White Paper

World GDP
How the developing world’s middle
class will drive Agriculture over the
next 10 years
Bill Claybrook, Senior Associate
Tim Kerstein, Business Analyst

© 2009, Adayana
 World GDP

Introduction
Much attention has been paid over the years to global population, predicted to grow to nine billion
people by 2050i. Although this increase of 2.5 billion people will challenge the food and agriculture
world to feed the growing population, one does not need to project to 2050 to see a looming
challenge. The next 10 years will challenge agriculture due to the booming middle class in the
developing world. By 2020, the world will not only grow by one billion people, but population shifts
will add 1.8 billion people to the middle class as the poor citizens of the developing world climb their
way out of povertyii. As history has shown, an increase in social rank is typically associated with a
desire to increase one’s well-being beyond what is needed for survival. In this case, a shift in income
and social rank will result in a demand for higher food quality with increased protein consumption.
This shift in income and social rank will result in demand for more calories, higher food quality, and
greater protein. This will be a challenge for the food and agriculture industry, whose resources will be
strained with the addition of more than 1.8 billion to the world’s middle class by 2020 and the resulting
increased food demandii.

Over the past 20 years, the developing world’s middle class has driven major economic change, with
more than 1.2 billion people entering this cohort from 1990 to 2002iii. Changes in the next 10 years
will also drive major economic change, including a massive increase in global food demand and its
related impacts. While the developing world’s middle class may be deemed “poor” by western
standards (earning $2-$13 USD per dayiv), it represents a dramatic improvement in lifestyle and
nutrition for a developing country. Therefore, this maturing middle class segment demands more
meat-based proteins and other higher-nutrition foods than their prior sustenance and survival food
needs. The shift in sources for calorie consumption has been, and will continue to be, a major driver
of global food demand. By understanding the growth of the developing world’s middle class, we can
better understand future challenges and opportunities for several sectors of the agriculture industry
which includes animal production, grain demand, and water usage.

Impact to Animal Production:

Globally, meat consumption is expected to double by 2020 mostly due to the increase in the
developing world’s middle classv. This increase in meat consumption is not unprecedented. For
example, the economic improvements in China from 1990 to 2005 brought more than 630 million
people out of poverty and into the middle class causing an increase in meat demand of 240 percent in
Chinavi. Most of the global meat demand is expected to be supplied by the developing world’s meat
production industry concentrated around the developing world’s urban centers. The reason for this is
twofold, the developing world urban centers are where the new middle class will live and the poor
infrastructure and transportation logistics that plague the rural areas will force livestock production to
be close to these cities. Without modernized animal production technology and investment, there are
large concerns for local and global disease risks coming from unhealthy production environmentsviii.
2

© 2009, Adayana
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Even with this updated technology, increased animal production will prove a huge strain on both the
global grain supply and fresh water resources.

Impact on Grain Demand:

Producing a pound of protein requires many more pounds of grain and related calories. Beef, pork,
and poultry need eight, four, and two pounds of feed grain, respectively, to produce only one pound
of meatix. Similarly, approximately 2,000 pounds of grain are needed to produce enough meat and
livestock products to support a person for a year. However, only 400 pounds of grain is needed to
support a person for a year if grain is eaten directlyx. Satisfying the growing demand for protein from
meat sources requires a significant increase in grain production.

To understand the impact of a country with high protein demand, consider the United States and what
would happen if the developing world took on its dietary habits. If all grain produced for livestock in
the U.S. was used to feed people, 800 million individuals could be fed. That is almost triple the
number of people currently living in the U.S. Consider what could happen if a country like China,
India, or another developing country with a population the size of the U.Six. shift their diets from
vegetarian to diets with protein consumption at the U.S. per capita rate. That would be the
equivalent increased grain demand of 500 million developing world “poor” people who currently
consume only vegetarian diets. A version of this scenario is what will strain the grain industry over the
next ten years.

In addition to the strain placed on livestock production and grain caused by increased protein
consumption of the world’s developing middle class, water resources are also a large concern in
feeding this growing segment.

Impact to Water Usage:

Globally, agriculture uses about three-fourths of the world’s freshwater withdraw, and the increased
demand of animal production will only exacerbate the impact on water demand. Pound for pound,
protein can take up to 15 times the amount of water. The protein-rich diets of North Americans can
require up to 1,300 gallons of water daily to produce, compared to the mostly vegetarian diets of Asia
and Africa which require only 530 gallons of water. However, with the increasing protein demand, this
vegetarian diet of Asia and Africa is rapidly changing.

