PORTLAND, Ore.—Expectations of booming global populations, often associated with upward pressure on commodity crop prices, are unrealistic, according to an economist for a major bank.
“It’s too simplistic,” said Michael Swanson, agricultural economist for Wells Fargo.
While populations will grow, current projections are often unsophisticated and rely on scant analysis, he said during an Oct. 22 economic forum hosted by the company here.
Much of the population increase over the next two decades is expected to occur in sub-Saharan Africa, but that projection is based on the current trajectory of reproduction in that region, Swanson said.
In reality, though, this type of “click and drag” forecast doesn’t account for societal changes that occur when economies become more robust and complex, he said.
As incomes rise, people generally move to cities and have fewer children, dampening the rate of population growth, Swanson said.
The trend has been observed in the U.S. and other developed countries but it is also becoming apparent in China, which has relied on a massive population for its economic success, he said.
There’s no reason to think Africa will be any different as education levels and urbanization rise, Swanson said.
People also often have outdated views of population trends in countries like Mexico, which is stereotypically associated with big families but where reproductive rates have actually slowed, he said.
For those reasons, Swanson said he’s skeptical of the notion that an enormous demand for commodity crops will steadily drive up prices in the long term.
Due to corn-based ethanol production, demand for that important commodity crop is now intertwined with oil and fuel prices, he said.
The long-term demand for oil will be shaped by what happens in China, which is becoming more of a mature economy prone to volatility and slower growth just like other developed nations, Swanson said.
The Chinese market will also affect the U.S. timber industry, which was buoyed during the housing downturn by log exports to that country.
Aside from China’s economic performance, demand for U.S. timber there is affected by competition from Russia—a country with major forests directly to the north of China, said Kevin Bergquist, senior vice president and agribusiness consultant for Wells Fargo.
Russian log shipments to China were hindered by an export tariff that was intended to spur processing within Russia, he said.
Improved lumber production in Russia may occur over the long term, but roads, railroads and other infrastructure in the heavily forested eastern portion of that country remain primitive, Bergquist said.
The tariffs have provided a competitive leg up for U.S. timber producers, but Russia may change them at any time in reaction to geopolitical tensions, he said. “Russia is a real wild card.”
Source: www.capitalpress.com