According to the U.S. government’s Bureau of Labor Statistics, the seasonally adjusted price for proteins – meats, poultry, fish, eggs and dairy – hit an all-time high in May.
That topped off a year in which the index rose a whopping 7.7%.
This isn’t a U.S.-centric trend, either… It’s a worldwide phenomenon. As the emerging world becomes more prosperous, the demand for a protein-rich diet has steadily increased.
By 2030, the United Nations’ Food and Agricultural Organization estimates that the average person will eat nearly 100 pounds of meat each year.
That’s a 37% increase from 1991 levels, and it’s driving the demand for feed crops through the roof. National Geographic reports that, by 2050, the world will need twice the amount of crops that it does today.
Meanwhile, there’s one country that’s responsible for a huge portion of this new demand…
That country is China, the front-runner of the emerging world’s protein scramble.
The World Bank says that the average Chinese person is now eating 40% more calories per day than in 1980. Meanwhile, those calories have shifted away from traditional staples to include far more meat and dairy.
It’s not surprising, therefore, that the nation is investing heavily into the food and agriculture sector.
Many Chinese companies have been focused on acquiring food and agriculture assets this year, and the nation’s $650-billion sovereign wealth fund, China Investment Corporation, said that it’s shifting its focus to agricultural investments.
In fact, overseas mergers and acquisitions in the food industry have accounted for 17% of the total merger and acquisition activity in the country so far this year.
Much of the activity has centered on the trading subsidiaries of firms involved in the flow and pricing of raw agricultural products. But Chinese companies have acquired all types of food companies, from breakfast cereal makers, to cheese and dairy producers.
And don’t forget, China’s shopping spree comes on the heels of last year’s $4.7-billion deal to acquire Smithfield Foods, the world’s biggest pork producer.
But what does all of this action mean for you? I thought you’d never ask…
M&A Activity to Stay Hot
First of all, the global trend toward proteins has barely begun. By 2050, the world will have more than nine billion people to feed, meaning that higher food prices are here to stay.
We should also expect merger and acquisition activity to stay hot in the sector, as nations around the world scramble to lock up protein-rich food sources for their growing populations.
Deals like Tyson Foods (TSN)’s $7.7-billion buyout of Hillshire Brands (HSH) will become more commonplace in the near future, and much of the activity will likely come from China or other foreign buyers like Brazil’s JBS SA ADR (JBSAY), which already owns the Pilgrim’s Pride brand in the United States.
Finally, there’s another sector that’s crucial to the agriculture industry… and it’s going to benefit handsomely as the global clamor for a diverse diet rages on.
Keep an eye out for my next article – I’ll tell you all about it!
And “the chase” continues,