China’s Meat Consumption: An Income Elasticity Analysis and Long-Term Projections
Tadayoshi Masuda1 and Peter D. Goldsmith2
1
National Soybean Research Laboratory University of Illinois at Urbana-Champaign Email:
[email protected] 2
Department of Agricultural and Consumer Economics University of Illinois at Urbana-Champaign Email:
[email protected]
Poster prepared for presentation at the Agricultural & Applied Economics Association 2010 AAEA, CAES, & WAEA Joint Annual Meeting, Denver, Colorado, July 25-27, 2010
Copyright 2010 by Tadayoshi Masuda and Peter D. Goldsmith. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.
China’s Meat Consumption: An Income Elasticity Analysis and Long-Term Projections Tadayoshi Masuda* and Peter D. Goldsmith** *National Soybean Research Laboratory and **Dept. of Agricultural and Consumer Economics, University of Illinois Introduction Bennett (1941) suggests that the ratio of cerealpotato calories to total food calories is itself a rough (inverse) index of income status, and a rougher index of quality diet. In the light of what is called the Bennett’s law, China (Mainland China + Hong Kong + Macau)’s per capita income growth as well as population growth and urbanization fuel the increase in meat consumption per capita and in total (Figures 1, 2, 3). During the half century, China’s per capita real GDP (constant US dollar in 2000) increased 14.3 times and its total population 1.9 times.
Figure 2. Shifts of Meat1 Consumption Quantity2 Share of China3, USA, Brazil and Continents 100% 9% 80% 60% 40% 20% 0%
Figure 1. China’s Ratio of Meat Calories to Total Food Calories (1965-2005) 100% 13%
12%
14%
16%
17%
19%
75%
20%
22%
29703000 2842 2901 2704
50%
78%
81%
81%
78%
75%246972%
64%
60%
56%
6% 14%
7%
2500
2167 25%
0%
1932 1799 1854 2% 2% 2% 2% 6% 5% 4% 4%
2000 3% 7%
3% 8%
5% 11%
15% 1500
9%
9%
9%
8%
8%
9% 218
250
244 9%
200
191 165 43% 38% 37% 48% 51% 50% 52% 51% 50% 141 124 6% 6% 107 5% 92 3% 3% 3% 4% 4% 16% 15% 15% 3% 76 18% 17% 24% 23% 21% 20% 21% 26% 27% 12% 16% 10% 6% 8% 9%
150 100 50 0
China USA Brazil Eurasia excl. China America excl. USA & Brazil Africa Oceania World Meat Consumption (MMT, right)
3500 15%
9%
Notes: 1. Meat = Bovine Meat + Mutton & Goat Meat + Pig Meat + Poultry Meat + Other Meat. 2. Domestic supply quantity for food (million metric tons). 3. China = Mainland China + Hong Kong + Macau. Source: FAOSTAT and authors’ calculation.
Notes: 1. China = Mainland China + Hong Kong + Macau. 2. Meat = Bovine Meat + Mutton & Goat Meat + Pig Meat + Poultry Meat + Other Meat. 3. Other Animal Products include offals, animal fats, eggs, milk, aquatic products. 4. Other Vegetal Products include sugar crops, sugar & sweeteners, honey, pulses, tree nuts, oilcrops, vegetable oils, vegetables, fruits, stimulants, spices, alcoholic beverages. Source: FAOSTAT and authors’ calculation.
Objectives 1) to estimate the long-term income elasticity of demand for meat by commodity (pig meat, poultry meat, bovine meat, and mutton & goat meat) in China and discuss the differences; 2) to project the long range meat consumption by commodity through 2030 in China; and 3) to discuss the policy and business implications regarding China’s livestock industry and international feed grain and oilseeds markets.
Figure 3. China’s Meat Consumption and Its Composition (1961-2005) 60.0
100% 75% 50% 25%
51.4 17% 12% 12% 13% 11% 12% 16% 45.5 20% 20% 33.7 23.3 82% 80% 76% 81% 81% 80% 16.8 73% 67% 65% 12.1 9.5 10.5 6.5
45.0 30.0 15.0 0.0
0%
Pig meat (%, left) Poultry meat (%, left) Bovine meat Mutton & Goat meat Other meat Total Meat Consumption (kg/capita/yr, right) Notes. Meat Consumption = Domestic Meat Supply for Food / Population. Carcass retail weight loss is not considered. Source: FAOSTAT and authors’ calculation.
