AGRIBUSINESS
Figure 2: Opportunities in the Food & Agribusiness Value Chain
Energy Crops &
Agri-Inputs
Commodities
Inputs
Primary Primary
Secondary Retail &
Production Processing
Processing Food Service
Consumer
Protein
Food
Processing
Agri
Equipment
Upstream Midstream Downstream
Source: Rabobank, 2008
US$20bn a year in agriculture to meet global food demand. He also amounts that farmers are receiving for
urgednationstoseizean“historicopportunitytorevitaliseagriculture” their commodities. However, in the US
asawayoftacklingthefoodcrisis.Bantolddelegatesthatfoodpro- for example, many consumers are
ductionwouldhavetoriseby50%by2030tomeetthisdemand. unawarethataround19%oftheretail
For investors, this presents something of a dilemma. While much pricegoestothefarmer;theother81%
interest in agriculture has emerged from financial and strategic goes toward food processing, trans-
investors in recent years, significant attention has been placed on portationandservices.
the downstream segment of the food and agribusiness value chain “Farmers’ profitability doesn’t change
– where business models are more easily understood by investors. retail prices. And farmers’ profitability
“Indeed, opportunities continue to exist in the downstream,” say isn’tguaranteedbyhighgrainprices.The
Rabobank.However,theypointtothefundamentalsdrivingthecur- samefactorsthatareliftinggrainprices
rentboominagriculturalcommoditiesthathavemovedsomeofthe areliftingproductioncosts,”accordingto
bestinvestmentopportunitiestotheupandmid-streamsegmentof Aure-Flynn.
thevaluechain(Figure2). Moving forward, any changes in the
... significant attention has been placed on the
factors supporting higher input costs
and higher prices – such as change in
downstream segment of the food and
demand, exchange rates, or ethanol
agribusiness value chain
policies – could change the agricultural
industry. Additionally, the food vs. fuel
“Thusinsteadoffocusingonthecommoditiesthemselves,theaim debatewillplayakeyroleintheupcom-
is to highlight opportunities emerging for food and agribusiness ing US Presidential election, with the
playerswhoarebestpositionedtobenefitfromchangingdynamics policies of both candidates on issues
in the world market – especially agricultural producers, input and suchasbiofuels,tradeandenergybeing
equipment players who support producers, as well as food industry closely watched not just by the agricul-
playerswhoseproductsarealignedwithlifestylechangeswhichare tural industry but by food buying con-
takingplacerapidlyinemergingmarkets,particularlyinAsia.” sumers.
Specifically, Rabobank believes that opportunities in agriculture The new demands that agriculture
are most pronounced in the following sectors: animal protein and willbeexpectedtomeetoverthecom-
dairy, food processing, energy crops and commodities, agri-inputs ingyearsarecreatingopportunitiesfor
andagri-equipment. increasedinvestmentintheindustry.
The search for alternative fuels is often blamed for the high cost Rabobank suggest that “valuable
offoodbutitisjustoneofmanyfactors.Inapodcast,analystswith acquisition opportunities which emerge
Rabobank’s Food & Agribusiness Research (FAR) department dis- and help to drive consolidation in
cuss the food vs. fuel debate. “First, food versus fuel is a handy agribusiness will bode well for compa-
soundbite,” says FAR Executive Director Karol Aure-Flynn. “But, the nies that respond to these challenges
fallacyoftheheadlineisthatthereisadirectcompetitionbetween proactively.”
•
thetwo;thatit’seitheror.Therealityisthatstrongglobaleconom-
icgrowthhaschangedthedemandequationforUScommodities. 1. The Boom Beyond Commodities: A
“We’reseeingourselvesatauniquepointinhistorywherealotof
New Era Shaping Global Food and
these factors have collided at the same time to create this food vs.
Agribusiness, 2008.
fuel debate,” said FAR Vice President Michael Whitehead. The com-
RabobankFoodandAgribusiness
bined factors have raised food prices leading many to believe that
Research(FAR).
they are increasing faster than they should, given the record
www.rabobank.com/far
COMMODITIES NOW SEPTEMBER 2008 55
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