Consumer preferences and concerns shape global food trade

Food Review, Sept-Dec, 2001 by Anita Regmi, Mark Gehlhar

Differences in total food availability between developed and developing countries are also reflected in their respective food budget shares (table 2). Low-income countries spend on average 47 percent of their total budget on food compared with high-income countries that on average spend only about 13 percent on food. Staple food products, such as cereals, fats and oils, and fruits and vegetables, account for a larger share of the total food budget in low-income countries than in higher income countries. (Because data for fruit and vegetables include roots and tubers--cereal substitutes in poorer countries--fruits and vegetables are categorized here as staples.) Meat and dairy budget shares are greater for high-income countries.

How countries respond to rises and falls in income helps policymakers assess future food needs, trade, and demand for associated transportation and infrastructure facilities. The income elasticity for food, which is a measure of the responsiveness of the quantity of food demanded to a change in income, is higher for poorer countries. Thus, when incomes fall by 1 percent in both low- and high-income countries, poorer countries make bigger cutbacks in food expenditures than wealthier countries. These cutbacks, however, are not implemented evenly across the different food groups. To meet their basic food needs, low-income countries make smaller expenditure reductions in staple food consumption, such as cereals (0.56 percent), and larger cuts in higher value food consumption, such as fish (2.77 percent) and dairy (0.93 percent).

Low-income countries may switch to cheaper products within a food group when the price of food in that group increases, such as substituting corn for wheat when overall cereal prices increase. Middle-income countries, with greater purchasing power, are more likely to switch to products outside a food group when prices for a particular food group change, such as substituting meat and horticultural products when cereal prices increase. In high-income countries, food is a small part of total household budgets and food price changes may lead to small or no adjustments in the composition of food consumed.

Urbanization Fuels Food Consumption Increases

Widespread growth in urbanization has also helped shape global food preferences in recent decades. Urban areas have more effective marketing facilities and a greater supply of products from domestic and foreign producers. Urban areas are also centers of economic opportunity and have a greater percentage of women working outside of the home. Increased opportunity cost of women's time increases the demand for nontraditional fast food in many countries.

The effects of urbanization on diets differ from country to country. For poorer countries, urbanization may initially lead to the substitution of purchased cereals and processed foods for home-grown and prepared staples, such as rice and cassava. Urbanization has resulted in significant increases in wheat consumption in Asian countries, such as China, India, and Indonesia, while the consumption of coarse grains (corn and sorghum) and cassava has declined. Similarly, consumption of cassava and coarse grain has declined in urban areas of western African countries, while consumption of rice has increased. With further increases in income levels, consumption of more expensive sources of nutrients, such as meat, fruit, and vegetables, increases, while the consumption of lower cost staples, such as roots and tubers, decreases.