The growing affluence of consumers in China and India is creating new markets for higher value food products. What kind of opportunity will this growth offer U.S. farmers? Mark Drabenstott, vice president and director of the Center for the Study of Rural America, and Nancy Novack, an associate economist at the Center, explore the issue in the latest edition of The Main Street Economist. The Main Street is published by The Center, which is based at the Federal Reserve Bank of Kansas City. China’s expanding economy has already helped fuel gains in the U.S. agricultural commodity market this year, although prices have recently moderated. “China is well on its way to becoming a classic growth market for food,” the authors write, noting that in most developing economies, consumers make improving diets a top priority, devoting a big share of their income to spending on food – typically more processed foods and meat products. U.S. commodities, however, will face mounting competition for this market from countries with lower production costs. Although China’s economy may not grow at the torrid pace of recent years, most forecasters expect growth will continue and the nation will see a significant portion of its population move from rural to urban areas in pursuit of better economic opportunities. While economic trends in India may be similar to those in China, the impact for U.S. farmers may be quite different. India’s consumers are very sensitive to both economic and cultural factors related to food consumption. The nation’s large vegetarian population will limit gains in meet consumption while India’s agricultural policies have historically protected the nation and served as a barrier to imports. Past issues of The Main Street Economist are available at www.kansascityfed.org. # # # Return to www.kansascityfed.org
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