FRE 306- Global Food MarketsDr. Nisha Malhotra-UBC

Session Sept 11, 06

Dan Badulescu (guest instructor)

columbus@columbus-grp.com604-6123986

FRE 306 – Global Food Mkts.

• Agricultural Trade – • What exactly is involved in Ag Trade? • What kind of “goods” are part of ag trade?• Food– non processed(?) eg. tomatoes, apples,

coffee, cotton• Food- processed (different levels) – coffee, milk,

cotton, sugar, honey, orange juice, beef, lettuce• Raw materials- oils, fats, starch, barbasco, dyes, • Services- contract agriculture, advise, training,

insurance, finance, warehousing, logistics

FRE 306 – Global Food Mkts.

• Agricultural Trade – • What exactly is involved in Ag Trade? (slide 2)• What kind of “goods” are part of ag trade?• Inputs- fertilizer, pesticides, machinery, seed,

plastics (greenhouse, mulching), growing media• Tech services- agronomic, marketing, packing

distribution, quality assurance, safety & health• Marketing & retailing (super markets)

FRE 306 – Global Food Mkts.

• Agricultural Trade – • What exactly is involved in Ag Trade? (slide 2)• Exchanges (coffee in London), Chicago, CWB• Labor-migrant/seasonal workers (fruit pickers

from Quebec in BC), Mexican or Jamaican temps

• Information- technical, commercial, economic• Technology-GM seed/foods/nutraceuticals• Food chains-from grower to consumer

FRE 306 - Global Food Mkts.

• Market chains- the addition of value ?• From farmer to consumer – how many

chain links? • Who are the chain links?• Farmer-bulk buyer-broker-regional

wholesaler-shipper-processor-packer-distributor-market-corner store/supermkt.

• Who plays a role in food production / who carries the risk of food production?

FRE 306 - Global Food Mkts.

• Market chains- the addition of value ?

• At each chain link, value is added (?)

• At each chain link, price goes up (down)

• Vertical integration – corporations which fill more chain links (from farm to consumer)

FRE 306 - Global Food Mkts.

• Market chains- the addition of value ?

• Prices goes up – price where?

• Farm gate price vs. price to consumer

• Coffee $ 0.50 CDN/Kg at farm in Ethiopia

• Coffee $1.90 CDN/cup in Vancouver

• 120 cups/kilo = price per cup: 0.50/120= 4cents a cup or $ 228 CDN/Kg to farmer?!!

FRE 306 - Global Food Mkts.

• Market chains- the addition of value ?

• Structure of market or industry (vertical/horizontal, national, global,concentrated)

• Competition – perfect/imperfect

• Monopoly, oligopoly, cartel – who holds power? Who carries the risk?

• Food production is seasonal - long

FRE 306 - Global Food Mkts.

• Market structure & control

• Main agrifood concerns – Nestlé, Kraft, Danone, Pepsi, Bunge, ADM, Cadbury, Conagra, Unilever, MacDonalds, Walmart Carrefour, Monsanto, Tate & Lyle

• Food sectors & niches in the market

• Government support – benefits for whom?

• Market segments ?

FRE 306 - Global Food Mkts.

• Market structure & control

• Trade- is it free trade ?

• Uruguay Round – Gatt (General Agreement on Trade and Tariffs), WTO

• Main ag trade blocks EU, NAFTA, ASEAN

• Tools/measures: quotas, subsidies, tech barriers (regulations)

• Cases of interest: butter mountain in EU

FRE 306 - Global Food Mkts.

• Markets – trends and concepts to watch

• Biotech; Food security • Environment, welfare• Trade blocks• Energy costs• Labor• Hunger, safety & health,

terrorism, aid, poverty• R&D, Intellectual property

(IP), • Monopolies• Economy, CSR

FRE 306 – Global Food Mkts.

• Trade & Global Economy trends

• Trade blocks formation & consolidation

• Push for “liberalization” (less state roles)

• Less subsidies (in theory)

• Global organizations- WTO, supra state

• Global Governance (rules / referees)

• Equitable? Fair?

FRE 306 – Global Food Mkts.

• Key Crops – Corn

• Largest crop in USA, mostly animal feed

• 5 regions:65% world production: 700M MT

• China, EU, Brazil, Mexico, Argentina

• Growth in yields in 05, (marginal)

• GM corn advancing in USA, EU non GM

• Prices stable in last few years

FRE 306 – Global Food Mkts.World Corn Plantings

0%

5%

10%

15%

20%

25%

US Brazil Argentina Mexico China

FRE 306 – Global Food Mkts.

FRE 306 – Global Food Mkts.

• Comparative categories use of corn:

• USA Mexico

• Export 19% 5%

• Feed and residual 55% Food 65%

• Ethanol 15% 10%

• Industrial 11% 20%

– Approximate values

FRE – 306 Global Food Mkts.

• Corn trade dominated by 5 global regions• Cargill & ADM control + 50% global mkt.• Corn GM seed: Monsanto,Bayer,Syngenta• MNC´s have are dominant in global trade• Some examples of challenges (eg. US

corn is has lower price than Mexican corn.. disruption of markets)

(we will go into details later in October lectures)

FRE – Global Food Mkts.

• Coffee – origin Ethiopia (Robusta/Arabiga)

• Top countries Brazil, Colombia, Indonesia, Vietnam, Mexico, Guatemala; Uganda

• Top companies in trade: Nestle, Kraft, Unilever, Maxwell House, Harz Kaffee

• International Coffee Organization– London

• Price crisis- recurrent(last in 2000)Vietnam

• Organic-fair trade coffee –meaning/impact

FRE – Global Food Mkts.

• Coffee – origin Ethiopia (Robusta/Arabiga)• Example: Mexico• 2nd source of $ > remittances, ahead oil• 300, 000 coffee farms-800,000 hectares• 2 million people involved farming-harvest• Pricing wars, fall of 40%-1982 to 2000• Trends: pricing, fair trade, husbandry (we will go into more details later in Oct 06

lectures)

FRE 306 – Global Food Mkts.

• Some info sites to read/consult• www.agr.gc.ca/misb/fb-ba/index_e.php?s1=proc-...

• http://www.sandiegometro.com/1996/oct/connection.html• pdic.tamu.edu/flags/macdonald.pdf

• www.converge.org.nz/pirm/ctrlfood.htm - 31k

• www.globalexchange.org/economy/coffee - 42k