Agribusiness Industry from a global perspective
As Plunkett Research Ltd reported, 2 billion metric tons of grains are produced yearly around the globe, along with 400 million metric tons of dairy products and 200 million metric tons of meat. In one of the FAO’s papers, it was identified that production of agricultural commodities has stagnated in recent years owing to rising fuel and chemical input costs. The report also says that in some cases, a shortage of supply was observed, caused by weather-related phenomena (as in the banana, coffee and citrus sectors), by stockpiling for oilseeds or by reduced export subsidies for dairy products in the European Union (EU). Fresh fruit import prices were globally put on pressure due to increasing sea freight rates. For some agricultural commodities that are short in supply, for example orange juice, manufactures have been able to increase the price and maintain the margin, but for those are in plenty of supply, severe reduction in the manufactures’ margin was in place as the costs were increased. However, FAO’s research paper, The State of Agricultural Commodity markets 2006 indicated that although manufacturing costs have increased, there is growing evidence that the processing of primary commodities in developing countries is rising. The share of these countries in the processing of cocoa, cotton, oranges, sugar and tea is on an upward trend. This reflects a combination of increasing trade liberalization for processed products, an attempt by developing countries to add value to commodities and the strategy of transnational companies to move processing activities into countries with low labor costs.
Written on: October 15, 2008