FBA Issue 29: November / December 2009
Singapore's odd meat eating habits: A wealthy society reverts back to eating poor man's protein?
by Eric J. BROOKS
Singapore is a tiny country with western income levels that imports all of its meat. In other words, it is a mature, wealthy market that is all demand and no supply. If the rest of Asia wants to understand how their meat consumption will behave when their countries become wealthy, Singapore gives them a window on the future.
Incomes rise, meat consumption falls sharply
Yet, when eFeedLink analysed statistics provided by the Agri-Food and Veterinary Authority of Singapore, it saw a trend that should concern Asia Pacific's policymakers.
Over the last 12 years, Singapore's per capita income overtook even that of the US or Japan, yet its per capita meat intake declined over this time.
Imagine if the Chinese become as wealthy as Americans, yet their per capita protein intake suffered a large, double digit decline. For China, such an outcome would lead to a strange, massive, shutdown of meat processing plants even as the country prospers. That is why what is happening in Singapore must be studied carefully.
Thanks to rising egg consumption, Singapore's fall in per capita protein intake fell by approximately 14 percent over the last 12 years. However, if only poultry, pork, beef, fish and mutton are taken into account, then meat consumption has fallen by 19.8 percent since 1997, with most of the decline occurring in the last five years.
Among traditional protein lines, only egg consumption increased significantly. Generally, a rising per capita egg and vegetable intake only coincides with a fall in meat consumption when incomes fall.
Consequently, this large fall in per capita meat intake is highly paradoxical, since Singapore has enjoyed rapid income growth over this time. However, when we break down Singapore's per capita protein consumption by meat type or into smaller time periods, some very interesting observations arise.
Price impacts consumption, not recession or bird flu
First of all, Singapore suffered two recessions between 1997 and 2002, and only one recession from 2003 to 2008. Income grew more rapidly after 2003 than between 1997 and 2003.
The accompanying graph indicates that Singapore's per capita meat consumption swan dived during the economically more prosperous years after 2003.
Per capita meat intake only fell 1.1 percent from 1997 to 2003 when Singapore suffered two serious recessions in less than four years. It then plunged 15.6 percent from 2003 to 2008, when the country was far more prosperous.
Clearly, whatever it is that Singapore's highly elastic meat demand responds to, it is not recession, income growth or employment levels. Indeed, Singapore's meat intake held up better during the earlier, recessionary period than during the post 2003 prosperity. That has startling implications: It overturns classical assumptions about meat consumption, which assume that per capita meat intake rises when personal incomes or employment increase.
Of course, we must bear in mind that there were other intervening factors. Bird flu, for example, is responsible for large declines in egg and poultry consumption from 2004 to 2006. Similarly, in the late 1990s, mad cow disease in cattle and nippah disease in swine caused sharp but temporary drops in beef and pork consumption.
Nevertheless, consumption rebounded very quickly after these outbreaks. Noticeably, on their own, diseases cannot account for a sustained, decade long fall in per capita meat consumption.
Highly price elastic Asian meat demand
Only two trends coincided with Singapore's large, post 2003 decline in meat intake. The first was severe food price inflation, which took hold after 2005 and accelerated in 2007 and 2008.
Interestingly, this food price inflation coincided with rising Singaporean incomes and employment levels. From this, we can derive an interesting implication: Even if incomes increase, a rise in the price of meat relative to other items will reduce meat consumption more than a recession's temporary drop in overall income will.
Second, we can see that in wealthy Asian societies, aggregate meat demand is far more price elastic than it is in the western countries. While overall meat and seafood consumption fell by 19.8 percent from 2003 to 2008, consumption of eggs and vegetables both increased by 14 percent each during this same time. Even though high incomes make it unnecessary for most to reduce food expenditures the way they do in poorer parts of Asia, Singaporeans, when meat prices rise, quickly substitute lower cost proteins or even vegetables in place of meat.
Mid range meats impacted
Third, the decline in protein consumption did not occur among high or low range proteins but rather, in mid-level meat lines. Ultra high end or low proteins actually saw per capita consumption increases even as overall meat intake fell. Hence, per capita intake of a poor man's protein like eggs and rich man's meat such as beef both increased over 14 percent even as all overall meat consumption fell by 19.8 percent. 
