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Marketing Into Growing Economies

It’s one of those rare times at present, when every sector of agriculture is receiving profitable prices from the marketplace.

This fits well with the theory of an increasing worldwide population and the growing demand for food. It’s comforting to believe that as farmers we can just continue to do what we’re doing and watch the returns roll in. But is this view nave?

China and India figure prominently into the discussion. Although China has received a lot of attention over many years, India has become a huge market for Saskatchewan, particularly for our pulse crops – peas and lentils.

The economy of China is roughly four times larger than India’s. And India is a poorer country. The Gross Domestic Product per capita is a little over $1,000 in India, as compared to about $3,700 in China.

But many analysts are betting on India to surpass China in the years ahead and they give two main reasons – demographics and the political system.

China’s one-child policy curbed population growth, but it’s going to mean a high dependency ratio. In other words, in 10 to 20 years time, there will be a high proportion of retired citizens being supported by a relatively small number of working-age people.

India has lots of people in the younger age categories.

We may decry the lack of human rights in China, but strong government control has them on a path of incredible economic growth. By comparison, India is a democracy, so there are limits to what government can dictate.

Over time, many analysts believe that having a stronger private sector in India will allow that country to grow more rapidly than the central-planning model employed within China.

The growth of these emerging economic titans is one of the key reasons for believing in a bright future for agriculture. They have an increasing appetite for pulse crops, canola, wheat and even meat products that we can sell them.

While he recognizes the opportunities, Saskatoon agriculture consultant Al Scholz is among those who believe that commodity agriculture will remain a tough business most years. He describes it as a race to the bottom as exporting nations around the world compete on price to supply similar products.

While everyone recognizes the potential growth in world food demand, there is also a great deal of underutilized productive capacity in the Former Soviet Union and in Africa. Higher commodity prices will encourage production from these regions.

There’s also a great deal of food that goes to waste. Up to 50 per cent of all food production in India is lost to spoilage, insects and rodents.

To escape the commodity business, Scholz says we need to pay more attention to what consumers are demanding. He points to companies like Wal-Mart and Safeway who have developed a “Sustainability Index” to give consumers some information about each product’s life cycle.

For food, that index will reach back to the farm. Farm managers that are prepared, and adapt to consumer demands for life cycle traceability, should be rewarded in the marketplace.

Despite the allure of growing markets in India and China, it’s prudent to continue exploring ways to differentiate our products.

Kevin Hursh is a consulting agrologist and farmer based in

Saskatoon. He can be reached at [email protected]

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