FOOD FOR THOUGHT: Trends in Agribusiness for 2021
Delwin Graham - Jun 04, 2021
“Agribusiness” is the business sector that encompasses farming and farming related commercial activities and involves all the steps required to send an agricultural good to market – namely production, processing, and distribution.
Is there any industry more intimate to us than farming? We depend upon it for our very survival. “Agribusiness” is the business sector that encompasses farming and farming‑related commercial activities and involves all the steps required to send an agricultural good to market – namely production, processing, and distribution.
Because agribusiness is a broad industry, it incorporates a wide range of different companies and operations. Some examples of agribusinesses include farm-machinery manufacturer Deere and Company (DE:NYSE) and seed-and-agrichemical manufacturer Monsanto. Bayer Ag (BAYRY:OTC), which acquired the Monsanto company in 2018, produces the herbicide Roundup (glyphosate) and various Roundup‑ready genetically modified seeds. Nutrien (NTR:TSX) is a Canadian-based provider of crop nutrients like potash, nitrogen, and phosphate. The Archer Daniels Midland Company (ADM:NYSE) processes oilseeds like canola and soy, in addition to processing corn into ingredients such as corn syrup, dextrose, and starch. Smithfield Foods Inc. is the largest U.S. producer of pork. Smithfield is owned by a Chinese company, WH Group (formerly Shuanghui International), which is the largest pork producer in the world and the largest meat producer in China. (Cf., Jennifer Chait, “What is Agribusiness?”, www.thebalancesmb.com, December 18, 2020)
Market forces have a significant impact on the agribusiness sector, as do natural forces like draughts, floods, and changes in the earth’s climate. Changes in consumer tastes and demands alter what products are grown and raised. Changing preferences include an increased demand for plant-based foods, prioritizing locally produced food, and a growing awareness of global food security and climate change.
Aside from consumer demands, agribusinesses constantly face pressures from global competition. Products such as wheat, corn, and soybean tend to be similar in different locations, making them commodities that trade on a worldwide basis. AgTech – the confluence of agriculture – is being used to maximize volume and efficiency while reducing costs. “Smart Agriculture” uses modern technologies to monitor and manage farms through the use of sensors, cameras, and various analytic software. “Precision farming” uses information technology, GPS, drones, and precision machinery that allow crops to be grown more efficiently by allowing inputs to be tailored to the unique circumstances of a specific field. (Cf., Bennett Wong and Riley Dearden, “AgTech and AI – Influential Agribusiness Trends in Alberta,” www.dentons.com, January 21, 2021)
Here are several trends to watch for in the agribusiness sector.
1. Food is abundant. According to World Economic Forum reports, food costs as a percentage of income for western consumers show that less than ever is spent on food, ensuring that food purchasing decisions are no longer primarily driven by price. Food in Brazil, China, and India continues to become more affordable, although food prices in most African countries remain expensive, challenged by the structures of farming and food distribution. However, given the preponderance of cell phones in the developing world, agricultural apps and platforms are available to farmers and consumers, and they are making market pricing and information more widely available and are disrupting inefficiencies, resulting in more affordable food. (Cf., Aidan Conolly, “10 Food and Agribusiness Trends and Technologies to Watch in This New Decade”, www.forbes.com, February 21, 2021)
2. Agribusiness is threatened by climate change. Farming creates monocultures. The UN has pointed out that our agricultural system is reliant upon twelve crops and five animal species. Farming is also a contributor to the climate change that threatens these monocultures. A 2019 report from the UN Intergovernmental Panel on Climate Change found that 23% of greenhouse emissions produced by human activity came from agriculture and forestry activity, and according to a 2018 study in the journal, Science, the food supply chain is responsible for approximately 26% of greenhouse gas emissions. The process of storing dioxide in agricultural soil – carbon sequestration – can be a way of offsetting emissions, but ultimately the goal is to reduce the emissions themselves. (Cf., Marina Leiva, “Agribusiness Trends to Look Out For in 2021”, www.investmentmonitor.ai, January 20, 2021)
3. Plant-based is king. Credible alternatives to meat, milk, and eggs are being generated by startups using fermentation, plant proteins, and Petri dishes. Beyond Meat (BYND:NASDAQ) and Impossible Foods are two well-known companies developing this market. According to a Meticulous Research report, the plant-based food market is expected to reach US$74.2B by 2027, at a compound annual growth rate of 11.9% during the forecast 2020-27 period. (Cf., Leiva, “Agribusiness Trends …”)
4. Disruption in animal agriculture. With reduced land due to urbanization, innovations in cell-based meat, a growing pressure to reduce global emissions, and continued criticism of the practices associated with livestock farming, the sector will have to find a way to accommodate the growth in alternatives to animal-based products. (Cf., “Trends to Watch in 2021: The Year Ahead in Law and Business”, www.blg.com, January 5, 2021)
5. The rise of the ‘blue economy’. According to a study into the state of aquaculture and fishing by the Food and Agriculture Organization of the UN, aquaculture production increased by 52% between 1990 and 2018. While it is seen as a solution to providing a protein-rich diet without further damaging fish stocks, aquaculture comes with its own set of challenges revolving around sustainability. (Cf., Leiva, “Agribusiness Trends …”)
6. Disruption of commodity markets. The shift in commodity trading from the U.S., coupled with the desire for transparency, is driving trade away from traditional commodity markets such as Chicago toward decentralized online transactions, with blockchain to secure the transactions. (Cf., Connolly, “10 Food and Agribusiness Trends …”)
7. The supermarket is fracturing. While COVID-19 catalyzed the rapid shift to e‑commerce in the food-retail space, orders by apps, drone delivery, and alternative options will require constant innovation. (Cf., Connolly, “10 Food and Agribusiness Trends …”)
8. Brazil is the world’s greenhouse. The growth of Brazil’s agribusinesses has been constant and now dominates the global trade of soy, corn, coffee, asparagus, orange juice, sugar, chicken, leather, beef, cashews, and more. (Cf., Connolly, “10 Food and Agribusiness Trends …”)
9. China is the world’s main food customer. Whereas China is incapable of self‑sufficiency, it has become the major customer for all of the world’s main commodities, which in turn is driving the “belt and road” strategy to focus on food production in other countries, both for itself and for international markets. (Cf., Connolly, “10 Food and Agribusiness Trends …”)
The task of feeding the planet in the future is a grave responsibility, but it could also be a very profitable opportunity. How can we have it both ways? Please contact me at email@example.com or 780-408-1518 for a few ideas.