In China, the impact of increased protein intake has had a dramatic effect on its water demand over
the past 25 years. In 1985, the average Chinese diet included 20 pounds of protein per year. This
year, the average diet will include more than 50 pounds of protein. The annual increase in water
demand due to the economic growth of China over the past 25 years equals the total annual water
consumption of Europexii. (see chart below)

© 2009, Adayana
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Source: ii Moisés Naím. Foreign Policy

It is no surprise that China’s most fertile and water-rich region currently experiences massive water
shortages, impacting yield potential, and resulting in desertification. China’s food security-driven
policy to produce all food domestically has certainly worsened this problem, but many other countries
and regions of the world will encounter similar challenges as its population enters the developing
world’s middle class.

With projected increases in animal production, water shortages are sure to follow in many areas of the
world. Although water shortages are local and regional problems, there will be opportunity for global
water saving technology to be brought to all regions of the world.

Conclusion:
The issues of animal production, grain demand, and water usage will only become more pressing
in the next 10 years. If the new developing world’s middle class consumes, per capita, half of the
amount of meat the average American consumes, the resulting increase in grain demand will be
equivalent to adding 1.5 billion people with vegetarian diets.

© 2009, Adayana
 World GDP

That is a 50 percent greater impact than the predicted population growth over the next 10 years. The
massive increase in the number of the developing world’s middle class citizens will press global food
and agriculture production.

Whereas many food and agriculture businesses have focused on feeding the increasing global
population over the next 40 years, the next 10 years will also challenge the industry to feed the
shifting diets and demands of the developing world’s middle class. While a prolonged global economic
slowdown has potential to disrupt these numbers, most of the developing world economies have
remained relatively unscathed and experienced growth at high, single-digit growth rates.

The issue of the developing world’s middle class growth has not gone unnoticed by government and
foreign policy experts. They are again predicting massive food shortages and economic disasters
that will result in social upheavalxiii. Although the challenges will be significant in global agriculture,
there are solutions to these problems. There still remains massive productivity improvement and new
arable land potential in regions such as the Black Sea and Africa, as well as more moderate potential
for improved production through technology in developed agriculture regions such as the U.S., EU,
and Brazil. With the right investment, education, and technology, the agriculture industry will continue
to feed the world over the next 10 years and beyond.

For more information on this topic, contact:

Bill Claybrook,
Senior Associate
bclaybrook@adayana.com

© 2009, Adayana
 World GDP

References:
i
UN Department of Economic and Social Affairs: Population Division http://www.un.org/esa/population/publica-
tions/wpp2008/pressrelease.pdf
ii
“Can the World Afford a Middle Class?” Moisés Naím. Foreign Policy, 28 February 2008
iii
World Bank - The World Bank Development Research Group Director’s Office, January 2009 http://www-wds.
worldbank.org/external/default/WDSContentServer/IW3P/IB/2009/01/12/000158349_20090112143046/Ren-
dered/PDF/WPS4816.pdf
iv
Who’s in the middle? The Economist Print Edition Feb 12, 2009
v
Population Resource Center http://www.prcdc.org/globalpopulation/Population_and_Food/
vi
The Developing World’s Bulging (but Vulnerable) “Middle Class” Martin Ravallion The World Bank Develop-
ment Research Group January 2009
vii
2020 Global Food Outlook: Trends, Alternatives, and Choices. Food Policy Research Institute August 2001
Mark W. Rosegrant
viii
Dramatic changes in global meat production could increase risk of diseases. Erwin Northoff 17 September
2007 http://www.fao.org/newsroom/en/news/2007/1000660/index.html
ix
Potash Corp. – Industry and Business Overview http://www.potashcorp.com/media/pdf/investor_relations/
industry_overview/2008/POT_OB_GlblDevlpmnt_08.pdf Potash Corp
x
M.E. Ensminger, Ph.D. Internationally recognized animal agriculture specialist, former Department of Animal
Science Chairman at Washington State University. http://www.earthsave.ca/aboutsoy
xi
Roger Segelken, Cornell University, http://www.news.cornell.edu/releases/aug97/livestock.hrs.html
xii
The Economist Print Edition, Sin aqua non, Apr 8th 2009
xiii
“Can the World Afford a Middle Class?” Moisés Naím. Foreign Policy, 28 February 2008

© 2009, Adayana