We deal with time series of China’s domestic meat supply quantities for food (in metric tons) as meat consumption from 1961 to 2008. We employ the concept of income elasticity of demand using the per capita meat consumption and per capita real GDP. Data sources are FAOSTAT (FAO) and WDI Online (World Bank). Vector Error Correction Model (VECM) is employed to estimate the cointegrating equations or long-term income elasticities. Gonzalo (1994) shows that Johansen’s (1988) maximum likelihood approach clearly has better properties. Following Johansen (1995), the trend parameters are either set to zero or unrestricted to improve fitness. The damped-trend linear exponential smoothing model (Gardner and Mckenzie, 1985; Gardner, 1985) is applied to estimate per capita GDP beforehand. Given the estimated income elasticities and per capita income, China’s meat consumption quantities are projected using a recursive form through 2030.
Results, Projections, and Discussion
1965 1970 1975 1980 1985 1990 1995 2000 2005 Meat Total (%) Other Animal Products (%) Cereals & Starchy Roots (%) Other Vegetal Products (%) Total Food Kcal/capita/day (Right)
Methods
-With respect to income increase, pig meat consumption is inelastic (0.151), mutton & goat meat and poultry meat are rather unity (0.882 and 1.057, but bovine meat consumption is elastic (1.560) (Table 1). - As GDP grows annually at 4.9% in 2010-20 and 2.8% in 2020-30, total meat consumption increases at 3.2% and 2.0%, respectively, and reaches 136 mil. metric tons in 2030 (Table 2). - China’s per capita meat consumption (54 kg/ca/yr in 2006-07) is already above the world average (41) and will exceed the current Brazil’s per capita meat consumption (81) in 2020s. - China is a top importer of feed crop (soybean) and now meat importer (Table 3). - As food policy, China needs to consider selfsufficiency and distribution of protein foods. - International meat and feed crop markets will be affected by China’s livestock industry.
Table 1. Long-term Income Elasticity of Meat Consumption in China Commodity Elasticity Std. Err. Pig meat 0.151 0.048*** Poultry meat 1.057 0.087*** Bovine meat 1.560 0.143*** Mutton & Goat 0.882 0.045*** Other meat 0.944 0.088***
Log L # of lags 169.556 3 168.582 3 154.035 3 169.507 3 132.126 3
Period # of Obs. 1964 -2008 45 1964 -2008 45 1964 -2008 45 1964 -2008 45 1964 -2008 45
Note. ***Denotes significant at 1%. Source: Estimation by authors.
Table 2. China’s Meat Consumption: Projection Summary Meat Consumption, Total (MMT) -- Pig meat -- Poultry meat -- Bovine meat -- Mutton & Goat meat -- Other meat Per Capita Meat Cons. (kg/capita/year) -- Pig meat -- Poultry meat -- Bovine meat -- Mutton & Goat meat -- Other meat GDP (billion constant 2000 USD) Per Capita GDP (cons. 2000 USD/capita) Population, Total (million people)
1999/01 62.6 41.0 12.9 5.2 2.7 0.8 49.2 32.2 10.1 4.1 2.1 0.7 1,372 1,077 1,274
2010 81.6 48.7 19.0 7.7 4.4 1.8 59.9 35.8 14.0 5.6 3.2 1.3 3,276 2,406 1,362
2020 111.8 54.9 31.6 15.8 6.7 2.8 77.7 38.2 21.9 11.0 4.7 1.9 5,302 3,683 1,439
2030 136.3 58.3 42.0 23.8 8.5 3.6 92.6 39.6 28.6 16.2 5.8 2.4 6,956 4,728 1,471
1999/01-2010 2010-20 2020-30 2.7% 3.2% 2.0% 1.8% 1.2% 0.6% 4.0% 5.2% 2.9% 4.0% 7.5% 4.2% 5.0% 4.4% 2.5% 7.6% 4.7% 2.6% 2.0% 2.6% 1.8% 1.1% 0.6% 0.4% 3.3% 4.6% 2.7% 3.3% 6.9% 4.0% 4.3% 3.8% 2.2% 6.9% 4.1% 2.4% 9.1% 4.9% 2.8% 8.4% 4.4% 2.5% 0.7% 0.6% 0.2%
Meat Consumption, Total (CAGR %) -- Pig meat -- Poultry meat -- Bovine meat -- Mutton & Goat meat -- Other meat Per Capita Meat Consumption (CAGR %) -- Pig meat -- Poultry meat -- Bovine meat -- Mutton & Goat meat -- Other meat Gross Domestic Product (CAGR %) Per Capita GDP (CAGR %) Population, Total (CAGR %)
Note. 1. Projection starts from 2009. 2. CAGR = Compound Annual Growth Rate. Sources: FAOSTAT, World Bank WDI, and estimation by authors.
Table 3. Meat Supply Balances in China, USA, Brazil & India (2006-07 year average) Element Production (million metric tons) Net Import (million metric tons) Dom. Supply (million metric tons) Per Capita Supply (kg/capita/year) Population, Total (million people)
World China USA Brazil India 269.9 71.6 41.5 21.1 6.4 0.7 -3.0 -5.8 -0.5 269.9 72.3 38.5 15.3 5.9 40.7 54.2 125.5 80.8 5.1 6,631 1,332 307 189 1,156
Source: FAOSTAT and authors’ calculation.
Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
Figure 1. China’s Ratio of Meat Calories to Total Food Calories (1965-2005) (1965 3500
100% 15%
13%
12%
14%
16%
17%
19%
20%
22%
75% 2842
2901
29703000
2704 50%
78%
81%
81%
75%246972%
78%
64%
60%
56%
2500
2167 25% 1799 0%
2000
1932 1854
2% 4%
2% 4%
2% 5%
2% 6%
3% 7%
3% 8%
5% 11%
1965
1970
1975
1980
1985
1990
1995
6%
7%
14%
15% 1500
2000
2005
Meat Total (%)
Other Animal Products (%)
Cereals & Starchy Roots (%)
Other Vegetal Products (%)
Total Food Kcal/capita/day (Right) Notes: 1. China = Mainland China + Hong Kong + Macau. 2. Meat = Bovine Meat + Mutton & Goat Meat + Pig Meat + Poultry Meat + Other Meat. 3. Other Animal Products include offals, animal fats, eggs, milk, aquatic products. 4. Other Vegetal Products include sugar cr crops, sugar & sweeteners, honey, pulses, tree nuts, oilcrops, vegetable oils, vegetables, fruits, stimulants, spices, alcoholic beverages. Source: FAOSTAT and authors’ calculation.
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Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
Figure 2. Shifts of Meat1 Consumption Quantity2 Share of China3, USA, Brazil and Continents 100% 9%
9%
9%
9%
9%
8%
80% 60%
0%
9% 218
51%
50%
52%
51% 124
50% 141
165 48%
107 3% 76
92 3%
3%
3%
4%
4%
21%
20%
18%
17%
24%
23%
10%
12%
16%
6%
8%
9%
43%
5% 16%
38%
37% 150
6%
6%
15%
15%
100
50
21%
26%
27%
China USA Brazil Eurasia excl. China America excl. USA & Brazil Africa Oceania World Meat Consumption (MMT, right) Notes: 1. Meat = Bovine Meat + Mutton & Goat Meat + Pig Meat + Poultry Meat + Other Meat. 2. Domestic supply quantity for food (million metric tons). 3. China = Mainland China + Hong Kong + Macau. Source: FAOSTAT and authors’ ors’ calculation.
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250
200
191
40% 20%
8%
244 9%
0
Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
Figure 3.. China’s Meat Consumption and Its Composition (1961 (1961-2005) 2005) 100%
51.4 17%
12%
12%
13%
11%
12%
75%
16%
45.5 20%
20%
60.0 45.0
33.7 50% 76% 25%
6.5
81%
81%
9.5
10.5
80% 12.1
82% 16.8
23.3 80%
30.0 73%
67%
0%
65% 15.0 0.0
Pig meat (%, left) Poultry meat (%, left) Bovine meat Mutton & Goat meat Other meat Total Meat Consumption (kg/capita/yr, right) Notes. Meat Consumption = Domestic Meat Supply for Food / Population. Carcass retail weight loss is i not considered. Source: FAOSTAT and authors’ calculation.
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Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
Figure 4. China’s Population Shift from Rural to Urban (1965-2030 2030) 1439 1462 1471
100%
75%
1404 1362 18% 18% 18% 20% 23% 1320 28% 32% 1274 36% 41% 1218 45% 50% 53% 57% 1148 61%
1,500
1,250
1059 986
50%
25%
1,000
916
82% 82% 820 82% 80% 77% 72% 68% 64% 59% 720 55% 50% 47% 43% 39%
750
500
0% 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 Rural population (%, left)
Urban population (%, left)
Total Population (million, right) Source: FAOSTAT and authors’ calculation.
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Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
Table 1. Long-term Income Elasticity of Meat Consumption in China commodity Pig meat Poultry meat Bovine meat Mutton & Goat Other meat
Elasticity 0.151 1.057 1.560 0.882 0.944
Std. Err. 0.048 0.087 0.143 0.045 0.088
*** *** *** *** ***
Cons. -4.706 -8.572 -5.761 -6.566
Std. Err. -
Note. ***Denotes significant at 1%. Source: Estimation by authors.
