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Agribusiness Survey Sees China as Continued Economic Engine

Agribusiness Survey Sees China as Continued Economic Engine
A poll of agribusiness clients by Rabobank shows many still see the Asian giant driving commodity demand for the next decade.

There are two key issues that a recent Rabobank poll shows as key for the North American food, beverage and agribusiness for 2013. First is China's continued influence on ag commodity demand and global economic growth and the second is increasing weather extremes.

The financial firm polled more than 350 executives from leading companies in the North American food, beverage and agribusiness industry. The poll was conducted at Rabobank's recent Markets Forum held in New York City.

SURVEY SAYS: China is top of mind as a global powerhouse, but the Rabobank survey looked at other issues as well.

The respondents were asked to name the country or region they believe will have the greatest impact on global agricultural commodity demand for the next 10 year ans 61% chose China. As for other countries, the respondents ranked them much lower with India getting 14%; Africa 10%, Latin America 9% and Southeast Asia 6%.

Yet many point to China's recent signs of slower growth as a concern. Executives in the Rabobank poll see China continuing as the most important driver even if its economy slows. Of those choosing China, 41% said the country would drive the global economy between five and 10 years while 40% say China will remain the primary driver of global economic growth for the next 50 years.

In a release commenting on the survey, Bill Cordingley, head of Food and Agribusiness Research for Rabobank in the Americas says: "These results are not surprising and reflect the significant impact that China has had on the food and agribusiness industry over the past 10 years, globally as well as in North America. China today has the second largest middle class in the world at 157 million, which will surpass the U.S.'s middle class in the next ten years, so China's demand for agricultural commodities is going to continue to grow. Our North American clients in the food, beverage and agriculture sectors see opportunities to play a role in the Chinese market, not only as exporters but also as investors in the country's domestic growth by bringing technology, know-how and capital to support development of a more modern, safe food system in China."

The respondents also offered views on a range of other topics they believe will be significant issues for the global food and agriculture industry in the coming years including production levels, risk management, genetically modified organisms, social media and U.S. and European macroeconomics.

Here's a quick rundown on respondents' views of other key topis:

Weather Extremes: 60% of attendees named weather extremes/volatility as the single biggest factor affecting North American food and agribusiness in 2013. That far outweighed the two closest factors - consumer demand (13%) and policy/regulation (10%). Geopolitical events, trade/tariffs/exchange rates and policy/regulation all received votes in the single digits.

Risk Management: Reflecting concern over severe weather, 59% of respondents say that the 2012 Drought has changed their views about risk management in their business. The executives cited an increased focus on financial liquidity (25%), increased investment in risk management and insurance (21%) and greater diversification (13%) as their three leading solutions to hedge against weather volatility.

Corn Yields: More than 90% of respondents say U.S. corn yields will exceed 170 bushels per acre by 2025 (overall average, which was much lower in drought-hammered 2012 at 120 bu./acre). Notably more than a quarter of respondents forecast yields over 250 bushels per acre while 40% cast yields between 200 and 250 bu./acre.

Social Media: The respondents looked to the power of social media and more than half say the growing influence of the technology is changing the way the handle brand and reputation management, and business communications. Adds Cordingly: "Social media has introduced a new and widely accessible communications platform to the media mix, and this has created both opportunities and risks for companies in the food industry. For some parts of the industry, 'business as usual' may not work any longer as social media exercises its potential to be a catalyst for change. However, the social media phenomenon also offers the industry an opportunity to engage in direct discussions with consumers and other stakeholders, to address concerns, to educate, and to clarify fact from rumor or misinformation. One thing is certain, social media is changing the food business in North America."

GMO Acceptance: While well established in the U.S. market, GMO technology in agriculture remains controversial in many parts of the world. Polled on the factors that would most encourage increased uptake of GMOs in the next decade, 56% cited sustained high commodity prices. Others say that greater consumer acceptance (34%) will be key to higher adoption but 7% say they believe GMO uptake will slow.

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