Rabobank Report: Rethinking the F&A Supply Chain

Rabobank Report: Rethinking the F&A Supply Chain

This time is different.

On the occasion of the Duizenberg lecture in Washington, Rabobank presents its report entitled ‘Rethinking the F&A Supply Chain: Impact of Agricultural Price Volatility on Sourcing Strategies’. In Rabobank’s view the world is facing a period of significant agri-commodity scarcity that is set to last for at least this decade and which signals the start of a profound transition in the global F&A sector.

Key points:

• The global food system has been brought to a tipping point, and 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 impact the timing of the outlook, but they do not undermine the conclusion that global agri-commodity prices are expected to shift higher and become more volatile. This in itself is not a new phenomenon but what is happening this time is genuinely different.

• Larger F&A players, and even governments, are looking into minimising their risks by securing their current and future agri-commodity supplies, while at the same time dealing with higher price-risk levels. In doing so, they may well raise the stakes for companies that have remained on the sideline.

• The battle for agricommodity supply in the next decade is only the beginning of a profound transition. In the next 40 to 50 years, the F&A sector will need to double agri-commodity supply with access to only about half of the current land, water and mineral resources. Delivering this four-fold improvement in output is the over-riding challenge facing the incoming generation of F&A leaders and farmers.

Rabobank foresees the most change in the F&A sector around main dynamics that will play out over the next decade.

• Global food companies with market power will strengthen their influence in the supply chain

• Smaller and midstream processors and traders will come under the most pressure

• Global and regional trading houses will strengthen their positions in the supply chain

• Farmers will be squeezed from many sides. Farmers without market power and strong balance sheets will be most vulnerable. The good news is that F&A companies increasingly recognize the need to work with farmers and support them.

Through to 2050 F&A companies may need to look beyond their own chains and even outside F&A to industries such as farm technology, chemicals, paper and pulp to lower the overall resource footprint and establish sustainable food supply.

ENDS

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