Commodity Brokers Biography
Why was global consumption exceeding global production? There are several reasons. The biggest was that global demand in aggregate was growing faster than global production. Yields were increasing over this period, but consumption was growing even faster. Many looked at this situation and simply assumed it was India and China. Indeed, consumption was growing rapidly in both countries, but so was production. Both India and China have self-sufficiency policies in basic cereals (e.g., wheat, rice and corn). So it was not particularly India and China; rather, it was growth in demand the world over. As incomes rise, people demand more meat and meat needs much more cereal input than if the cereals are consumed directly by humans alone. In the years just before 2008, there were also some droughts (e.g., Australia) and disease problems in several world regions. These supply problems exacerbated an already declining stocks-to-use ratio. Thus, the stage was set for serious shortages.
Why was global consumption exceeding global production? There are several reasons. The biggest was that global demand in aggregate was growing faster than global production. Yields were increasing over this period, but consumption was growing even faster. Many looked at this situation and simply assumed it was India and China. Indeed, consumption was growing rapidly in both countries, but so was production. Both India and China have self-sufficiency policies in basic cereals (e.g., wheat, rice and corn). So it was not particularly India and China; rather, it was growth in demand the world over. As incomes rise, people demand more meat and meat needs much more cereal input than if the cereals are consumed directly by humans alone. In the years just before 2008, there were also some droughts (e.g., Australia) and disease problems in several world regions. These supply problems exacerbated an already declining stocks-to-use ratio. Thus, the stage was set for serious shortages.
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