The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank, México
28 de Abril - 2 de Mayo de 2008

The World

Where's the rice? Last week we were talking about the increase in commodity prices. Now it is not wheat but rice that is the center of the market’s attention. We are hearing that not only are rice prices on the rise but that there has also been rationing of rice – not only in lower income countries where rice is an important part of the diet, but also by some retailers in the U.S. According to an analysis by the International Grains Council "global rice production and consumption are estimated to be broadly in balance". This means that stocks, which are already small, will not grow and that the market could be thrown into an even tighter situation if there are major setbacks in production. To heighten these apprehensions, there are already reports of "delays in planting this year’s crop". As a result, due to concerns with high prices and that there will not be enough rice to feed their people, a number of countries have limited or suspended rice exports. In April alone, for example, Brazil, Cambodia and Egypt suspended or banned rice exports for between two to seven months. Faced with the possibility of not being able to acquire all the rice they need, buyers are anticipating purchases, putting pressure on supply, bidding up prices. Seeing prices rising and hearing of possible shortage, more buyers have entered the market. If that was not enough ocean freight rates have firmed up. While there may be some price relief as the production outlooks becomes clearer, we are, nevertheless, looking at a tight year in the rice market.

Should an 82 percent market be a concern? It should be if just a couple of decades ago you had 93 percent of the U.S. market. That is the situation that Gatorade faces. Of course it would be expected that they would lose some market share as new players enter the market: in just the last two years, for example, the segment saw "more than 200 new brand introductions". Gatorade's problems, according to analysts, go beyond just new players in the market. While there is strong brand loyalty, Gatorade is having problems attracting new consumers, especially younger consumers. It seems that they are not clear on their message. On one hand they have come out with a number "products under the brand banner". Meanwhile, on the other hand, "Gatorade is moving further into the mainstream...to create a brand that is an alternative to soft drinks." Until they decide how they want to position themselves to consumers, Gatorade really can't expect consumer to know what they are buying.

Mexico

Petroleum reform means cheaper fertilizers: Looking to further expand the support for reforming the petroleum sector, that was the message that the President gave at a breakfast meeting with agribusiness leaders attended by Rabobank. Problems with the PEMEX, the oil company, have, along with other factors, have impacted negatively in domestic production capability. Between 1994 and 2007, the value of fertilizer production in Mexico fell by almost 52 percent.