An Egg a Day
What would be the impact if India’s exploding population consumes more protein?
By Joli A. Hohenstein
During the next 20 to 30 years, India is poised to be the third biggest economy behind only the U.S. and China. It will also be the most populous.
While it is easy to get caught up in short-term issues and barriers to leveraging this market, when it comes to capitalizing on India’s growth, the consensus is that agriculture – both in Illinois and on a broader scale – needs to play the long game.
Market watchers say the exponential growth projected for India in the coming decades portends amazing opportunities for those aggressive and progressive partners. Population growth between 2017 and 2035 is expected to equal about 75 percent of the current U.S. population.
“The country is expected to have a population greater than China – 1.6 billion by 2050,” says Jeff Nawn, CEO and founder of The North Hill Group, a policy development consulting firm. “That’s a large share of the global economy.”
India’s population is expected to surpass that of China by around 2022.
At the same time, buying power will rise. Right now, India’s economy accounts for about seven percent of world gross domestic product (GDP). By 2050, that could double to 15 percent.
“As an exporting country, India is not a market we can ignore,” says Nawn.
Big Production Potential
India boasts the second largest arable land total in the world and is the second largest producer of wheat and rice. “Indian agriculture is dominated by millions of small, marginal farmers (85 percent of India’s total farmer base). The typical farmer owns up to two hectares and two to three cattle,” says Shiva Mudgil, vice president, RaboResearch Food & Agribusiness.
Crop production is at risk as more than half of the country is entirely rain-fed and subject to irregular rain patterns. Crop production growth is hindered by soil degradation, pest attacks and processing and food storage losses in India. The World Bank says as much as 12 percent of vegetables and six percent of grains are lost due to improper post-harvest management.
That may open the door for more U.S. corn and soybeans. Animal feed demand is projected to grow significantly and imports will be needed to meet that demand.
Rabobank says poultry feed costs in India are increasing due to a production shortfall in corn. Soybean meal prices also are higher. Deloitte Touché Tohmatsu India LLP reports that from 2014 to 2017, global production of soybeans grew at a CAGR of five percent, whereas India’s production declined at a CAGR of one percent. Global soybean meal exports have increased at CAGR of 0.9 percent during that time while Indian exports have increased seven percent.
“India is amongst the top five producers of soybeans and imports large quantities,” says Mukul Varshney, director, corporate affairs for John Deere. “Consumption is in the form of edible oil across India. Soy products such as milk and tofu are not very popular yet. Those imports may increase once non-animal protein gains momentum or animal feed finds an alternative.”
Bigger Consumption Opportunity
“India’s packaged food and beverage industry was estimated at $100 billion in 2018 and could grow at a 12 percent compound actual growth rate (CAGR) for the next five years,” says Mudgil.
As the Indian population grows, greater food consumption is driven by higher per capita income.
“If we look at the market, it’s a young population, and they’re experiencing rapid economic growth and rapid population growth,” says Nawn. “About 46 percent of the population is below age 25. Their incomes are rising, and their demand for export products continues to increase. This creates an established consumer base ready and eager to consume more and new foods.”
Based on per capita GDP growth, India’s per capita food expenditures are expected to increase from $311 to $715 between 2017 and 2035, putting them close to levels in China today. Key proteins such as meat, eggs, fish and seafood, as well as a greater portion of the Indian population’s food expenditures will be going to food eaten away from home.
India is the third largest consumer of edible oils after China and the European Union, and that could increase between 16.6 and 32.8 million metric tons between 2017 and 2035. Soybean oil consumption alone could increase to 12.3 million metric tons. That would put total vegetable oil consumption in India at 280 percent of 2017 U.S. consumption.
“The impact of every person in India eating an egg a day? It would be staggering,” says Nawn. “It would be irresponsible for us to ignore what India will be to the global GDP.”
Simply put, it is important the U.S. engage with the Indian market over time and important that U.S. agriculture understand that the market will grow and offer sales opportunities.
“The benefit of growth in China over the last 25 years is also a great example,” says Nawn, “not just in soybeans, but pork, beef and other industries. And think of the benefits that occurred through the NAFTA agreement. We have seen incredible growth through increased exports.”
Biggest Next Steps
How can Illinois soybean producers help encourage development of this market?
“Call your elected officials or see them at the coffee shop and tell them we want a bilateral trade agreement,” says Nawn. “The U.S. government should be engaging and setting up framework for export growth. Policymakers will respond to that effort to engage from farmers and agriculture.”
India may be receptive, as agriculture is seen as a growth market. The government has made agriculture a key focus, increasing budget allocations by 24 percent from 2016 to 2017. While the country is largely self-sufficient for meat and protein meal production in the short-term, the rate of projected growth raises the question of how they will meet demand long-term.
“With 1.6 billion people and the GDP per capita increasing that way, food sourcing won’t be the same in the future,” says Illinois Soybean Association CEO Craig Ratajczyk. “They will need protein meal to feed animals, and they will increase their protein consumption as a population. Many people see India as the next China for the next two decades or longer.”
Agribusiness consulting firm Informa believes India will respond to more consumer demand with increased meat imports, increased oilseed production and crush, increased soybean meal imports and increased oilseed imports and domestic crush.
Ratajczyk agrees there is opportunity for increased business from this projection. On a recent trip to India, Ratajczyk says he was amazed at the number of buildings under construction.
“They are where China was 10 to 15 years ago,” he says. “The opportunity for soybeans and agriculture is something we need to explore. If we want to serve the checkoff and the U.S. farmer, exploring the Indian market is something that must be on our list.”