To meet an increase in demand, global food output will have to double over the next four decades
Due to the severe weather conditions that have been seen around the globe lately, farmers have had to deal with droughts, floods and volatile markets. However, the need to feed a hungry world means the long-term prospects for the agricultural industry looks bright. To meet an increase in demand, global food output will have to double over the next four decades.
1. MORE MOUTHS TO FEED
The rise of the developing world and the weakening of many developed markets, especially Europe, are two global irreversible trends. The rise of the developing world will have a huge impact on demand. It is expected that by 2050 there will be about 9 billion people in the world but they will be eating as much food as 13 billion people at today’s nutritional levels. To meet such an increase in demand, global food output will have to double over the next four decades.
2. COMMODITY PRICES ON THE RISE
According to the Organisation for Economic Co-operation and Development, world farm commodity prices will edge higher in the next decade, and oilseeds are set to out perform wheat and other cereals, both trends fuelled by demand in emerging economies.
3 GROWTH IN AGRICULTURAL EQUIPMENT SALES
World demand for agricultural equipment is expected to increase by 6.7 percent per year through 2016 to US $173.5 billion. Growth will be driven primarily by sales gains in rapidly developing countries like China, Brazil, and India. Population expansion and strong economic growth in these nations will put increasing pressure on their agricultural sectors to become more efficient and productive, thus increasing sales off arm machinery.
4. SPIKE IN MACHINERY REPLACEMENT
Demand for farm equipment in industrialised nations like North America and Western Europe will be driven by technological advances, as the efficiency gains afforded by more sophisticated technology makes it economically feasible for farmers to replace their machinery more frequently. Due to the delayed replacement of older machinery during the 2008-2010 economic crisis, 2011 saw a spike in demand as better economic conditions prompted farmers to finally replace older machines. As the average replacement cycle is eight or nine years, this means many farmers may not replace machinery before 2019-20.
5 SHIFT IN MANUFACTURING
In 2011, the US held a slight lead over China as the largest producer of farm machinery, with industry shipments of US $23.1 billion. However, the Chinese agricultural equipment manufacturing industry is expected to expand rapidly, while production growth in the US will be more moderate. As a result, China will overtake the US to become the biggest manufacturer off arm machinery in the world, with industry shipments 70 percent greater than those of the US in four to five years’ time. Manufacturing output will also rise rapidly in Brazil and India, supported by strong local markets and rapidly industrialising economies.
For more information contact: WWL Market Intelligence, Ari Marjamaa