Wealthier China Helps Keep Food Prices High

Don't expect food prices to come down much in 2012, experts say.

While the reasons behind today's high food prices are complex, one nation - China - has an oversized influence on global markets. China's three decades of breathtaking economic growth has fueled a remarkable rise in prosperity in the world's most populous nation.

But what's been good news for China is bad news for many others connected to the global food economy.

Rising prosperity, changing diets

Experts say the first thing people do when they rise out of poverty is improve their diets. That means more meat and animal products.

A few decades ago, meat was a luxury in China. Food was strictly rationed until the 1980s.

Chinese Academy of Social Sciences economist Zhu Ling recalls eating meat only once or twice a month when she was growing up. “Only during Chinese New Year could we get 250 grams of pork each," she says.

But that changed after Deng Xiaoping’s economic reforms in the 1980s, which set the stage for China’s miraculous growth.  

“This was an era of change and improvement in food consumption," she says. "Basically, apart from vegans, everybody, every family has seen an increase in meat and seafood consumption.”

Chinese pork consumption has more than doubled since 1990, and chicken consumption is up five-fold.

Feeding animals that feed people

Livestock need to eat, too. Feeding those rapidly growing herds and flocks has quickly made China the world’s most voracious consumer of soybeans.

“Ten, 15 years ago China imported virtually no soybeans at all," says to U.S. Department of Agriculture analyst Hui Jiang. "Since the mid-1990s, Chinese imports have grown drastically, to today dominating over half of the total world trade in soybeans.”

The impacts are felt around the world.

“This has been positive for American agriculture,” says Maryland farmer Dave Burrier.

Soybean grower have seen the price of their crop nearly double since Beijing entered the market. Last year, China imported one out of every four soybeans grown in the United States.

Increasing competition

Demand for soybeans has also helped fuel economic growth in Brazil and Argentina, which now compete with the U.S. for the world soy market.

China's tremendous demand helps push prices up - and not just for soybeans.

All crops need land to grow on. “That puts competition on crops like corn and other crops as well," says Jiang. And competition for farmland is also helping increase the cost of food.

And prices are expected to stay high in part because China is not done growing. Its expanding middle class is projected to more than triple this decade, "and its food expenditure is expected to double in the same timeframe," Jiang says.

"Its impact on demand cannot be overstated,” she adds.

Growth in the developing world

But it’s not just China. People in India, Brazil and other emerging economies are also growing wealthier and eating better. Plus, the world is expected to add another two billion people by mid-century.

That’s good news for farmers like Burrier. “I really think that because of the population increase that we’ll continue to have tremendous demand,” he says.

But for consumers, food prices will likely remain high until supply can catch up with that tremendous demand.