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East Asia to become the 'most significant' market for New Zealand food and fibre products: Rabobank

Posted in Rural News

Content supplied by Rabobank

The importance of the East Asia region as the most significant market for many New Zealand and Australian food and fibre products is set to grow in coming years, highlighted more recently by the global economic downturn, according to Rabobank.

In a recent report titled, ‘Feeding East Asia’, Rabobank says the global and economic downturn has sharpened the focus onto the East Asian region as it continues to expand its slice of the global economic pie, offering opportunities no longer available in traditional markets as incomes grow and diets change in fundamental ways.

“The significance of East Asia to New Zealand and Australian farmers and agribusinesses is growing from an already strong base, with markets in developing economies coming on-stream to supplement more established markets in the region,” senior analyst Marc Soccio says.

“As developing countries across East Asia continue to grow their share of the global economy, rising incomes are gradually transforming household consumption patterns. Opportunities for greater trade with the region are widespread and are more or less subject to the ongoing evolution of strong and sustainable consumer economies.”

Supply chains are evolving, and competition to capture value from rising trade flows is arising from both within the region and beyond. “But overall, with a greater understanding of this diverse region, New Zealand and Australian suppliers appear well positioned to satisfy growing demands for a greater range and value of food and fibre production in years to come.”

The cultural and socio-economic diversity inherent in East Asia remains a defining characteristic that makes the region a particularly complicated prospect to navigate.

Accordingly, the need to better understand the region and its future direction has never been so great, as this will provide New Zealand and Australian food producers with the competitive advantage required to explore the right markets, in the right way, at the right time.

On the topic of the rising tide of foreign ownership in the sector, the Rabobank report refers to the case of Australia’s sugar sector which undertook a significant shift in ownership of the industry’s downstream milling assets in the period from 2010 to 2011.

“In fact, over the past decade, control of almost three-quarters of Australia’s downstream sugar refining assets have been acquired by foreign investors – around two-thirds are now owned by businesses based in East Asia,” Soccio says. “The investment into the sector has had a revitalising effect, but it has also significantly changed supply chain dynamics, with cane farmers now needing to be more mindful of how they transact with parties further downstream.”

The value created by opportunities to supply food and fibre products to East Asia into the future will be influenced by a number of factors.

“Competition from suppliers, both within the region and in other parts of the world, will continue to put the strong reputation of New Zealand and Australian food producers to the test,” Soccio says.

“Many countries across East Asia are significant agricultural producers in their own right and will try to meet their own needs as best as they can, which can limit opportunities for some crops where New Zealand and Australian producers may not have a clear cost or quality advantage.”

Other competitive forces, such as the way in which value is shared in the supply chain, as well as exchange rates and bilateral trade negotiations, will also have a bearing.

“One way or another, the stronger ties being forged to the region through greater inbound and outbound trade and investment will underline New Zealand and Australia’s pivotal role in feeding Asia in the years to come,” he says.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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2 Comments

Supply chains are evolving,

Supply chains are evolving, and competition to capture value from rising trade flows is arising from both within the region and beyond. “But overall, with a greater understanding of this diverse region, New Zealand and Australian suppliers appear well positioned to satisfy growing demands for a greater range and value of food and fibre production in years to come.”
Sounds like suppliers here he is not thinking of farmers.
and
 
“Competition from suppliers, both within the region and in other parts of the world, will continue to put the strong reputation of New Zealand and Australian food producers to the test,” Soccio says.
“Many countries across East Asia are significant agricultural producers in their own right and will try to meet their own needs as best as they can, which can limit opportunities for some crops where New Zealand and Australian producers may not have a clear cost or quality advantage.”
Sounds like he is thinking that food producers are the farmers and will be further driven to lowest cost producing.... as the consumer quality will be from the processor (his supplier)....
 
Thisis not good news for farmers. We put this up at the end of last month.
"We hear in the media every day about how bright the future is going to be for agriculture, and the world's going to run out of food, and we're going to double our population … all these rosy pictures will always be the rainbow.
''You won't quite get that pot of gold. It will always be just out of reach. It will always stay a tough business. What happens every time?
''We've seen it three or four times since 2008. Agflation. The more people believe commodity prices are up, up goes input costs."
Read more: http://www.smh.com.au/business/agribusiness-may-be-better-off-in-private-hands-as-shares-lose-lustre-20121109-293hq.html#ixzz2BlP2VsHC
 
and:
The banks told cattleman Peter Camm to get big or get out. “I realised there is a time to walk and a time to run. I got out of there as fast as I could. Now I sit back on the verandah saluting the sunset.”
 

Camm is one of the very few to have made the beef game profitable and, although most in the industry say it was just luck, he reckons it was smart timing.
When he sold his cattle stations Welltree and La Belle in 2008, it was at the very top of the market and the now struggling RM Williams Agricultural paid him $72 million.
Camm did not believe the hype over world food shortages, world food security, and the proximity of a growing middle class in Asia. That big picture did not match up with a business with incredibly slender margins and loads of debt.
So he got out at the perfect time to watch the rest of his industry succumb to the global financial crisis. It’s been a long, slow, ongoing crash.
Queensland’s cattle industry groans under more than $9 billion in debt – a 17 per cent jump since 2009. In the Northern Territory about 15 major stations have been on the market for more than a year and the banks are watching the loan-to-value ratios and debt serviceability like hawks.
 
Widely predicted world food shortages and growing Asian middles class market have not delivered the dream
http://afr.com/p/national/cattlemen_beef_with_banks_irqQ0fOi39xLWH845S7rjM
 
The main culprit is debt.
Big debt combined with the minuscule returns that are now squeezed out of cattle operations have culminated in property values crashing from their sky-high prices.
Condon warns that the run of favourable seasons had “perhaps provided some breathing space, but appears to have only delayed the inevitable descent for some into financial crisis”.
 

 

Thanks Henry. So is the

Thanks Henry. So is the demand for Fonterra unit securities a vote for the Fonterra the co-op or Fonterra the processor? (strong demand for units a vote of confidence in industry; Bad News Browns words and by default compliant shareholders council, not mine).