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Over the next fifty years, as we add another 4.5 billion people to the world's population, global demand for food will increase almost 70% if population growth predictions are correct.

Already approximately 1 billion people go to bed hungry each night. Somewhere in the world someone starves to death every 3.6 seconds - most are children under the age of five.

Migration is defined as: the long-term relocation of an individual, household or group to a new location outside the community of origin. Today the movement of people from rural to urban areas is most significant.

Migration cause can be explained two ways:

Push factors - conditions in the place of origin which are perceived by migrants as detrimental to their well being or economic security.

Pull factors - the circumstances in new places that attract individuals to move there.

Unemployed, poor and hungry (push factor) people from rural areas are attracted to cities because cities are perceived to be places where they could make more money and have a better life (pull factor).

During the 19th and early 20th centuries urbanization heavily contributed to industrialization. Job opportunities in the cities caused the mass movement of people from the country to the city. These rural to urban migrants provided cheap and plentiful labor for emerging factories.

Nowhere is this rural to urban migration - and a higher degree of industrialization - more evident today than in China and India.

Chinese urbanization

• At the end of 2009 mainland China's total population was 1.334 billion. 712 million people or 53.4 percent of the population were residing in rural areas while 622 million or 46.6 percent were residing in urban areas - Chinese urban dwellers are the largest such population in the world
• City's Blue Book: China's Urban Development Report No. 3 said China's urban population is twice that of the population of the United States, one quarter more than the total population of 27 countries of the European Union and that the urban economy would continue to drive domestic demand
• The UN has forecast that China's population will have about an equal number of people, the 50-percent point phenomenon, living in the rural and urban areas by 2015
• China has set a goal of 65 percent of urbanization rate in 2050. Over the coming 40 years that means 20 percentage points of urban growth per year, that translates into 300 million rural residents becoming urban residents over this time period
• By 2025 China's urban population is expected to rise to 926 million. By 2030 that number will increase to a billion
• China's current urbanization rate of 46 percent is much lower than the average level of 85 percent in developed countries and is lower than the world average of 55 percent
• In 2010 the disposable income of the urban population stood at 17,175 yuan per capita - the net income of the rural population was 5,153 yuan per person
• 221 Chinese cities will, by 2025, have one million people

Indian Urbanization

India's GDP growth has averaged an impressive 6.5 percent a year since the economic reforms that began in 1991.

"Every major industrialized country in the world has experienced a shift over time from a largely rural agrarian-dwelling population to one that lives in urban, nonagricultural centers. India will be no different. However India's urbanization will be on a scale, that outside of China, is unprecedented." McKinsey Global Institute's report India's Urban Awakening

• India has 1.2 billion people and the second largest urban system in the world - currently 340 million people.
• The share of the urban population in India is expected to reach 40% by 2021, and by 2011, urban areas could contribute around 65% of GDP.
• India Urban Awakening predicts that 590 million people or 40% of the population will live in cities by 2030 up from 340 million today. By that time, Asia's third largest economy would have 68 cities with populations over 1 million, up from 42 today.
• With less than 1/3 of the population India's urban areas generate over 2/3 of the country's GDP and account for 90% of government revenues.

Climbing the Protein Ladder

The change of diet among newly prosperous, urban populations in developing countries is the most important factor stoking the rise in global food demand.

A rising income means more money in the household budget. The new middle class consumers forgo plant based calories in favor of adding more protein from meat and dairy products to their diets. It takes up to 8 kilograms of grain to produce one pound of beef - less for pork, chicken, milk or eggs - between 2kg and 6kg. As meat consumption soars, more grain is needed to feed more livestock.

In 1995, the Chinese ate an average of 25kg of meat per person, by 2007, the Chinese were consuming 53kg of meat per person.

Enlarging and diversifying the meat supply is a first step for every developing country.

The Protein Ladder:

5.Grain fed beef

4.Grass fed beef

3.Milk, other dairy products

2.Pork

1.Chicken and eggs

Rice, beans and bread

In 1980, the world ate 133 million tonnes of meat and drank 342 million tonnes of milk. By 2002, consumption had increased to 239 million tonnes of meat and 487 million tonnes of milk. The United Nations Food and Agriculture Organization (FAO) estimates that by 2030 global annual consumption of meat will stand at 373 million tonnes and 736 million tonnes of milk.

The more people there are on this planet and the more Asians, and others, decide they want a western style diet the more grains/oilseeds are needed to feed them. And many of those very same grains are needed to raise the animal protein, the beef, pork and chicken they want - they are also the very same grains the world's poorest people, the ones who can't afford to climb the protein ladder, depend on to survive.

The Cost of Climbing the Protein Ladder

Animal agriculture already takes up 30% of total land area on the planet and uses over 70% of agricultural land worldwide. If the entire world population were to consume as much meat as the Western world does - 176 pounds of meat per capita per year - the global land required would be two-thirds more than what is presently used.

Livestock agricultural reduces the available acreage for direct human grain consumption in two ways:

• The acreage necessary to produce a certain amount of calories from any livestock is drastically greater than the required acreage to produce the same amount of calories from plants
• Livestock agriculture requires additional acreage to grow the grains needed for livestock feed

Currently farmed animals eat one-third of the world's cereal production. In the industrialized world, two-thirds of the agricultural land produces cereals for animal feed. In the United States, farmed animals, mostly cattle, consume almost twice as much grain as is eaten by the entire US population. Over 100 million acres of US agricultural land is used to grow grain for animals and still more is imported.

Food For Fuel

Another systemic cause for the price rise of food is the diversion of food crops for the production of bio-fuels. An estimated 100 million tons of grain per year are being redirected from food to fuel.

Economist Dr. Hazell has said that filling an SUV tank once with ethanol consumes more maize than the typical African eats in a year

A World Bank policy research working paper released in July 2008 states: "large increases in bio-fuels production in the United States and Europe are the main reason behind the steep rise in global food prices."

The World Bank report says that bio-fuels are responsible for raising food prices between 70 to 75 percent. Higher oil prices and a weak dollar were responsible for the rest of the price rise. The analysis disputed the argument that increases in global grain consumption and droughts were responsible for food price increases.

An economic assessment report, also published in July 2008, by the Organization for Economic Co-operation and Development (OECD) found that the effect of bio-fuels on food prices to be much smaller.

Perhaps more telling is the fact the OECD study said current bio-fuel policies would only reduce greenhouse gas emissions from transport fuel by 0.8 percent by 2015.

Ironic that:

• Producing one kilogram of beef is responsible for greenhouse gas emissions (in the form of methane - cow farts) equivalent to driving a car for 250k's
• Producing that one kg of beef uses the energy equivalent of powering a 100W bulb for 20 days

Population Growth

According to the FAO the world's population will increase from 6.8 billion today to around nine billion by 2050.

World Population

Conclusion

On the demand side of the world grain production equation there are three sources of growth:

• The addition to the planet of an additional 80 million people per year
• Three billion more people moving up the food chain consuming more grain intensive livestock products
• The massive conversion of grain to ethanol

Global grain production is under duress - because of aquifer depletion, severe soil erosion, climate change, severe weather events and the green revolution has run out of steam with no new technological miracles in sight. Inventories of most grains have sunk to historical lows.

Our agricultural regime should be on every thinking person's radar screen. Is it on yours?

If not, maybe it should be.

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** Richard Mills does not own shares of any companies mentioned in this report