Appetising Commodities
In a recent report entitled The Boom Beyond Commodities, Rabobank argue that the
current commodity cycle is different from those that have gone before due to the
emergence of the biofuel industry. Past cycles have seen peaks and troughs, but the
addition of fuel – the fourth “F” – to the other factors driving demand (food, feed and fibre)
means “demand will remain strong over the coming years”.
By Guy Isherwood
THE GLOBAL FOOD and agribusiness industry is set to undergo sig-
nificant changes in the coming years, say Rabobank in a report: The
Boom Beyond Commodities. Increased demand for food and animal
feed – as well as the growing use of crops for biofuels – require the
greater deployment of scarce agricultural resources and has shifted
the industry’s value proposition upstream, says the report.
Commodity markets characteristically bring peaks and troughs. But
unlike booms of the past, one unique and substantial driver of the
current commodity cycle has been the emergence of biofuel initia-
tives around the world. Although far from perfect, they have added
the “F” to the factors of demand namely food, feed and fibre, mean-
ing that “demand will remain strong over the coming years”.
... new opportunities are being created in both
developed as well as emerging economies
Underlying these dynamics are several key pillars which are shap-
ing the food and agribusiness industry and driving a paradigm shift
in global agriculture. These include income, population and urbani-
sation growth, resource scarcity, freer trade, food safety and, finally,
sustainability (Figure 1).
As the prices for commodities have fallen from record highs,
investors are now looking for other opportunities in the sector, and
the focus is moving to companies involved in food and agriculture.
Moreover, new opportunities are being created in both developed as
well as emerging economies “leading to tremendous growth poten-
tial that extends beyond the boom in the commodities market,” say
Rabobank. Essentially, food could – and should – become an impor-
tant part of investment portfolios and is being ever more closely
watched by investors.
To a large extent, this investor interest has been triggered by rising
prices and the realisation of the increasing difficulties of feeding a
rapidly growing and urbanis-
Figure 1: Key Drivers Affecting Global Food & Agribusiness ing population. Add to this
the changing dietary pat-
terns in emerging economies
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This was recently empha-
ENERGY
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sised at the UN Food and
Agricultural Organisation
(FOA) summit meeting in
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Rome. Secretary General Ban
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Source: Rabobank, 2008
ed to invest as much as
54 SEPTEMBER 2008 COMMODITIES NOW
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