The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank, México
9 - 14 de Marzo de 2008

The World

Buying more beef: In what is another indication of the changing structure of the global animal protein market, JBS, the Brazilian Beef Company, last week announced the acquisition of – subject to regulatory approval – National Beef and Smithfield’s beef division in the U.S. and Tasman in Australia. With this deal, which runs some US$1.68 billion including debt, JBS further solidifies their leadership position in the global beef market. In the U.S. by acquiring the fourth and fifth largest beef companies they are now calculated to control around 28 percent of total slaughter capacity. Together with Cargill and Tyson, the other two large producers, these companies have an estimated 70 percent of the U.S. market. While there are regulatory issues to be dealt with, analysts see the enhanced concentration as potentially positive.

The thinking is that this will bring needed discipline, facilitating the ability to pass through higher grain prices and/or putting pressure on cattle prices. The betting is that this will improve the industry’s bottom line. While much of the focus has been on the U.S. market, the Australian acquisition is particularly interesting because it further announces to the world that JBS intends to be a global player. What Australian acquisition does is position them in the Asian, and particularly the Japanese, market. Meanwhile, Smithfield’s decision to get out of the U.S. beef business should give them, in the short run, some breathing room to deal with the depressed U.S. hog market. Into the mid – term, we would not be surprised to see them becoming more aggressive outside their domestic market.

If it’s kosher is sells: Looking at the claims on the new food products, it seems to be the thinking of U.S. food manufactures. According to Mintel “kosher was the most the most frequently used claim on new products launched in the U.S. during 2007.” It is not that the Jewish population is growing; rather manufactures see the kosher designation as a plus for positioning their products since it plays to consumer concerns about quality and food safety. A large number of consumers perceived kosher products as “a higher mark of health and safety than non – kosher items.” Because kosher laws do not allow for the mixing of meat and dairy products, the dairy free and meat free segments have been major drivers of kosher claim – products. Interestingly, because of the similarities some consumers of hallal products trust the kosher seal and will purchase kosher products. Too bad the same thing isn’t happening in the Middle East.

Mexico

Too sweet: That is probably what the domestic sugar industry is thinking. The millers’ Chamber is projecting a 2.1 percent increase in sweetener demand this year. While that sounds good, they are also projecting a 3.5 percent increase in cane production this year. That, along with an estimated 14 percent increase in HFCS imports means that sugar inventories will remain above the one million metric ton mark. The industry points to inventories as a factor pressuring prices on the domestic market. We would also add that the strength of the peso, now that the border is open under the NAFTA, has also worked to hold down domestic prices.