Rabobank recently presented its report entitled ‘Rethinking the F&A Supply Chain: Impact of Agricultural Price Volatility on Sourcing Strategies‘. Within it, they outline the perception that we will enter a period of significant agri-commodity scarcity. Rabobank believes that this scarcity will last for at least a decade signals the start of a global upheavel and change in the global Food & Agriculture sector.
The key points of the report were:
- The global food system has been brought to a tipping point
- the battle for agri commodities will only intensify
- When and how the F&A supply chain responds are still open questions – whether to respond is not.
- A possible double dip recession or the rolling back of biofuels legislation may alter the timing of the outlook, but unlikely to undermine these conclusions
- global agri-commodity prices are expected to shift higher and become more volatile
- This isn’t a new phenomenon but it is genuinely different.
- Larger Agrifood players (and even governments) are looking into minimising their risks by securing their current and future agri-commodity supplies
- The battle for agricommodity supply is only the beginning of a profound transition
- next 40 to 50 years will need to double agri-commodity supply with only half of the current land, water and mineral resources
- A four-fold improvement in output is the over-riding challenge facing the incoming generation in the Agrifood sector
Rabobank already forecasts major corporate dynamic shifts to play out over the next decade, predicting that:
- Global food companies will strengthen their influence in the supply chain and lock their market power
- Increasing pressure will be placed on smaller, midstream processors and traders
- Global and regional trading houses will fortify their positions in the supply chain
- Farmers without strong balance sheets and without market power will face the most pressure and vulnerability
The only seemingly ‘good news’ rabobank seemed to preffer was a perception that Agrifood companies would have to increasingly recognise the need to work with farmers and support them.
Reading between the lines, one must imagine that the message here is clear — global food supplies are at risk. The agriculture industry is being squeezed from all sides to do four times as much with four times less. Ignoring the arguments for sustainability, organics or any other philosophy – the corporate and goverment push for securing the supply chain of agricultural prioducts will create a change in the social, economic and cultural basis of the way food is considered and made available.
Perhaps my own article on the threats to the agriculture industry in Victoria that were described as a “doom and gloom” view were in fact understated?