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Agriculture And Food Chain Needs Collaborative Approach

27 April 2010

The meat and livestock industries will need to collaborate along the chain if they are to pull themselves out of the current recession caused by the banking crisis last year, writes TheCattleSite senior editor, Chris Harris.

The industries are being pulled in different directions by different market forces and there has to be a change in relationships along the chain, Siôn Roberts, the chief executive of English Food and Farming Partnerships told the Outlook 2010 conference in London.

Mr Roberts said that the industry is facing a long term market trend of moving from a protected subsidised industry to a non-subsidised one and it is increasingly being subjected to market forces.

The industry is also facing issues of food security both on a global and a business level.

The UK food and farming industry is also changing in structure but during this change and through the height of the recession, the industry has seen investment hold up well.

The dynamics of consumer demand is also changing, as consumers are increasingly wanting to know where and how their food is produced and they are balancing this against the affordability of the products, Mr Roberts said.

He said that historically food prices have been pulling inflation down, but during the height of the recession, when interest rates hit rock bottom, food prices started to push inflation up.

However, now they are starting again to keep inflation down as raw material prices have fallen back.

"There is going to be a much more subdued picture in the future looking forward, "Mr Roberts told the conference.

"Food inflation has come down to zero, but food prices are higher."

Mr Roberts said that the global agriculture picture is going to be affected by several unknown factors, including the price of oil, climate change and commodity prices.

"We have had a recession, but there has not been much difference in the global demand for wheat," Mr Roberts said.

The wheat stocks dropped during the recessions and they are now being replaced. But he added that wheat prices have been becoming more volatile over the last decade.

Mr Roberts said there is a correlation between the way the wheat prices have performed and the way beef prices have performed, mirroring the volatility.


Source - EFFP

Consumer demand for food has been growing at a constant and rapid rate, but at the same time, food retail prices have remained very stable.

He described four scenarios for the industry as it emerges from the current economic crisis.

The effects of the recession could be long-lasting, mitigated by global cereal prices remaining low, or on a pessimistic note the recession effects could be felt for a long time and cereal prices could rise.

However, there could be a scenario where the economy grows faster, but cereal prices remain high or the most optimistic outcome would be for strong growth and low cereal prices.

He said that the affordability of food has been improving over the last 20 years, but now in the last three years things have started to change.

While food will become more affordable, it will not be at the same rate as it has been over the last 20 years.

Up to the recession, during the age of prosperity, food was very affordable, then prices rose during a period of uncertainty, but the new normal pattern will be for a continuing affordability as a slower rate then in the past.


Source - EFFP

He said the major change for the meat and livestock sectors has been in the development of dedicated suppliers to the retail sector. Now there are a lot of groups that are forming to supply the different parts of the sector.

With this formation of a dedicated supply chain and groups, there is developing a need for a collaborative approach in the industry.

"You have to have a strong commercial logic around supply chain objectives," Mr Roberts said.

"Everyone in the supply chain is mutually dependent and this is going to be critical for both the food and farming industries.

"There has to be a change in relationships and this is a most powerful thing."


April 2010

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