New York, New York
December 19, 2008
The global market place,
fluctuating commodity prices and how consumers respond to prices
are some of the issues addressed in
Rabobank’s 2009
North American Food & Agribusiness Outlook.
The Outlook is produced annually by the Rabobank Food &
Agribusiness Research and Advisory (FAR) team, which provides
information and analysis covering all of the major sectors
throughout the food chain. The Americas-based FAR team is part
of Rabobank’s global FAR group, comprised of approximately 80
research analysts located around the world, who conduct research
on subjects of strategic interest to companies and customers
within the food, agribusiness and agriculture sectors.
According to the authors of this year’s Outlook, “the world of
agribusiness is rapidly changing. Increasing demand for food,
growth of noncommercial investment in commodity markets, a
turbulent financial market, and changing consumer behavior has
altered the agricultural landscape. However, despite these
current uncertainties, it is likely that opportunities will
persist.”
In the Outlook, Rabobank’s FAR team takes an in-depth look at
issues that will affect the global agricultural industry in the
coming year. Below are highlights of three key issues addressed
in this year’s Outlook: consumer response, global markets and
commodity volatility.
Consumer Response
“The downturn in the economy has reversed the way consumers
shop,” said FAR Vice President Stephen Rannekleiv. “Five years
ago, there was a growing trend of U.S. consumers willing to pay
more for high quality, luxury goods. Today, there has been a 180
degree turn.”
A growing consumer-preference trend toward discounters, such as
Wal-Mart and Costco, is pressuring other retailers to keep
prices low. In addition, demand for private label products has
increased as consumer seek greater value for money. “There is a
generalized return to frugality across all levels of society,”
said Rannekleiv.
Consumers are cutting back on all discretionary spending and
cutting out waste, which is forcing beverage marketers and
retailers to work harder to convince consumers to spend more.
“In fact, it is possible, that this mindset could prevail beyond
the current economic downturn,” said Rannekleiv.
This change in consumer purchasing patterns is expected to
impact agricultural producers, food and beverage manufacturers,
food retailers and food service providers. Particularly hard hit
will be those that are positioned as luxury items – such as high
end restaurants and premium wines.
Global Markets
“Last year was a very different world,” said FAR Vice President
Michael Whitehead. “We can look back on one of the most eventful
years for agriculture in memory, but more critically we look
toward one of the most important years agriculture has faced.”
During the first half of 2008, the low U.S. dollar provided a
competitive boost for U.S. agricultural exports. However, 2009
is likely to see pressure on exports as the global economic
recovery slows and demand weakens.
Additionally, a key factor affecting trade in 2009 is the
progress of the Doha agreement on agricultural trade. The U.S.
agricultural sector may also see some countries imposing tariff
increases and trade restrictions, and the World Trade
Organization may possibly take action on a wide range of
products such as cotton, corn, sugar and ethanol.
“The best thing for the global trade outlook for 2009, is that
2010 will follow,” said Whitehead. “Despite this, forecast for
longer-term growth should provide some optimism for the U.S. ag
sector that positive fundaments, in terms of population
increase, rising incomes and evolving diets are very much still
there.”
Commodity Volatility
“Market whiplash has presented the grain and oilseed complex a
tough prognosis. Crude oil, investor speculation, and exchange
rates continue to generate unpredictable swings,” said FAR
Executive Director Karol Aure-Flynn. “Global demand growth is
expected for the long term, but is uncertain during the
currently unstable global recession.”
However, one certainty is that this period of high commodity
prices has created far more volatility than previous years,
which is likely to constrain organic expansion and emphasizes
the need for strategic planning. Risk management measures are
essential.
“Price volatility will be the key challenge for all segments of
the sector as players examine their long-term strategy and
short-term tactics,” said Aure-Flynn
However, moving forward, “once the market resumes focusing on
the fundamentals of low stock levels and increased demand for
food, and the strong de-leveraging process coming from investors
slows down, it is expected that commodity prices will partially
recover from the levels reached in October 2008,” said
Aure-Flynn.
The premier bank to the global food and agriculture industry,
Rabobank is a global
financial services leader providing institutional and retail
banking and agricultural finance solutions in key markets around
the world. From its century-old roots in the Netherlands,
Rabobank has grown into one of the 25 largest banks worldwide,
with over $800 billion in total assets and operations in over 35
countries. Rabobank is the only private bank in the world with a
triple A credit rating from both Standard & Poor’s and Moody’s,
and is ranked among the world’s safest banks. In the Americas,
Rabobank is a leading financial partner to the entire American
food and agribusiness industry and is a specialist in
sophisticated, customer-driven solutions in the Global Financial
Markets and Corporate Finance arenas. Rabobank also provides
retail and commercial banking services in California; leasing;
and real estate lending, operating loans, input financing and
crop insurance to American agricultural producers, input
suppliers and agricultural manufacturers. |
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