various countries and regions where population growth will significantly strain food supplies. The countries and regions selected for the study included: North Africa, the Middle East, Sub-Saharan Africa, Indonesia, the Philippines, Brazil, Mexico, India and China. Based on the projections in this study, domestic production by these countries will increase by only 23%, while total consumption will increase by 49%. Projected imports of 153 million tonnes in these areas will more than double 2010 totals.

The study noted that the world’s biggest wheat exporters — the United States, Canada, Australia, the Black Sea region, Europe and Argentina — are expected to see minimal, or even negative population growth through 2050. In contrast, population growth will be strongest in the countries of the tropic and subtropical regions where little wheat is grown.

Obviously, these primary wheat producers/exporters will have to find a way to significantly increase production over the next four decades to meet the demand from these regions with significant population growth.

“Wheat already accounts for one-third of all global grain trade by tonnage,” Weigand notes in the study. “Such a large expansion of trade will have major implications for all segments of the industry, including buyers, shippers, handlers, and especially producers in those countries that will supply the increased exports.”

Specific findings in the study show:

• North African wheat imports will climb from 22.3 million tonnes in 2010 to 51.4 million tonnes in 2050 despite a negative wheat consumption per capita growth rate. The current projected growth rate for cereal consumption in these countries (Algeria, Egypt, Libya, Morocco and Tunisia) is -0.08% to 2030 and -0.15% from 2030 to 2050. This projection leaves per capita wheat consumption at still a very robust 206 kilos in 2050. The UN projects North Africa’s population to reach 245 million in 2050, a 44% increase from its current population of 170 million.

• The Middle East’s imports will double from the region’s minor wheat producers, from 14.4 million tonnes to 29.5 million tonnes. Wheat consumption per capita has slowly been declining since reaching a peak in 1996 at 191 kilos. However, consumption per capita has been growing for the region’s minor wheat producers, from approximately 125 kilos a decade ago to 140 in 2010. The Middle East’s population is expected to reach 437 million by 2050, a 54% increase from 284 million in 2010. However, the fastest population growth will come in the region’s minor wheat-producing countries.

• With both the highest population growth rate and wheat consumption per capita growth rate, Sub-Saharan Africa’s wheat imports will increase by 23.1 million tonnes by 2050 to 45 million tonnes. The region’s wheat consumption per capita growth rate is the highest of any region, and FAO estimates that cereal consumption per capita will grow by 0.5% per year through 2050. The region’s population currently stands at 820 million and could potentially more than double to 1.68 billion by 2050.

• Indonesia’s 2050 wheat imports will climb by 34% from 2010 imports, to 7.1 million tonnes. A non-producer of wheat, Indonesia has seen consumption per capita jump from 8.1 kilos in 1980 to 21.2 kilos in 2010, with consumption expected to increase to 22.4 kilos by 2050. With a growing consumption per capita, imports will have to increase at a faster rate than its population growth, which is expected to grow by 24% over the next 40 years to 288 million.

• The Philippines’ domestic demand for wheat will grow by more than 60%, leading to imports of 4.5 million tonnes in 2050. Like Indonesia, the Philippines is entirely dependent on imports. Its consumption per capita increased 64% over the past 30 years and its population is projected to grow by 56% to 146 million by 2050.

• Brazilian wheat imports will climb 62% from 6.5 million tonnes in 2010 to 10.5 million tonnes in 2050 to fulfill domestic demand. Although consumption per capita is expected to remain flat over the next 40 years, its population is projected to grow by 12% by 2050 to 219 million.

• Mexico’s wheat production will grow only slightly, but a negative population growth rate and relatively flat wheat consumption per capita means imports should remain relatively steady through 2050.

• India will go from being a self-sufficient wheat producer to a net importer of 12 million tonnes during that period. While India’s cereal consumption per capita is expected to decrease in the future, wheat consumption is expected to increase as diet preferences shift from rice to wheat products. India’s wheat production will increase moving toward 2050 but will likely increase at a slower rate than its population growth, which is expected to rise from 1.2 billion to 1.6 billion over the next 40 years.

• China’s wheat imports will grow steadily between 2019 and 2040, but a negative population growth rate beyond 2040 will lead to declining wheat imports. China’s wheat consumption per capita is expected to decline from 72 kilos in 2010 to 69 kilos in 2050 as it trends toward greater meat consumption.

China is the world’s largest wheat-producing country with output reaching 115 million tonnes in 2010, but production is expected decline slightly by 2050.

