lunes, 24 de diciembre de 2007

The Agribusiness World

Ken Shwedel
Investigador de Agronegocios, Rabobank, México
24 - 28 de Diciembre de 2007

The World

Food price outlook makes for a not so merry Christmas: Food prices during the year have continued strong. The U.N.’s Food and Agriculture Organization produces a food price index. This year it “hit its highest level since being launched in 1990.” In fact, “the global cost of imported foodstuffs this year was expected to be 21 percent higher than in 2006, and the highest amount on record.” Behind the increased prices are both structural reasons and short term market disruptions.

Structurally demand has been growing for a number of reasons, including the increasing incomes in a number of developing countries, particularly in Asia, and the development of the biofuels industry. As demand has grown food supply has become more susceptible to draughts, floods, etc. The future doesn’t really offer any price relief. While projections vary from analysts to analysts, the outlook is for commodity prices to continue to show strength into, at least, the mid-term. The USDA, for example, is a projecting food prices to rise between 3.5 to 4.5 percent in the U.S. next year. The high food prices are now beginning to raise questions about the future direction of food and agricultural trade. In China, for example, with food prices said to have risen by over 18 percent through November, the government, worried about inflation, repealed “the 13 percent tax rebate on grain exports”.

Of course China isn’t the only country looking at border measures/policies to protect their consumers. The U.N. is reporting that are “more than 20 countries including Argentina and Azerbaijan, Mexico and Morocco, where governments were trying to offset [food price increases] often by restricting exports or cutting tariffs on food imports.” This means that we will see a redimensioning of trade relationships. At the same time, we can expect food companies in a number of markets to come under official pressure to hold back on the magnitude of price increases.


Lots of turkeys: Although Mexico is in fourth place globally in terms of per capita turkey consumption at 1.9 kg, consumption is still a ways away from the U.S., the global leader, with 7.6 kg/person. Most of the consumption takes place during the Christmas season, with 70 to 80 percent sold as whole birds. In spite of the fact that imports represent an important portion of the market the industry is intent on expanding consumption so that Mexicans will eat more turkey throughout the year – not just around Christmas. The industry, for its part is highly concentrated, with Parson and Del Mezquital-Bachoco having a 35% share each and Viridian a 25 percent share.

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