From Mao to McDonald’s: Emerging Markets for Potatoes and Potato Products in China 1961–2007

Abstract

China is not only the world’s largest producer of potatoes, but also its largest consumer. This article uses a value chain framework, FAO times-series data and a review of the literature to estimate and then interpret growth rates for the different uses of potatoes in China over the last five decades. It singles out changes in government policy, production, per capita incomes, and consumer tastes and preferences to explain the rise in consumption of potatoes as food and the decline in their use as feed. The paper also notes the negligible importance of imports as a percentage of the total volume of potatoes consumed and the emerging influence of various private sector initiatives before reassessing past projections of future utilization levels. It concludes by highlighting opportunities for industry and identifying some key topics for future research.

Resumen

China no solamente es el país que produce más papa en el mundo, sino también el que la consume. Este articulo utiliza un enfoque de cadena de valor como marco teórico, los datos de serie de tiempo de la FAO, y una revisión de la literatura para estimar y después interpretar las tasas de crecimiento para los diferentes usos de la papa en China durante las últimas cinco décadas. Los resultados subrayan los cambios en la política, la producción, los ingresos per cápita, y los gustos y preferencias de los consumidores para explicar el crecimiento en el consumo humano y la bajada en la alimentación animal. El articulo nota también la poca importancia de las importaciones como un porcentaje del volumen total de papa consumida y la influencia emergente de varias iniciativas del sector privado antes de evaluar proyecciones previas para los niveles de utilización en el futuro. Se concluye subrayando las oportunidades para la industria e identificando algunos temas clave para la investigación en el futuro.

Annex. Background on the IMPACT Model

Scott et al. (2000) reported estimates of global projections for food supply and demand based on a 1998 version of IFPRI’s International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT). That IMPACT model covered 37 countries or country groups and 18 commodities, including all cereals, soybeans, the major roots and tubers (i.e., potato, sweet potato, cassava, and yam), meats, and dairy products, accounting for virtually all of the world’s food and feed production and consumption. The model was specified as a set of country-level demand and supply equations linked to the rest of the world through trade. In IMPACT, food demand is a function of commodity prices, per capita incomes, and population growth. It includes fresh and processed food. Feed demand is a function of livestock production, feed prices, and feeding efficiency. Total demand equals the sum of food, feed, and other demand, e.g. products for industrial use such as starch. Crop production is determined by the area and yield response functions. Area is projected as a function of crop price, investment in irrigation, and estimated rates of land lost to urbanization and degradation. Crop yield is a function of crop price, input prices, investments in irrigation, and yield growth due to technological change. Growth in productivity due to technological change is in turn estimated by its component sources, including advances in management research and, in the case of food crops, plant breeding research. Other sources of growth considered in the model include private sector investments in agricultural research and development, agricultural extension and education, markets, infrastructure, and irrigation.

The projections to 2020 referred to in this paper used FAO data for 1992–94 as the base year and the United Nations medium-variant projections for 1996 for demographic assumptions. National income projections were estimated on a review of projections drawn from sources such as the World Bank. The model is solved of an annual basis by linking each country model to the rest of the world through commodity trade. The market-clearing condition solves for the set of world prices that clears international commodity markets, so that total imports of each commodity equals total exports. World prices of commodities thus act as the equilibrating mechanism and maintain the model in equilibrium. The outcome of the annualized iterative process is an estimated annual series of projected market clearing prices, consumption levels by commodity and country group, feed-use levels, production area, yield and production levels by commodity and region, and net trade across country groups by commodity. The analysis extends to 2020.

Key parameter estimates were drawn from econometric analysis, assessment of past and changing trends, expert judgment, and a synthesis of the existing literature. The baseline line scenario uses conservative estimates of the effects of income growth on the demand for R&T and the effects of technological change and other parameters on increases in production and yield. In the high demand scenario, more expansive estimates for some of these same parameters are employed in selected regions to calculate the impact on demand and supply. Among the novel features of this model was the incorporation of individual root and tuber (R&T) crops—rather than aggregating all R&T into one commodity, and the full collaboration of commodity specialists in arriving at the final set of projections, see Scott et al. (2000) for further details.