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1.2 Mega-Trends Impacting the Agricultural Economy

Economic Growth in Emerging Countries and in the BRIC: Impact on Demand for Agricultural Produce

Economic growth in emerging countries and in the BRIC countries has been very substantial during the last few years. This growth has also been achieved through a very dramatic socio-economic change in many different ways. In China, for instance, millions of rural dwellers have been mobilized to become workers in factories in cities and in the coastal areas. In terms of food and agriculture, this means a major shift from farmers producing crops to consumers to feed.

In India, China, Brazil, and many other emerging countries or even in the socalled Least Developed Countries (LDCs), rapid urbanization has led to a pressure on the supply for food that the neglected countryside and aging farmers have not been able to deliver. This has been, at least for a large part, the cause of the food crisis of the last few years.

Emergence of an Urban Middle Class with New Consumption Patterns

The growth that developing countries have been experiencing during the last decade – steady for some, spectacular for others – has led to the emergence of a significant middle class. This middle class is made up of people who have a fairly good level of education, often double income households, living in cities as a nuclear family with fewer children than in traditional families. Their relative purchasing power is significant as a consequence of these factors.

The consumption patterns and habits of this middle class have also changed due to this new life style. They will tend to shop in supermarkets rather than in traditional markets. They buy more pre-prepared food in smaller quantities to suit the size of the family (nuclear) and of the lodging (apartments). They prefer better quality than large quantity. School children want to copy the way of life they see on television and in ads, which affects both their nutrition and their clothing.

This phenomenon is so widely spread globally that it has been part of the recent food and price crisis in major cities in the developing countries. For instance, according to observers in Dakar, the price of millet, the traditional staple food, has not rose much, while the price of imported rice increased tremendously in 2008 and 2009.

An urban middle class with a good purchasing power is the solvent demand and market that the agricultural sector of developing countries has been hoping for in order to boost its production. For instance, Basmati and perfumed rice are now grown in many African countries, competing with imported Asian long grain rice for the higher end market. However, the pre-conditions for success are to adapt the supply to the new demand via the appropriate distribution channel.

Increasing numbers of national and multinational corporations have seen it as a huge opportunity and are entering this market, building value chains in linkage with small and medium farmers. They are willing to invest in technical assistance, infrastructure, financial and non-financial services in order to retain serious suppliers who will deliver timely, quality crops.[1]

  • [1] Cf publications on value chains listed in the bibliography.
 
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