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China's consumption drives need for feed 29 Jan 2010
China's meat consumption is driving a need for fertilizer that won't end any time soon.
According to the New York Times, if China’s industrialization follows the course of other nations, per capita meat consumption will continue to drive commodity prices.
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 billion.
The revolution of eating habits is m ore an evolution, as changes in consumption often moves at a slow pace. In the United States, for example, demand for meat has grown consistently over the years, as Americans now eat 276 pounds of meat a year, an increase of 60 percent since the 1950s. Other developed countries show similar patterns.
The New York Times reports 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.
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.
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