Population Growth, Rapid Rural–Urban Migration and Increased Demand on Scarce Resources Seen to Affect Future Food Supply in Asia

(Jakarta) May 9, 2019 – Asia, which is expected to be home to 4.9 billion people by 2030, will see food consumption more than double on a per capita basis over the next 12 years. Meanwhile, however, expanding populations in Asia exacerbated by rapid internal rural-urban migration in developing Asian countries are trends that may strain domestic food supply.

These are some of the major trends reported by a white paper released today by The Economist Intelligence Unit. Titled “From Farm to Fork”, the study commissioned by Cargill, it found that within the food supply chain, there are six megatrends that affect its viability including urbanization, ageing rural populations, resource scarcity, supply chain integration, modern retail, and food loss and food waste.

In Indonesia, urbanization is expected to accelerate. In 2010, already half of the population was living in urban areas and according to the World Bank, 68% of the population will be living in cities by 2025. With urbanization, diets are also becoming more diverse and more resource-intensive, particularly when they include meat. Simultaneously, the Indonesian economy is shifting away from agriculture with urban employment gradually overtaking rural employment.

The lack of adequate infrastructure is another stumbling block to Indonesia’s food supply chain. According the EIU study, poor infrastructure makes it difficult to transport and store food, driving costs up and increasing food loss and food waste. In Indonesia, for example, there are considerable differences in the price of rice between producing and consuming regions, due to poor maintenance of infrastructure, cargo insecurity and topography with, experts noting that it is not economically viable to trade or even move food from inland areas if road transport networks are poor, port capacity is insufficient or there are no storage facilities.

Other megatrends revealed in the study include:

Resource Scarcity - Domestic production will be affected mainly by resource scarcity and sustainability concerns. This will be made worse in the long-run by climate change.

a. Food and Agriculture Organisation (FAO) of the United Nations estimates that 40% of land in ASEAN countries will continue to face severe degradation.
b. Competition of water will also increase due to urbanization, and 40% of Asia will face severe water shortages by 2030. This will all be made worse by climate change
c. Currently agriculture is the main user of fresh water, but by 2030 Asia will need 65% more water for industrial use, and 30% more for domestic use.

Supply Chain Integration - Supply chain integration already faces challenges for smallholders. Geopolitical shifts may drive further regional integration at the expense of global integration.

a. Being able to integrate various stages of the supply chain means an increase in ability to trace and track food quality.
b. Smallholders can work with large firms, but will struggle to meet quality standards demanded by consumers and large agri-business firms.
c. Modern retail (including vertical integration) means supermarkets want high quality food in large volumes. We could end up with shorter, more regional supply chains.

Modern Retail - Modern & online retail to become prevalent with focus on food safety /sustainability.

a. The average Asian consumer has more money and more evolved food preferences, so supermarkets have to meet changing requirements and deliver safe, high quality food products at competitive prices.
b. E-commerce could re-design the food chain by lengthening them physically but shortening the number of players within the chain.
c. National Bureau of Statistics reports that Chinese online sales grew by one-third in 2015, reaching a value of RMB3.88trillion.
d. 37% of all Asian consumers already shop online and another 53% are willing to do so.

Food Loss and Food Waste - Food loss will transition to food waste, but an awareness could lead to data-driven solutions.

a. Food loss generally occurs when there is inadequate technology, weak infrastructure support, technical skills deficiency or knowledge gaps, and also poor logistical support.
b. Food loss tends to happen during harvest time and post-harvest, but high-income Asian countries are more likely to show patterns of food loss (Japan, South Korea and China) during consumption stage.
c. Food loss and food waste are yet to be systemic issues, but an increased awareness has been building and research encouraged in the area.

Arief Susanto, Corporate Affairs Director of Cargill Indonesia, said, “We believe all stakeholders, including private sector, play an important role in finding solutions to food supply chain challenges. We work with farmers, government, industry groups, customers and consumers to make the future of food more sustainable. Through our combined long experiences with new technologies and insights to create a food-secure future, we answer the food industry and consumers’ needs for more sustainable food ingredients, including enhance global supply chain traceability and transparency.”

To read the white paper in full, please go to here.