Let us explore this BHP Billiton bid for Potash a little further

Let us explore this BHP Billiton bid for Potash a little further. We understand the reasons why, growing world populations are going to put increasing pressure on food production, higher yields are going to be demanded over time, and there should be bigger demand for fertilizer. In order to achieve the crops that farmers will have to produce. What is also apparent to me is that mechanized farming will become a more important industry, it is quicker and it can work around the clock.



So quite simply, we know why Marius Kloppers sees this as a very big add on to the existing business. I was quite astonished to see this Reuters piece titled BHP's Kloppers eyes elusive first big acquisition, written in Sydney which included the following line: "Kloppers, who turned vegetarian after a steady diet of fish and meat school lunches in apartheid South Africa, is critical of developed countries for hoarding food and using sugar cane, palm oil and other food crops to manufacture biofuels."



Do they not have meat in Sydney? Australia is defined as a developed country, the norm for kilograms of meat eaten in developed countries is 80 kg's per annum per person. That is roughly 220 grams a day. Which is fair enough I guess. I saw a number that suggested the average Aussie a decade ago ate 40 kg's of beef a year.



But the number in developing countries is MUCH lower, in fact the number is an astonishing 28.9 kg's per person, which is 79 grams of meat per day. Check out the table below, which I took a snapshot from EarthTrends, sadly the most up to date data on the web is from 2002. What a disgrace, but here goes:

Here are two practical examples of why we will need to plant more crops to not only feed us, but the meat that we eat too. In 1974, when the world population was 4 billion, the average Chinese person ate only 10.5 kg's of meat per annum. That works out to 28.75 grams of meat a day. In 2002, according to this table from Google docs the average Chinese person ate 52.4 kg's of meat per annum, or 143.5 grams of meat a day.



This document, China and Industrial Animal Agriculture:

Prospects and Defects suggests that Chinese meat consumption is now 119 pounds per annum, that is about 54 kg's of meat per year, or 148 grams per day.



700 million pigs live in China, wow, that is a lot of hog. Each pig should eat around 8 pounds of feed a day, that is around 3.6 kg's of food. I found the most basic website, an American one, but hey, it works called Pork4kids. And from birth to fully grown takes 5 months. I am presuming that a small pig can't eat 3.6 kg's of corn, soya and wheat.



Perhaps a pig farmer out there can tell me and more importantly, how many people could be fed from the feed
that the pig consumes. And how many people a pig feeds. But you do the math to determine how much pigs must be fed a day to keep them going. This Pork4Kids suggests that it costs 100 Dollars to raise a pig, and around 60 percent of that is food. So call it 60 Dollars.



What does that trend look like in India? What is meat consumption in India? It is well low, for religious reasons. So you meat eaters should be so happy. I say you meat eaters because I am a vegetarian, who has been eating fish for about two years. I know, that is really bad, I should stop. But no meat for around 14 years or so. Back to India, who consume 5.2 kg's per person per annum, that is back in 2002. 14.25 grams a day!! That compared to in 1974 when it was 3.6 kg's per annum. Less than 10 grams of meat a day. The Brazilians' eat a lot of meat. Far above that developing world standard, eating 82.4 kg's per annum in 2002, or 225 grams a day.



But if you think that this is ONLY a developing market phenomenon think again. The folks who enjoy more meat than anybody else are the Danish. Lego and Lurpak might be big there, but so is bacon. 146 kg's of meat per person consumed in 2002, that is 400 grams of meat a day per person. Back in 1974 each Dane only ate 65 kg's per annum, that is roughly 178 grams a day.



So whilst the Chinese have been eating meat like crazy, so have folks in the developed world, as producers and food outlets are more accessible so everyone is eating more meat. And that meat needs more grain. And the grain yields need to improve to feed more people and livestock. So, can you see where we are going with this? Fertilizer prices should ramp up over time. And that everybody is where BHP Billiton see the big picture.