Next decade to prove fruitful for growers, claims economist
The fruit industry can look to enormous gains in the next decade, according to Foreign Agricultural Service Office of Global Analysis (OGA) senior economist Oliver Flake. Speaking at the Produce Marketing Association’s (PMA) Fresh Connections: Southern Africa conference in Pretoria yesterday, Flake emphasized the growing middle class in developing countries would be a strong driver for growth, while other issues such as drought, biofuels and exchange rates would also have a crucial part to play.
Flake is upbeat about the prospects for global fruit consumption, especially considering the rise of middle classes in China and India.
“Overall the forecast is optimistic, for agricultural profitability, and prices in general, and the reason is this new demand emerging from developing countries, which is due to the rising middle class,” he said.
“Consumers in low income categories mainly consume grains and rice, and when they move into the middle class, the first thing they do is consume more meats and high value products like fruits and vegetables.
In terms of economic development, growth is more pronounced for fresh fruits and vegetables than other commodities; in this sector there has been a 150% growth rate in developing countries.
Flake explained that India was a good example of a country that would benefit from catering to the fresh needs of a burgeoning middle class, but imports were severely restricted by government policy. The country recently added 21 new pests to its quarantine list, further repelling foreign trade.
He added Sub-Saharan Africa was one of the fastest growing destination markets globally, along with Russia whose fruit imports have surged thanks to a relatively stable economy.
Other telling factors
Flake also pointed to other factors that would impact fruit exports in the next 10 years, with the euro expected to weaken into 2013 and “pull out again in 2014″.
Biofuels production around the world is also pivotal. The U.S. has reached its maximum mandate but worldwide growth is expected in corn-based ethanol.
“To produce biofuels takes commodities out the food chain and creates competition, it gives energy security for the country, but for the agriculture sector the benefit is in the price for the commodity, as they fetch higher prices,” he said.
He highlighted the impact of the U.S. drought – the worst since 1988 – on global food prices, has been managed more successfully than the crisis in 2008 due to record corn plantings, while South America has also been “great in responding to price changes, yields and demands”.
Energy prices play a big role in the global agricultural trade, and there is a strong correlation between crude oil, commodity and food prices. Furthermore, the biotechnology planted area in the developing world is now basically the same as the developed world, and this trend is expected to continue.
Flake said trade liberalization was boosting trade globally, and bilateral agreements would continue to boost trade.
Additional crop land was also a major factor. He believes there is a great deal of land in South America that can be brought into production and also points to potential in countries like Kazakhstan.
“Demand from developing countries will be the game changer in the next few years,” he told www.freshfruitportal.com.