The End of Food Inflation?

Context: Growing global population and economic uncertainties have impacted the demand for calories. Improving the efficiency of calorie conversion provides solutions with certain challenges.

Issues pertaining to food security:

• Stresses Agriculture: Croplands constitute just 12% of the total land area and pastures another 25%, leaving limited scope for multi-cropping at scale
• Shift in diets: Steady growth in the human population and rising incomes have shifted diet towards more expensive calories like from fats which have a large land and freshwater footprint.
• Rise in global calorie demand: The demand rose 2% annually for nearly 5 decades since 1960 but fell to 1.5% over the past decade due to slowed population growth.
• Relationship with low GDP growth: Per capita calorie demand has stayed unchanged at 0.5 % over long periods.
• Demand for carbohydrate calories tends to stagnate at 1800 kcal/day per capita, for more calories, people must spend on expensive sources like meat, poultry, and fruits.

• Fall in GDP growth in 2019 impacted calorie consumption as people resorted to restricted meals or portion sizes. (Study conducted by Yale University in rural Nepal)
• New challenges: The current locust scare in east Africa and South Asia poses a threat to food security.

Factors strengthening Food Security

• Efficient Calorie Conversion:

• • • Rising yields per hectare: Cereals are already in surplus; India is endowed with 12% of global cropland despite having only 2% of the global landmass.

• Acreage shifting to direct/indirect production of fats: Palm corn and soya have seen 86% of incremental acreage since 2000.

• Reduced Feed Conversion Ratio (the number of input calorie into livestock to get one edible output calorie): Due to rising industrialization and consolidation:

• The water use per tonne of meat is 40 to 60 % lower in industrial production than when produced through grazing or mixed farming.

• Sustainable Artificial Meat: It is the most efficient way of calorie conversion:

• 90% of lower greenhouse gas emissions
• 93-99% lower need for freshwater and land
• 46% less energy consumption than livestock-based meat.

• Reduced volatility in the trade of non-perishables: due to improved irrigation, strategic inventory reserves, and rising food trade. 

• Reduced climate disruptions: The frequency of weather disasters has not risen since 2000.

Implications of Efficient Calorie conversion:

• Resumption of low food inflation: Improvement sin production was a major factor driving overall inflation down over the past decades.

• It is unlikely that the excess money supply would drive overall inflation through food consumption.

• Better margins for packaged food companies: which can hold on to prices even as the input costs fall.
• Less pressure on land: Increase in fat demand through meat would need an additional 10 million hectares of corn and Soya production by 2025.

Remaining Concern:

• Continued pressure on farmer’s income: 

• Low inflation means low farm income.
• Protecting incomes through subsidies (20% of global GDP) may not suffice, and can cause socio-political challenges.