Growing middle class Backyard farms are being replaced by modern processing plants with quality control standards in place
SINGAPORE (Reuters) — A slew of food safety scandals has stoked China’s hunger for higher quality products, says a top executive from Cargill Inc.
The demand would sustain consumption of protein-rich farm commodities even as China’s economy slows.
The Asian country is toughening its fight against food safety violators in the face of rising incidents of food scares since a deadly scandal in 2008 when dairy tainted with industrial chemical melamine led to the deaths of at least six infants.
It is also prompting the country to move from backyard hog farms to mechanized modern plants requiring higher volumes of grain-based compound feeds.
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“The Chinese population has become highly sensitized to food safety and rightly so,” Cargill vice-chairman Paul Conway said.
“For commodities which go into direct human consumption or via meat, we don’t see a slowdown in China.”
A growing middle class that craves more high-protein and safe food products would also ensure that China’s consumption of agricultural commodities would remain high even as economic growth slows to six to seven percent.
“We are positive not only on China but on the region generally about the emergence of a stronger and more vibrant middle class who demand more variety and better quality in their food,” Conway said.
Food supply chain issues in China have come under increased scrutiny, with KFC parent Yum Brands Inc., Walmart and McDonald’s all recently facing food safety issues with suppliers.
Conway said China will also require more higher quality food as it shifts to a consumption-driven economic expansion and away from infrastructure, which could see rapid growth in its environment, health care and education sectors.
With sales of US$134.9 billion in fiscal 2014, Cargill expects its global grain business to double in seven to eight years with Asia growing at twice the pace, supported by thriving consumption in China, India and Indonesia.
The company has a major presence in China’s food supply chain, importing grain and oilseeds, making animal feed, raising chickens and manufacturing products such as sweeteners and cereals.
The company’s fully integrated poultry project, which recently started operations, has a capacity to process 65 million chickens per year as well as 176,000 tonnes of poultry products.
Conway said Cargill is building its fourth soybean processing plant in China
He said prices are unlikely to fall below the multi-year lows seen in October because U.S. farmers have been holding back supplies.
“It is clear that you are not going to see the sorts of lows that you used to see with these sorts of harvests,” he said.
“Farmers, particularly in the U.S., have enormous ability to hold supplies.”
Prices of corn, soybeans and wheat in Chicago have since rebounded, with soybeans rising 14.5 percent last month, corn climbing 17.5 percent and wheat adding 11.5 percent.
Conway said global food demand is rising rapidly despite record crops in the United States and elsewhere, which is keeping the agricultural industry on its toes given the 2008 food supply shock.
“Essentially we are only one harvest away from a big problem,” he said.
“We can’t relax because the world does need more food and of course today you have non-food uses such as biofuels.”
