lunes, 30 de junio de 2008

The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
23 - 27 de Junio de 2008

The World

More cost pressures on the food industry. Practically every day there is news of higher food costs. Most of the attention has focused on what is happening to the agricultural commodities themselves. While there is a lot to be said for the raise in the price of the agricultural commodities, it doesn’t tell, by far, the whole story. We have seen, for example, the Baltic Dry Index, which reflects ocean shipping costs, increase five-fold since 2006. Now we are seeing the packaging industry passing on the impact of their higher costs to their clients: “BASF, a major supplier of polymers and other chemicals for use in…consumer packaging, said that it is raising the prices for its paper and card board dispersions by up to 20 percent” in the European, Middle East and African markets. This comes after Dow Chemical, their major competitor, raised prices at the beginning of the month. The price increases, according to some analysts, reflect the need to improve company balance sheets due to increasing scrutiny by rating agencies and their creditors.

Cutting food miles in the U.K. Only just less than a year ago when we talked about food miles it was in the context of the impact on the environment. Now with the rising logistics costs, controlling food miles becomes a business imperative. In the U.K. looking to both respond to consumer environmental concerns and hold the line on distribution costs, they have developed the Sustainable Distribution initiative. Presently 37 food and beverage companies are participating, including a number of the major players in U.K. market. The initiative began last year as a pilot project “which saw Nestle and United Biscuits working together to create efficiency in their distribution network. United Biscuits trucks now collect a load of Nestle products each day reducing empty truck runs.” Estimates have the Sustainable Distribution initiative eventually removing some 800 trucks from the country’s roads, saving 23 million liters of fuel. We expect that this is only the beginning of what we will see as a number of joint efforts into the future. Some will be aimed at cutting costs, others at environmental issues, and some at both.


Holding the line. Last week the president announced a “goodwill” gesture by two of the countries Chambers that represent food manufactures. The agreement “freezes" the price of 150 food items until the end of the year. It should be pointed out that these are not necessarily 150 separate and different items, rather the list of items refers to specific brands and presentations. All in all, they represent less than one percent of the Consumer Price Index. The agreement only refers to the price at which the food manufactures sell these specific items. Subsequently, the Association that represents the nation's supermarkets said that they would also hold the line on prices of these items. Because this is not a formal price control program there is an "escape clause" if raw material rise substantially. We could see, therefore, some movements in prices and particularly prices at the "mom-and-pop retail level.

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