miércoles, 28 de noviembre de 2007

The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank
26 - 30 de Noviembre de 2007

The World

They want to change the way retailers do business in the UK: That is what analysts are saying about the provisional report from the UK’s Competition Commission. The UK retail market already shows a high degree of concentration: Tesco the market leader, for example, has around a 30 percent market share. And while the Competition Commission does see that “there is still room for competition” they are concerned about the way things are going. They point out, for example, that 110 properties that are “land banked”, that is, “stockpiled by various retailers to block competitors from gaining a foothold in certain markets.” The concern is that give the direction that the market is taking the impact on the way retailers do business with suppliers could lead to “unexpected costs and excessive risks [which] might affect suppliers’ ability to invest, in turn affecting both quality and product innovation.” Apparently, the Competition Commission wants to build on the current code of practice, which dates to 2000. It is expected that the Commission will recommend that retailers be required to sell some of the land they own. Among the other ideas is to create a supermarket ombudsman. For food companies, of course the report is good news since it has the potential of redressing the power relationships with retailers. Interesting, the industry’s reaction was somewhat “relief that more punitive measures were not called for by the commission.” In other words, retailers knew that all was not well with their industry.

More bio – fuels means more fertilizers: Analysts are saying that the growth in bio – fuel production has become one of the drivers of the fertilizer industry. The demand for corn, cane and oilseeds for use as feedstock for bio – fuels has underpinned the record high fertilizer prices. Even though there appears to be overcapacity in the industry, specifically ethanol in the U.S., the projections are for bio – fuel production to continue growing. The continued growth expectations are based not only on the high petroleum prices, but also based on “governments…actively encouraging and subsidizing renewable fuels.” The land needed to supply the bio – fuels market could reach easily reach 125 million hectares. That is in addition to the incremental land needed to supply the growing demand for foods. Not all of it will be prime agricultural land, meaning probable higher fertilization rates. According to a report by Integer, by 2012 feedstock for bio – fuels will generate demand for more than an additional 6.4 million tons of fertilizers.


One more retailer bank: This time it is Wal-Mart’s turn to be the new player in the banking sector, finally opening up their own bank. They started operations in three of their stores, with the goal of 16 branches by the end of this month in order to use December to evaluate and adjust, if necessary, their business model. Next year Wal-Mart’s plan is to open banking operations in 80 more stores. They are saying that their objective, at least initially, is to generate more foot traffic by offering banking services and more sales by facilitating consumer credit. Consumers will be able to open saving account with at least MX$50 and be offered MX$2,000 lines of credit, with weekly and monthly payment options. With Wal-Mart heating up the competition, this has the possibility of providing financial services to a large segment of the population which has had little or no contact with the formal financial sector.

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