jueves, 18 de octubre de 2007

The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
1 - 5 de Octubre de 2007

The World

Screwing doesn’t help the environment. In the on-going debate about whether or not it is better to use a screw cap or a cork to close a bottle of wine we are now being told that the decision should come down to “a question of what is best for the environment.” The advocates of cork argue that “cork is a renewable material – made from the fiber stripped from cork trees that can then regrow.” And now the Rainforest Alliance has joined industry people and wine aficionados in the debate. They are developing a certification system that will “verify that their cork comes from cork forests that meet Forest Steward Council’s social, economic and environmental standards”. If that is not enough, in social terms, it is said that the Mediterranean based cork industry provides income to some 100,000 people – cork oak covers around 2.8 million hectares. If you don’t want to take sides, don’t worry. There are options. Boxed wines are available and are said to effectively “block out air and light”. The problem is that boxed wines tend to be associated with wines known for their inexpensive prices but not for their quality. Besides boxed wines now there are wines in cans. The Argentine company Iron Wine “offers red (a malbec-cabernet blend) and white (chenin blanc) wines in 8 ½ and 12-ounce cans”. While the cans are also said to be also effective in blocking out light and air, they definitely lack the cache of bottled wine: we really can’t imagine a romantic dinner with candles and a six pack of wine.

Volatile and uncertain commodity markets.
Just a couple of months ago corn prices were nearing historic highs. Now corn prices have retreated and wheat prices are, in fact, at historic high levels and there is continued pressure on the soybean complex. What happened of course is that farmers responding to high corn prices, particularly in the U.S., planted more land in corn. To plant more land in corn less land went into soybeans. Wheat prices, for their part have reacted to a fall in projected U.S. production – according to the recent USDA report -- and the reduced Australian crop, due to dry weather. With 2007’s crop year coming to a close the market is refining 2008 projections. What most analysts foresee is a reduction in corn area with a growth in wheat and soybean plantings. This suggests that we’ll see lower wheat and soybean prices next year, but corn prices could be on the rise towards the second half of 2008. Looking further down the road, 2009 could see a reverse of this situation. Of course the 900 pound gorilla is the biofuels market. Most analysts were looking at overcapacity in the ethanol market and a fall in ethanol margins. These projections were based on a number of assumptions. While many analysts factored in a contraction in the price of corn, the on-going increase in petroleum prices and fall in the U.S. dollar were not, in general, part of their forecasting models. If continues de depreciate and petroleum prices continue their upward spiral all bets are off!


Where’s the wheat?
Just like what is happening in other parts of the world the record increases in wheat prices are also being felt in Mexico. Looking to calm the domestic market and dissuade speculation the government said it was considering “ways to import one million” MT of wheat. While the one million MT may seem like a lot, it really isn’t taking into consideration Mexico’s import needs. Wheat production in Mexico is overwhelmingly durum wheat. Locally bakeries, however, prefer other varieties. As a result Mexico exports it excess durum wheat and imports other varieties for domestic bakery use. Last year, for example, Mexico imported 3.8 million MT of non-durum wheats.

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