Population growth is a staple that drives many industries, none more than agriculture. For those of us who were around in the 1970’s, we heard all sorts of predictions about a burgeoning population desperate for all the food we could produce. We increased production dramatically, but the booming market didn’t happen. The 1980’s price crashes are hard to forget.
In 2014, we are hearing the same scenarios about needing to feed 9 billion people, or 2 billion more than on earth now. Yet, birth rates are rapidly falling. With once again record high land prices, this is starting to give an uncomfortable sense of déjà vu. Are farmers about to have the proverbial rug pulled out from under them again?
Examining the data
A fertility rate of 2.1 is the magic figure for keeping a population stable. This means the average woman will produce just over two offspring during her lifetime. Asia is reaching a milestone this year as the continent’s fertility rate falls to 2.1 from a high of 5.8 in 1950-55. China’s fertility rate is 1.7. Japan’s is 1.4. (Note: Fertility rate and birth rate are used interchangeably).
Looking at Table 1, the fertility rates in many countries, including the US, have been below 2.1 since at least 1980. In 2011, almost all our major trading partners have fertility rates below 2.1. If we stop here, farmers ought to look at getting into new careers as soon as possible.
Source: The Wold Bank, Fertility Rate; http://data.worldbank.org/indicator/SP.DYN.TFRT.IN?page=6
Source: The World Bank, Population Total, http://data.worldbank.org/indicator/SP.POP.TOTL
However, Table 2 shows in all the Table 1 countries, population is still growing, in some cases substantially. Even in Italy, with fertility rates as low as 1.3, the population is still increasing. There are three main reasons for this.
- A change in a country’s fertility rate takes 40-50 years to impact the country’s population.
- High fertility rates years ago are still causing some populations to continue growing.
- We have seen substantial increases in how long people live.
Another factor affecting the US population is immigration. According to the Census Bureau’s 2009 American Community Survey, the US immigrant population was 38,517,234, or 12.5 percent of the total US population. Since a large majority of these immigrants are of childbearing age, they have enhanced the US fertility rate much more than their raw numbers show. Their immigration to the US has also negatively affected other neighboring countries’ population and fertility rate.
Modernization and fertility rates
Globalization is the main driver in lowering fertility rates in less developed countries (LDCs). Manufacturing jobs that moved to LDCs raised their standards of living. As living standards rise and more women move into an urbanized work force, birth rates decline rapidly. Also, we shouldn’t underestimate the impact of satellite television. Western television shows expose people in LDCs to US living standards and smaller families. Not surprisingly, they want both.
Results are Bangladesh’s birth rate dropped from 6.9 in 1970 to 2.2 in 2011. Iran’s dropped from 6.9 to 1.9 in the same period. China’s economy is evolving from cheap manufacturing to higher end production, engineering and design. Low cost manufacturing jobs are moving to Africa and the Philippines. We can expect over time these last bastions of high fertility rates will see their birth rates fall as they move from subsistence to higher income levels. At the same time, birth rates continue dropping in developed countries. It is hard to argue increased wealth will cause fertility rates to increase to anything near 2.1 again.
What this all means
Over the near term, we can expect the world population to continue increasing as people live longer. At the same time, due to the declining fertility rate, fewer people will be born and because of the high fertility rate 20-40 years ago, the average age of populations will increase. One group of experts predicts the world’s population will slowly increase to about 8 billion people and then in about 40 years begin to decline. The decline may be steep.
In the US, the disproportionate increase in older adults is already reality as the baby boomer generation ages. This means fewer taxpayers and more tax drawers.
In the US, we may see our population start to fall earlier than the 40 year window for world population. While world population will continue rising with increased life expectancy, there is some evidence US life expectancy has peaked. Obesity in the US may actually lead to lower life expectancy. If illegal immigration is curtailed, it is possible the US birthrate could fall from the 2011 level of 1.9 to the European Union and Canadian level of 1.6. Before major immigration increases, the US fertility rate was extremely close to the EU and Canada.
For food producers, the message is very clear. With a stagnating US population and per capita consumption of dairy, meat and other animal protein sources close to maxed out; the recipe for continued growth is exporting. While the number of people worldwide is not showing the dramatic increases of the past, the number of people with money to spend on food is increasing.
US producers are taking advantage of this opportunity and increasing animal protein exports. However, other countries are adapting US agricultural technology and soon will cut into our export markets. To turn these threats into opportunities, we need to:
- Move US farm policy away from the 2014 Farm Bill that makes producers (especially dairy) less competitive on world markets.
- Move away from reliance on selling commodities and instead sell branded products with more margin and build loyalty to those brands to the increasingly wealthy consumers in other countries.
While we are not headed for a near term drop in world population, the international food market is changing. Instead of wanting diets based around wheat, rice, corn and soybean products, people in former LDCs want variety and more animal proteins. They also want safety. There are tremendous opportunities for those able to meet their needs and wants.