USW President Alan Tracy said the study results were about what he expected with North Africa, Sub-Saharan Africa and the Middle East having the biggest increases in imports. However, he doesn’t completely agree with the projections regarding China.

“Despite the study saying that in 2050 China will not be importing wheat, I think they will be importing wheat and reasonable amounts of it,” Tracy said in an interview with World Grain.

Meeting a growing challenge

So how will the world meet this growing demand for wheat in the upcoming decades? Certainly yield improvement, through better wheat breeding and the possible development and commercialization of biotech wheat will account for some of the increase. And there still is some room for expansion of land area dedicated to wheat production among the world’s major wheat producers, most notably in the Black Sea region countries such as Russia, Ukraine and Kazahkstan.

“We’ve been very interested in the Black Sea as an emerging major competitor,” he said. “They have some problems to overcome, but they have a large area dedicated to wheat with some potential to increase their acreage.”

Offsetting that, however, is the likelihood that major portions of Ukraine and southern Russia in the “black earth belt” will rapidly increase their corn and soybean production, particularly to supply the meat demand for Russia which is so insatiable, Tracy said.

“On the plus side, they’ve got very low yields and still have room for improvement in everything from fertilizer to finance to facilities,” he said.

Argentina also has the potential to convert pasture land into wheat production.

“I really don’t see, other than those two examples, much opportunity for any significant acreage growth,” Tracy said. “But over a 40-year time period, even relatively small increases in production per acre do add up.”

It’s no secret that wheat has lost acreage around the world — particularly in the U.S. — over the past 30 years. In 1980, 236 million hectares of wheat were harvested compared to 226 million in 2009-10. By contrast, 131 million hectares of corn were harvested in 1980 compared to 156 million in 2009-10.

Yield improvements, mainly due to the introduction of biotech varieties, have helped make corn and soybeans more profitable, leading farmers to abandon wheat plantings.

“I think the acreage decline has to stop, and it will stop because prices will force it to,” he said. “Prices will pull that acreage back or at least stabilize it. We’re going to have to see a bigger differential of wheat versus corn over a sustained period of time to keep that wheat acreage up to meet that demand, and the market will work to make that happen.

“Never underestimate the abilities of farmers to respond to a price incentive. The positive news is the demand will be there. We’re coming off the three largest wheat production years ever in the world and yet our stocks are getting exceedingly tight. Sure there were some production problems (last year), but this is very much unlike 2008, which was very much a supply-driven spike in prices. This one is looking like it is demand driven, which makes it more lasting. I think this study backs that up to a degree in that total demand is going to increase and the trade level is going to grow quite dramatically.”

The role of biotech

With the amount of arable land limited in the major wheat producing countries, one obvious way to increase production through improved yields would be the development and commercialization of biotech wheat. Recently, Monsanto Co. announced a return to the wheat business and plans to eventually introduce biotechnology attributes in wheat, something that would likley be accepted in the United States but would undoubtedly be a tougher sell in other parts of the world, where consumers have expressed concern about potential adverse health affects, although a number of scientific studies have shown no ill effects from consuming products derived from biotech crops.

“Internationally it’s a little tougher than with those other two crops (corn and soybeans) because of the direct food consumption of wheat,” Tracy said. “But I think we can handle that. It’s simply a matter of having good testing, having suitable tolerance levels in major importing countries, and getting approvals in major importing countries before products are commercialized there.”

Tracy said the wheat industry will have the opportunity to learn from the corn and rice industries in that regard and noted that the odds of cross-pollination in wheat are lower since wheat pollen doesn’t travel as far as corn pollen.

“Separation is going to be an easier issue to handle. In the long run, we are going to be able to supply both biotech and non-biotech wheat, and there will be a price opportunity for those willing to go to the extra effort to grow and maintain the separation of non-biotech wheat.

“The U.S. sells a million tonnes of non-biotech soybeans to Japan for tofu,” he noted. “They are perhaps the most sensitive single market with regard to biotech, yet we managed to make it work and soybean growers get substantial premiums for some of these non-biotech light-colored hylum beans for the Japanese market. It works because they have tolerances rather than a market which demands zero tolerance, which is not workable.”

Although some see the development and acceptance of biotech wheat being of critical importance to feeding the world in the coming decades, Tracy stops short of saying it will be necessary to meet demand.

“I think we’ll have biotech wheat that will be important initially for agronomic reasons and eventually have benefits downstream for processors and consumers,” he said. “The commitment of the USW and the National Association of Wheat Growers is to help make it happen to benefit our farmers in order to be able to help feed the world. Can we feed the world without it? Perhaps a little less well, but sure.”