Affecting the cost of animal feed and lowering the amount of milk from cows, the drought is pushing up milk prices.

Elasticity: Eating More Meat

Aug 15, 2013 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Environment, International Trade and Finance, Macroeconomic Measurement • 407 Views    No Comments

Earning more probably means eating more meat.

Chinese meat consumption surpassed the US in 1990. Their 7-fold increase since 1980 corresponds to a huge GDP pop–maybe by a 50 multiple. One Australian economist hypothesizes that when an economy doubles, people eat 15% more meat.

As the Chinese economy grew, so too did meat consumption.

From: Earth Policy Institute

Specifically, the Chinese are eating lots more pork. Somewhere near half of the world’s pigs live in China (the number is 476 million but how could the count be accurate?) and the government has also created a strategic pork reserve (really–sort of like our oil reserve) to cushion price spikes.

From: Earth Policy Institute/USDA data

From: Earth Policy Institute/USDA data

 

The Earth Policy Institute suggests that beef consumption is low in China because cows eat much more than pigs. While cows need 7 pounds of grain to gain a pound, the feeding ratio for pigs is 3 to 1.  

From: Earth Policy Institut/USDA Data

From: Earth Policy Institut/USDA Data

 

Although recently Chinese poultry production has increased and exceeds the US, still, per person, the Chinese consume far fewer chickens.

 

From: Earth Policy Institute/USDA Data

From: Earth Policy Institute/USDA Data

In a developing nation, meat is a luxury. Consequently, when income rises, the quantity demanded increases. Economists would say that we are looking at income elasticity of demand.

One last thought…With the first laboratory produced hamburger having been eaten several weeks ago from cloned meat, some say we can solve climbing and perhaps unmanageable meat demand.

Sources and resources: I do recommend looking at this Australian economic blog for their perspective on growing demand for meat, at the discussion on China’s meat and poultry demand from the Earth Policy Institute and then at a firsthand look at USDA data. However, for the most interesting article, do go to the story of the first laboratory hamburger.

Please note that GDP stats comparing 1980 to 2013 for China might be entirely inaccurate. We do know, though, that growth has been considerable.

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