#91 - We need to produce more food

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Food – In this article let’s see:

How the Food market is going to evolve over the years
Why the war in Ukraine is causing insecurity and malnutrition in the country
How much the market can be expected to reach as value in the future
How food’s production is increasing due to demographic

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Food – PwC

The Novel Food Market

Over the years the concept of diet has changed, moving from the original meaning of deprivation in order to contain weight to the idea of a balanced life for the improvement of the general wellness of people.

Novel Food types can be mainly clustered into 5 technologies/variants:

(i) plant-based,

(ii) animal cell-based,

(iii) fermentation-based

(iv) insects-based and

(v) hybrid meat.

Consumer targets can be divided between:

People with higher income: they can afford higher quality food and are willing to pay more for higher quality products.
Generation Z consumers and Millennials who appreciate fresh, healthy food and are open to trying new products.
Parents of young children who care about making healthy, quality, home-cooked meals.

Market & Investments

Global dollar sales of plant-based meat grew 17% in 2021 to $5.6 billion.

Global dollar sales of plant-based milk grew 14% to $17.8 billion, with milk accounting for the most popular plant-based product in the world.

Plant-based meat, egg, and dairy companies raised $1.9 billion in 2021, bringing total investments in such companies since 1980 to $6.4 billion.

Protein investments in 2021

With momentum growing for the entire alternative protein sector and total alternative protein investments increasing by 60% in 2021.

Investors are diversifying their allocations among alternative protein segments.

Both fermentation and cultivated meat companies seeing large increases in investment in 2021.

In 20 years, 35% of global meat consumption will come from cultivated meat products.

Enthusiasm is building among investors, who have several options for accessing the alternative meat market.

Including pureplay producers, distributors and servers, large multi-nationals, investment funds such as Agronomics and Cult Foods, an investment platforms.

Global consumption over the years

The global consumption of proteins is expected to grow by 2035 with a CAGR of +3% in the period 2020-2035 reaching about 880 million metric tons consumed.

The share of alternative protein is expected to shift from the current 2% of the global protein market to 12%.

Moving from 10-15 million metric tons a year as of today to ca. 100 million metric tons by 2035.

The market can be expected to reach a value of approximately $290 billion in 2035.

Real revenues could be closer to $10 per kilogram for high-quality meat alternatives but significantly less for high-volume products like milk.

By 2035, the shift to plant-based beef, pork, chicken, and egg alternatives will save more than 1 gigaton of CO2-e, about as much as Japan current annual emissions.

Food – Morgan Stanley – Wealth Management

Morgan Stanley & Co. Research estimates that the global food system will need to produce 50% more over the next thirty years to feed the 10 billion people expected to inhabit the planet in 2050.

Food production already accounts for 26% of greenhouse gas emissions.

This growth will require innovation so that both food and climate sustainability goals can be met.

Similarly—with demand set to rise and climate-impacted supply shifting rapidly—investment in infrastructure for water access will be needed as well.

Further, with 2 billion people already lacking access to safely managed drinking water, innovative solutions will be needed to help address sustainability goals.

Future of Food

The global food system will need to reinvent itself over the next 30 years to produce 50% more food and help 2.5 billion people escape malnutrition, while simultaneously reducing carbon emissions by 14 gigatons.

While there are potential solutions, compromises will be necessary to provide food that is

1) sufficient,

2) produced in a low-carbon manner,

3) healthy and

4) sustainable.

The UN estimates that by 2050 the global population will exceed 10 billion, largely driven by growth in Africa.

While the challenges seem daunting, Morgan Stanley & Co. Research believes they can be met through innovation, much of which is already being invested in by the food industry and disruptors.

Middle-class expansion

How will the world feed the estimated 10 billion people that are set to inhabit it by 2050?

Morgan Stanley & Co. Research estimates that by 2050—due to both population growth and middle-class expansion in developing countries.

The world will need to produce 50% more food than today.

Given the carbon footprint of existing food production processes, innovative solutions will be required to meet both food and climate sustainability goals.

Closely linked to both goals will be increasing water access as growing populations put more stress on water infrastructure, with 2 billion people already lacking access to clean drinking water.

Food and Agriculture Organization of the United Nations

Biannual Report On Global Food Markets

In view of the soaring input prices, concerns about the weather, and increased market uncertainties stemming from the war in Ukraine, FAO’s latest forecasts point to a likely tightening of food markets and food import bills reaching a new record high.

High food prices

Generally, periods of high food prices are considered a boon for producers, especially in countries that supply the international market, raising the profitability of farmers.

However, such periods tend to be short-lived when price incentives instigate a supply response.

Facilitated by continuous cropping seasons in the northern and southern hemispheres that bring food markets swiftly back into equilibrium.

The current war in Ukraine

The current war in Ukraine is causing extensive loss of life, massive population displacement and significant food insecurity and malnutrition in the country.

It is also damaging critical infrastructure and disrupting food supply chains and markets.

Because the war is engaging two of the world’s most important agricultural commodity market players, its effects are being felt internationally.

Cost of food

The increasing cost of food is heightening concern and distress throughout the world.

The FAO Food Price Index reached a record nominal high in March 2022, before marginally falling in April.

Most of all, the rising cost of producing food, driven by soaring prices of fertilizers, energy and other inputs, gives much cause for alarm as it increases consumer prices, imperiling food security.

From another perspective, the spike in the price of inputs raises questions about whether the world’s farmers can afford to buy them, to the extent that productivity and hence global food supply could be adversely affected in the 2022/23 season and beyond.

My conclusions and considerations

Let’s say that the situation in Ukraine is more complicated than we thought at the beginning.

And food market is surely been touched.

In these research we’ve seen why we need to produce more food (50% more over the next thirty years to feed the 10 billion people expected to inhabit in the planet in 2050) and how could be important the increase trend of plant-based food.

Impressive is even how proteins is expected to reach 880 million metric tons consumed and the value that the market is going to value all of that.

In summary below you can find my final conclusions and I hope you have found useful and interesting my hours of research.

Final conclusions by big players

Global dollar sales of plant-based meat grew 17% in 2021 to $5.6 billion.
Plant-based meat, egg, and dairy companies raised $1.9 billion in 2021, bringing total investments in such companies since 1980 to $6.4 billion.
In 20 years, 35% of global meat consumption will come from cultivated meat products.
The global consumption of proteins is expected to grow by 2035 with a CAGR of +3% in the period 2020-2035 reaching about 880 million metric tons consumed.
The market can be expected to reach a value of approximately $290 billion in 2035.
Morgan Stanley & Co. Research estimates that the global food system will need to produce 50% more over the next thirty years to feed the 10 billion people expected to inhabit the planet in 2050.
The global food system will need to reinvent itself over the next 30 years to produce 50% more food and help 2.5 billion people escape malnutrition, while simultaneously reducing carbon emissions by 14 gigatons.
The current war in Ukraine is causing extensive loss of life, massive population displacement and significant food insecurity and malnutrition in the country.
Soaring prices of fertilizers, energy, and other inputs, gives much cause for alarm as it increases consumer prices, imperiling food security.

Join the conversation with your own take on these topics in the comments below.

About the Author

Alessandro is a Financial Markets enthusiastic and he loves learning from articles/papers on many financial topics and in doing so he shares with you the most interesting charts and comments.

Disclosure

This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

#91 – We need to produce more food