Similarly, meat intake at the lower end of the mid range fell by more than those at the upper end. Hence, the last decade saw Singapore's per capita poultry consumption fell by a marginal 2.7 percent but pork intake decreased by 19.3 percent while seafood consumption dropped an astounding 36.5 percent.
The dynamics of all this can be explained by a two-fold substitution effect. Since it is the cheapest mass market meat, consumers across all categories cut their consumption of poultry by the least amount. They were far more likely to reduce their pork and seafood intake, as both of these meat lines are generally more expensive than poultry.
Substitution effect limits fall in chicken intake
Hence, consumers in Singapore's lower income bracket cut back on all meat lines including chicken in favour of eggs and vegetables. On the other hand, mid-level consumers were more likely to reduce seafood and pork consumption and substitute cheaper poultry in their place.
That means that lower poultry consumption among low-end Singaporean consumers was partly counterbalanced by increased poultry intake in the middle income bracket. Hence, while lower-end consumers cut back their poultry consumption to buy more eggs, middle-income Singaporeans were more likely to substitute some of the more expensive pork and seafood with lower cost poultry. This made for steep declines in per capita pork and seafood intake but a much smaller decline in poultry consumption.
This is why Singapore's poultry consumption only declined marginally while more expensive pork and seafood suffered double digit drops in per capita consumption.
Yet, even within the poultry line itself, we see the substitution of cheaper protein in place of more expensive birds. Throughout the decade, consumers reduced their consumption of duck 2.5 times more than they reduced their chicken intake. Moreover, as the accompanying graph shows when meat price inflation took off after 2004, duck consumption started falling even more rapidly relative to chicken than it did in the first half of the decade.
Surprisingly resilient beef demand
In fact, the only protein line where per capita consumption increased other than eggs was, of all things, beef. This can be explained by the fact that in Southeast Asia, beef is considered an expensive, high-end meat line. It is mostly bought by high-end, price inelastic consumers who are not impacted by recessions or drops in aggregate national income.
As Singapore's high-income earners have enjoyed more income growth than other parts of its society over the last ten years, it is not surprising that a meat Asians usually associate with prosperous people enjoyed rising per capita consumption. To a certain extent, the rise in per capita reflects Singapore's growing disparity between its wealthy and poor citizens.
Adapt meat consumption forecasts to Asian values
What is to be made of all these trends? Singapore's example shows us that in Asia, even in a wealthy country, a small change in the price of meat relative to other goods leads to large changes in consumption, even when income levels are high and rising.
On one hand, the recessions of 1998 and 2002 barely dented per capita meat demand. Despite two recessions in those five years, demand held up better than in western countries of comparable incomes. It is fair to say that Singaporeans don't mind the occasional interruption of prosperity, so long as their meat prices stay constant.
On the other hand, later this decade, when real meat prices rose, Singaporeans cut back their meat purchases and substituted cheaper proteins and vegetables at a pace seen only in developing countries with a fraction of its living standards. This occurred even when their real overall incomes were rising, both in absolute terms and in comparison to the citizens of the world's wealthiest countries. Apparently, the Lion City's meat demand responds to changes in the relative price of meat more than it does to changes in personal income, economic growth or employment.
This observation has profound implications for everyone from meat processors to feed mills, livestock farms to government policymakers. Singapore's income, meat intake and living standards are at the same level today that developing Asia's will be in a few decades. Culturally, Asians have always been a cost conscious lot. It is very possible that even when large markets such as China, Vietnam or India become wealthier, they will respond to meat price increases in the same, drastic, and unexpected manner that Singaporeans did?
That would mean that even after Asia becomes wealthy, its feed and meat consumption will fluctuate far more drastically in response to price changes than it does in the west. This has profound implications for meat processors who expand their Asian operations while using assumptions about income levels and consumption developed in the west. At the very least, Asian meat processors will need to employ more flexible manufacturing and inventory management than their western counterparts.
It also means that from China to India, Vietnam to the Philippines, governments seeking to improve health of their citizens will have to do more than make their people wealthier. In order to raise the protein intake of their citizens, Asian governments need to keep meat's price the same or lower relative to other goods, even as their economies grow wealthy.
However, the most important implication is the following: Singapore's example shows us that the classical relationship linking income growth, feed demand and meat consumption needs to be adapted to Asia's unique cultural values.  A larger, more extensive comparison of the different ways that East and West respond to changes in meat prices should be undertaken. 
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