The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
29 de Junio – 3 de Julio, 2009

The World

Still eating organics, but watching what they spend. Over the last couple of years we saw the organic market expand and go mainstream, particularly in the U.S. The question that analysts had was whether or not the organic market was a fad, or did it represent a shift in consumption habits. It appears that the answer is the latter. The economic downturn has turned into the acid test for organics, and, so far, they have come out with flying colors. Recent surveys in the U.S. are showing that even nowadays "nearly three-quarters of U.S. families buy organic products" and, more important, they don’t seem to be cutting out organics from their diet. What seems to be behind this is that consumers relate organic foods with healthy eating and "9 in 10 (87 percent) report that they were not willing to give this up". Among part of the population that buys organics there has been some adjustment in shopping strategies "such as being more selective when buying organics, buying organics on sale, using more coupons, and buying more store brand/private label organics". It appears that some of these buying strategies will continue, even after the economy improves. This is particularly the case with store brands/private label organics since they play an increasingly important part of consumers organic —as well as non-organic— purchasing strategies. What this means is that retailers will come out of the economic recession as the winners in the organic market, putting pressure on the branded organic segment to compete and survive.

Joint venturing for the Hispanic market. Hispanics are among the fastest growing ethnic groups in the U.S. and Mexicans are the largest segment of that Hispanic population. Looking to capitalize on this market Hormel Foods and Herdez Del Fuerte have formed a joint venture to "market Mexican foods in the United States", MegaMex Foods. Because Herdez’s brands are well-known in Mexico there is already a market among Hispanics in the U.S. from Mexico and/or are of Mexican descent. Some of Herdez’s brands are also sold in other Latin American markets outside of Mexico. While Herdez brings brands to the joint venture, Hormel brings their distribution skills to the venture and most likely will also manufacture some of the products. With Herdez’s wide portfolio, the thinking is that the new venture will also have products that can be sold to the non-Mexican market in the U.S. that consumes Mexican food. The objective here is not only to gain market share but to develop and expand the category.

Mexico

More clarity on bioenergy and somewhat corn friendly. Finally after more than a year since the bioenergy law was passed, the operating rules were published. One surprise is that operating rules will allow corn to be used for bioenergy. The Agricultural Ministry (SAGARPA) will have to give permission, and apparently this will only be permitted where there is a surplus of corn. What this will probably do is allow for corn based biofuels in the state of Sinaloa, which is a corn producing surplus state. While SAGARPA permission is needed for corn as a feedstock for bioenergy, SAGARPA has to be advised of the any intent to produce other feedstocks for bioenergy. It is not clear if this also pertains to sub products or animal wastes. Land cannot be shifted out of forestry use for the production of bioenergy feedstocks. Another important part of the operating rules is that it allows the Energy Ministry to permit the sale of bioenergy. This has the potential of opening both the biofuels and cogeneration markets.