The first region we consider in this Insight is Australasia, which includes Australia, New Zealand, and the islands of Micronesia. With its population increasing from a low base, and its highly productive agriculture, the region exports significant quantities of calories and protein to nearby demand centers like mainland China. Almost all of the region’s surplus comes from Australia and New Zealand, both of which experience highly variable growing conditions partly due to El Niño/Southern Oscillation-related temperature and rainfall fluctuations. For Asia, the presence of a nearby food source helps to reduce the urgency of food deficits when Australasia has big surplus years. But the region’s unreliability leaves trading partners constantly on edge and needing to contemplate alternative arrangements.
The Central America/Mexico region extends from the southern border of the United States to the border of Colombia. The area couples rapid population growth and demand expansion with mediocre productivity and productivity growth. Such a massive food deficit in the Western Hemisphere threatens to absorb some of the surplus production of northern and South America that Asia needs so badly. Westbound shipping rates to Asia have been persistently low due to enormous finished goods exports from China, otherwise ships would return from the US empty. As long as that situation lasts, it makes Chinese agricultural destinations price competitive with Mexico and Central America, but if shipping rates climb for any reason, that relationship would quickly invert. The resulting sharp rises in Asian protein prices would come as a shock to consumers accustomed to a mercantilist trade policy subsidizing food from far-flung sources.
The Middle East/North Africa (MENA) region contains almost half a billion people now and we forecast a 40 percent increase by 2050. Since populations started growing rapidly in the 1970s, food deficits have also expanded. We expect rising per capita demand for protein to continue unabated as incomes increase, but calorie demand per capita will see slowing growth as the urbanization process reaches completion.
The tense relationship between North African governments and countries that supply wheat has gone on for almost 50 years. From Egypt to Morocco, governments have been unable to reduce heavy subsidies for bread without sparking street violence, as we saw in the 2010-2011 Arab Spring. Government buyers constantly scour the globe for wheat supplies and are often the biggest purchasers in the market. This large and growing demand has met with booming supply from the states of the former Soviet Union, to the satisfaction of both parties. But almost all that wheat passes on cargo vessels through the Turkish Bosporus, historically a major choke point. Any disruption of traffic through that narrow Istanbul passage could quickly cause consternation, and worse, all over the MENA region.
We previously covered the People’s Republic of China and Southeast Asia in other articles in this series. The remainder of East Asia—including Japan, both Koreas, Mongolia, and Taiwan— has an even faster declining population profile than China’s, combined with uniformly growing per capita demand for calories and protein, similar to Southeast Asia. These two opposing trends taken together result in a relatively static situation. The uncertain future of North Korea adds a measure of volatility to the outlook.
Unfortunately for the region, it shares the vulnerability of China to any interference with transpacific sea lanes. Even worse, it lacks the caloric self-sufficiency that China has, in addition to running a protein deficit. This means that, unlike their giant neighbor, the people of East Asia ex-China cannot simply scale back meat consumption to weather any disruption in imports. Like many of the other regions discussed in this series of articles, East Asia ex-China would rapidly run out of food in a constricted trade environment.
This final installment of our study of nutritional balances in different regions of the world repeats the main lesson of the other two articles: There’s enough food for everyone, but it’s perilously far away from the people who need it. Strains have appeared in the post-World War II order engineered by the victorious Allies. This should lead to alarm among people at the ends of long, complicated food-supply chains who depend on orderly and friendly maritime commerce for their survival. But they seem to remain unaware of the risk.
With their massive One Belt One Road Initiative, Chinese leaders have at least tentatively proposed a solution to the problem by blazing a trail for Eastern European and Russian products to move eastward. But it doesn’t quite add up. According to the most optimistic projections, the huge appetites of rapidly growing Eurasian and African populations will race further and further ahead of their arable land’s capacity. Transoceanic trade must remain unobstructed … and cheap. Without easy access to the huge surpluses of the Western Hemisphere, the poor of Eurasia and Africa will go without. That process may have started already with the ongoing soybean trade issues between China and the US.
With the United States and now Europe increasingly appearing to turn inward, how long will this unprecedented period of globalization last? We expect 10 billion people on Earth by 2050, most of them in the Eurasian and African land masses. Without the global trading system built over the past 70 years, how will the world feed them all?