The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank, México
12 - 16 de Mayo de 2008

The World

Rice is nice. With rising prices for food we have seen policy makers employing a number of schemes to assure accessible food supplies for their people. These have focused, in the short run, on limiting exports, facilitating imports and price controls. Into the “longer” short term, policy makers in various countries have looked to subsidizing production costs for their farmers. Now we are seeing another policy variant: promoting the production of key commodities in countries other than their own. There are reports floating around in the market that Saudi Arabia is considering “investing in rice farms in Thailand by the end of 2008 in a move to boost security of food supply.” Saudi Arabia, with only some 25 million people, because of water scarcity cannot easily expand agricultural production.

The country is the sixth largest importer of rice in the world. About 70 percent of their imports are of basmati rice, yet they are seeing that exporting countries, particularly India which is the world’s largest exporter of basmati rice, are limiting supplies to the world market. This means that their alternative is to seek assured supplies outside the Kingdom. This is not the first time, of course, that countries have looked outside their own boundaries to guarantee food for their people. Mexico in the late 1970’s, for example, facing a drought and with world prices on the rise entered into contracts with farmers from the U.S. state of Michigan to grow black beans.

High fertilizer prices – the chicken or the egg? Not only have food prices been rising, but, as mentioned above, production costs, including fertilizer prices, have been rising. In fact, fertilizer prices "have been on the rise since 2006 and have increased to record highs in recent months." Driving fertilizer prices has been the increase demand coming from the rising prices for grains, oilseeds and other crops. Because of high prices for their crops farmers want to plant more and look to increase productivity. That means that they are demanding more fertilizers. There are, of course, other factors at work. High petroleum prices impact directly on the cost of some fertilizers. Likewise the increasing logistics costs, particularly sea transportation, have worked to support fertilizer prices. And, of course, the weak dollar doesn't help. Interestingly, although in some regions because of high prices a cut back in fertilizer use is being reported, for the most part, demand is strong as farmer’s margins are still not being seriously diminished. What all this suggest is that no serious weakening in fertilizer prices is expected into the near future and even longer.

Mexico

Buying more in Brazil. That is what Grupo Bimbo is doing. They are saying that they have reached an agreement to acquire 75 percent of Nutrella, a Brazilian company which “produces and sells packaged bread, buns and pastries”. The company produces in two plants, one in the state of Sap Paulo and the other in Rio Grande do Sul. Bimbo entered the Brazilian market in 2001 when they purchased Plus Vita. The thinking is that with this acquisition, Bimbo will strengthen their presence in the southern part of the country.