lunes, 26 de mayo de 2008

The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank, México
25 - 30 de Mayo de 2008

The World

Restaurant business suffering from check management: The economic slowdown and rising prices are impacting businesses in different ways. The restaurant business is being squeezed by higher costs for food and other operating costs, as well as by changing consumer habits. There has been some cut backs by consumers, but consumers, at least for the time being, still want to go out to eat. What has restaurants really worried, though, are the changes in the way people are eating when they do go out to eat. The restaurant industry refers to the changes as “check management”. That is, consumers are watching more closely what and how they spend their money in restaurants.

There is some trading down in restaurant categories, but consumers are also adopting strategies to save money once they are the restaurant. Sharing an entrée is on the rise. Restaurants are also reporting that they are seeing appetizers being substituted for entrees. And, side dishes as well as desserts are being ordered less often. The problem for the restaurant industry lies in the fact that many of the dishes that consumers of which cutting back, or eliminating, are high margin items. If there is good news here, it is that these changing habits are not expected to be permanent. Nevertheless, for the time being restaurants’ bottom line is coming under increasing pressure.

Food and energy – having it both ways: There has been a number of interesting analyses lately that have taken the price of agricultural commodities and converted them into value per BTU unit. This is then compared to the price of petroleum, expressed in BTU units. What this shows is that there has been a convergence of prices. That means that agriculture is now part of the energy market. Of course you don't have to tell that to Cosan, the Brazilian company that is said to be both the world's largest producer and grower of sugar cane. But just as interesting, they are calculated to be the world's second largest producer of ethanol.

Now they are moving further downstream in the ethanol market saying that they will acquire ExxonMobil's distribution assets in Brazil. That works out to around 1,500 gas stations throughout the country. We have seen jv's and alliances between players in the biofuel market and there are instances where cooperative growers have gone into manufacturing biofuels, but examples of such a large scale and deep vertical integration, are rare. What is interesting here is that this, in effect, merges the energy and agricultural markets into one business model. And you can be sure that companies in both markets will be watching this to see what it means for them.


Lot’s of corn: That is what the Secretary of Agriculture is saying. In fact, the government is projecting that the corn harvest will come above last year’s record 23.7 MMT. We have no reason to doubt that the country is on its way to a very good corn crop this year. Farmers are responding to favorable prices and the huge budgetary support (some USD 337 million for corn and beans). So far we have not heard of any major weather related problems. A good crop year, though, doesn’t mean that corn prices will come down substantially in the country. With an open market and a corn deficit – even if there is a record harvest – prices for Mexican corn are aligned with world market prices, which are projected to remain high.

No hay comentarios.: