U.S must prepare for emerging markets in developing nations
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NASHVILLE, March 1, 2012- The U.S. needs to prepare to handle a variety of emerging market systems in developing economies with rapidly growing middle classes, said U.S. Grains Council President Thomas Dorr today at the 2012 Commodity Classic in Nashville.
“Systems will vary country by country, but they will have one similarity,” he said. “Emerging markets will be unable to build food systems on the U.S. system model. They will create new product marketing systems likely very different than our legacy markets.”
Asian nations are least able to increase their feed grain production due to dense populations and a limited natural resource base, which makes it impossible to “simply copy the U.S. production system.” These nations must develop new strategies to “pull off miracle of food,” he said.
The question for the U.S. will be how to position ourselves to compete for new opportunities in these markets, he explained. Vietnam is just one example. With a 90 million strong population and growing economy, he said it is the eighth largest market for U.S. feedstuffs.
Although Vietnam is 20 years behind China on development curve, Dorr said the nation is quickly increasing its pace to catch up.
“Vietnam is learning on the China example,” he said. “Its economy will be one to be replicate as emerging economies grow.”
The increase in global population to nine billion and 70 percent increase in food demand by 2040 are well-known statistics, but a notable aspect is that 350 million more households will enter global middle class by 2020. These households will eventually make up 49 percent of developing countries' populations and this impact on demand “is going to be stunning,” Dorr said.
“A growing population demands a growing protein supply; a growing income demands a growing animal protein supply,” said US Soybean Export Council (USSEC) chairman Roy Bardole. “Vietnam has both.”
In addition to standard grain and soybean markets, Vietnam's aquaculture production will be important for our soybeans, said Bardole. Vietnam plans to increase the volume and value of its aquaculture production in the next years, and likely provide soybean meal as feed. The nation is third in aquaculture production worldwide and production is expected to reach three million metric tons by 2015.
While these emerging economies will provide opportunities for U.S. exports, managing U.S. infrastructure and port systems may be a challenge. Bardole warned that the $3 million Panama Canal expansion to be completed in 2014 makes it vital for the United States to increase its port capacities.
The Panama Canal expansion is a great thing, he said, “but it will cut our throats if we don't fund the Army Corps to build up our ports,” Dorr added.
The ships passing through the Canal after its expansion will have three times the carrying capacity than they do now, Bardole said. However, currently only one port in the United States is able to receive these larger ships, with the possibility of one being built in Washington, Dorr explained.
In addition to this concern is the fact that emerging economies worldwide are able to access the resources to build state-of-the-art infrastructure, which may make it difficult for existing legacy systems in established countries to compete, Dorr said.
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