﻿ PoultryWorld - China's consumption drives need for feed

News 660 views

China's consumption drives need for feed

China's meat consumption is driving a need for fertilizer more than steel. The New York Times states that if China's industrialization follows the course of other nations, per capita demand for infrastructure like concrete and steel will peak long before meat consumption does.

Analysts point to this as the reason why mergers and acquisitions activity in the agriculture sector has become so hot. For example, Vale, based in Brazil, just agreed to buy Bunge’s Brazilian fertilizer assets for US$3.8 bln.

The revolution of eating habits moves at a slower pace than a country’s revolution of infrastructure. In the US, for example, while steel production per capita peaked in the 1950s, demand for meat has grown consistently, as Americans now eat 276 pounds of meat a year, an increase of 60% since the 1950s. Other developed countries show similar patterns.

Reports further state that while China is eating more protein, it still has a ways to go to catch up with the developed world. Per capita consumption of meat in China is less than 100 pounds, and this figure may be inflated. Producing more animals to keep up with growing demand will require mountains of feed - one full steer requires around 3,000 pounds of feed. Growing this grain will increase demand for fertilizer substantially. China is already the biggest consumer of potash (a quarter of all global production) and the top producer of phosphate — and it imposed restrictive tariffs on exports in 2008.

While these trends appear abstract, they affect corporate behaviour. The economic crisis sent commodity prices into a tailspin. While steel insiders cautiously slammed the brakes on merger activity, fertilizer companies threw caution to the wind. Among the deals, bidding wars broke out among the fertilizer groups CF Industries, Terra Industries and Agrium.

As long as China’s taste for meat increases, fertilizer companies should continue to eat one another up.

Natalie Berkhout

Or register to be able to comment.