December 26, 2007

 

Biofuels and foreign pork exports to become key US issues in 2008

 

 

Biofuels, a hot topic in 2007, would still continue to be in the spotlight in 2008 while US pork exports would be another key issue, according to Rabobank's 2008 North American Food & Agribusiness Outlook.

 

The Outlook is produced annually by the Food and Agribusiness Research team (FAR) team, which provides information and analysis covering all major sectors throughout the food chain. The Americas-based FAR team is part of Rabobank's global FAR group, comprised of 80 research analysts located around the world.

 

The Outlook takes an in-depth look at issues that will affect the global agricultural industry in the coming year, with three key issues highlighted Animal Protein Exports, Biofuels and Consumer Trends,

   

Animal Protein Exports

 

Rabobank noted a growing reliance of the US meat industry on export markets. Record pork supplies this year meant US pork exports will remain under the spotlight in 2008.

 

China, often touted as the next big opportunity for US pork exports, is likely to become especially important given the recent decline in exports to Mexico, traditionally one of the most important markets for US pork.

 

While the Chinese government has implemented measures to stimulate domestic production, prices are expected to remain historically high for the next 12 months, because the Chinese pork inventory is barely keeping up with rising demand, the report said.

 

Additionally, while a devalued dollar will help US pork exports, competition is also expected to become stiffer, with two other pork producing countries, Argentina and Brazil, having recently signed agreements gaining access to China's pork market.

 

"Future export performance will be influenced by: US dollar movements; ongoing market access constraints and trade reform; competition from other meat exporters; cost competitiveness; and the threat of unforeseen events, such as disease," said FAR Executive Director Fiona Boal.

 

Boal added that despite the risks, the US meat industry should not lose sight of the fact that the benefits of exporting and competing on the world stage far outweigh the risks.

 

Biofuels

   

The biofuel sector would become the most important driver for growth in the US grains and oilseeds sector even as feed still accounts for most of its use, the Outlook said.

 

In 2007, the initial enthusiasm of the market toward ethanol and corn are now tempered by caution as questions arose over issues such as whether the US was approaching an ethanol surplus, and whether current infrastructure were capable to adapt to ethanol.

 

After a strong performance in the 2007/2008 calendar year, corn acreage in the United States is likely to dip slightly, as some growers take advantage of higher soy prices and respond cautiously to a re-adjustment of the ethanol market structure, said FAR Vice President Michael Whitehead.

 

Still, as the ethanol market in the US becomes more efficient, and as US government support for biofuels solidifies, a return to strong corn acreage and good prices seem likely, the Outlook said.

 

Consumer trends

 

The main consumer trends affecting food purchases would be health concerns, and increased desire for premium products and for a greater variety of products, the Outlook indicated.

 

With more media coverage on obesity and associated health problems, consumers are trying to eat healthier foods, placing an increased focus on items such as fruits, vegetables and whole grains, the report said.

 

Additionally, as household disposable income increases and free time diminishes, consumers have an increased desire for better quality and more convenient products that command higher prices, prompting an increase in sales of specialty items.

   

"Food retailers are expected to see continued growth of many gourmet and specialty items, even if inflation continues," said FAR Vice President Stephen Rannekleiv, noting that inflation or even a slowing of the economy is more likely to affect mid-tier products than specialty items."

 

Rabobank serves the global food and agriculture industry, and provides institutional and retail banking and agricultural finance solutions in key markets around the world.