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Log L 169.556 168.582 154.035 169.507 132.126
# of lags 3 3 3 3 3
Period 1964 -2008 1964 -2008 1964 -2008 1964 -2008 1964 -2008
# of Obs. 45 45 45 45 45
Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
Table 2. China’s Meat Consumption: Projection Summary Meat Consumption, Total (million metric tons) -- Pig meat -- Poultry meat -- Bovine meat -- Mutton & Goat meat -- Other meat Per Capita Meat Consumption (kg/capita/year) -- Pig meat -- Poultry meat -- Bovine meat -- Mutton & Goat meat -- Other meat GDP (billion constant 2000 USD) Per Capita GDP (constant 2000 USD/capita) Population, Total (million people)
2
Meat Consumption, Total (CAGR %) -- Pig meat -- Poultry meat -- Bovine meat -- Mutton & Goat meat -- Other meat Per Capita Meat Consumption (CAGR %) -- Pig meat -- Poultry meat -- Bovine meat -- Mutton & Goat meat -- Other meat Gross Domestic Product (CAGR %) Per Capita GDP (CAGR %) Population, Total (CAGR %)
1999/01 62.6 41.0 12.9 5.2 2.7 0.8 49.2 32.2 10.1 4.1 2.1 0.7 1,372 1,077 1,274
2010 81.6 48.7 19.0 7.7 4.4 1.8 59.9 35.8 14.0 5.6 3.2 1.3 3,276 2,406 1,362
1999/01-2010 2.7% 1.8% 4.0% 4.0% 5.0% 7.6% 2.0% 1.1% 3.3% 3.3% 4.3% 6.9% 9.1% 8.4% 0.7%
Note. 1. Projection starts from 2009. 2. Compound Annual Growth Rate. Sources: FAOSTAT, World Bank WDI, and estimation by authors.
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2020 111.8 54.9 31.6 15.8 6.7 2.8 77.7 38.2 21.9 11.0 4.7 1.9 5,302 3,683 1,439
2010-20 3.2% 1.2% 5.2% 7.5% 4.4% 4.7% 2.6% 0.6% 4.6% 6.9% 3.8% 4.1% 4.9% 4.4% 0.6%
2030 136.3 58.3 42.0 23.8 8.5 3.6 92.6 39.6 28.6 16.2 5.8 2.4 6,956 4,728 1,471
2020-30 2.0% 0.6% 2.9% 4.2% 2.5% 2.6% 1.8% 0.4% 2.7% 4.0% 2.2% 2.4% 2.8% 2.5% 0.2%
Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
Table 3. Meat Supply Balances in China, USA, Brazil & India (2006-07 year average) Element Production (million metric tons) Net Import1 (million metric tons) Domestic Supply2 (million metric tons) Per Capita Supply3 (kg/capita/year) Population, Total (million people) Notes: 1. Net Import = Import – Export. 2. Domestic Supply = Production + Net Import. 3. Per Capita Supply = Domestic Supply / Population. Source: FAOSTAT and authors’ calculation.
World 269.9 269.9 40.7 6,631
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China 71.6 0.7 72.3 54.2 1,332
USA 41.5 -3.0 38.5 125.5 307
Brazil 21.1 -5.8 15.3 80.8 189
India 6.4 -0.5 5.9 5.1 1,156
Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
References Bennett, M.K., 1941. Wheat in National Diets. Wheat Studies of the Food Research Institute, Stanford University. 18(2), 35-76. Deaton, A., Muellbauer, J., 1983. Economics and Consumer Behavior. Cambridge Univ. Press. Delgado, C., Rosegrant, M., Steinfeld, H., Ehui, S., Courbois, C., 1999. Livestock to 2020: The Nest Food Revolution. Food, Agriculture, and Environmental Discussion Paper 28. IFPRI, Washington, D.C. FAO. FAOSTAT. http://faostat.fao.org/ FAO. 2006. World Agriculture: Towards 2030/2050 Interim Report. Rome. Gardner, E.S.Jr., 1985. Exponential Smoothing: The State of the Art. J. of Forecasting. 4, 1-28. Gardner, E.S.Jr., Mckenzie E., 1985. Forecasting Trends in Time Series. Management Science. 31 (10), 1237-1246. Gonzalo, J., 1994. Five alternative methods of estimating long-run equilibrium relationships. J. of Econometrics. 60, 203-233. Hamilton, J.D., 1994. Time Series Analysis. Princeton Univ. Press. Johansen, S., 1988. Statistical Analysis of Cointegration Vectors. J. of Econ. Dynamics & Control. 12, 231-254. Johansen, S., 1995. Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford University Press, New York. Keyzer, M., Merbis, M., Pavel, F., 2001. Can We Feed the Animals? Origins and Implications of Rising Meat Demand. Center for World Food Studies, Amsterdam.
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Poster #11972, Masuda and Goldsmith, 2010 AAEA Annual Meeting in Denver
Keyzer, M.A., Merbis, M.D., Pavel, I.F.P.W., van Wesenbeek, C.F.A., 2005. Diet shift towards meat and the effects on cereal use: can we feed the animals in 2030? Ecological Economics. 55, 187-202. Mills, T.C., 1990. Time series techniques for economists. Cambridge Univ. Press. World Bank. WDI Online. http://publications.worldbank.org/WDI/
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