India among the countries that will be impacted the most by a coming world food crisis

by Dave

Citizens in a a huge arc of countries ranging from West Africa – Angola, Nigeria to North Africa – Egypt to the Middle East – Iran and the Indian subcontinent, and China will suffer the most during the next food crisis. As I’ve spoken before, food exporting countries in Latin America, specifically in the Mercosur – Argentina, Brazil, Uruguay, Paraguay should profit from this. Still waiting for an Indian company to capitalize on this scenario that will most likely unfold in the near future.

One of the observations that goaded me on the path to promote Agriculture Outsourcing in Latin America, was the fact that many cooks, drivers, maids, cleaning ladies in urban South India suffer from diabetes, and are proud of it – a stark difference from a couple of decades ago. This Nomura paper speaks to that demographic in a section titled “the <$3000 sweet spot” -
“Unlike other commodities, the sensitivity of the demand for food to an increase in income is much greater for low-income earners. In economists’ parlance, the highest income elasticity of the demand for food is in the low-income bracket.  For example, in low-income countries (defined by the World Bank as those with an average Gross National Income (GNI) per capita of below USD1,000), demand for grains rises quickly as income increases – a 10% increase in incomes is associated with a 6% increase in demand for grain
via Business Insider and Nomura Research

GDP per capita in USD: $1,017
Food as a percentage of total household consumption: 49.5%
Net food exports (as percentage of GDP): 0.3%
From the executive summary of Nomura Research paper:
The surge in commodity prices in 2003-08 was the largest, longest and most broad-based of any commodity boom since 1900. The prices of energy and metals surged the most, but it was the agricultural market that saw the most fundamental change. It may not take much of a disruption in food supply to trigger another surge in prices given that the dynamics have become a whole lot more uncertain as a result of new and some increasingly powerful influences acting on both sides of the food supply-demand equation. Indeed, droughts this year in Russia and Kazakhstan and severe flooding in Pakistan and China have sent global wheat prices higher, while meat and sugar prices have hit 20-year highs, despite lacklustre growth in many of the advanced economies.

We expect another multi-year food price rise, partly because of burgeoning demand from the world’s rapidly developing – and most populated – economies, where diets are changing towards a higher calorie intake. We believe that most models significantly underestimate future food demand as they fail to take into account the wide income inequality in developing economies. The supply side of the food equation is being constrained by diminishing agricultural productivity gains and competing use of available land due to rising trends of urbanization and industrialization, while supply has also become more uncertain due to greater use of biofuels, global warming and increasing water scarcity.

The fall in agricultural prices from their H1 2008 highs was caused more by the global recession and the tumble of oil prices than by an expansion in food availability. In most developing countries, despite burgeoning demand, supply did not respond significantly to high food prices (FAO, 2009a, p.4). It may not take much of a disruption in food supply to trigger another surge in prices given that the dynamics have become a lot more uncertain as a result of new influences acting on both sides of the food supply-demand equation. Furthermore, based on the historical pattern of the Southern Oscillation Index, the world is due for another severe El Niño event, which will likely cause big global weather disruptions.
Nomura Global Economics Strategy Sep2010

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