What is Now Trendy in the Agri-Sector? (PART 2/2)

 

Following the insights of Jagdish Parihar which can be found at What is Now Trendy in the Agri-Sector? (PART 1/2), this article will explore more trends that pertain to the agri-sector.

 

Jagdish Parihar is the Managing Director & Chief Risk & Compliance Officer at Olam International Limited. He was a speaker at the Global Commodity Risk Management Forum 2016, and he will also participate in this year’s event as well. During his talk last year, Mr Parihar explained the key macro-trends in the agri-sector.

 

Evolving consumer preferences (health, safety, quality) and dietary habits (shift from carbohydrates to proteins & fats)
There is a saying that goes “in the old days, people just ate food; now, they eat gluten-free, organic, non-dairy, vegetarian, fair trade, local, nut-free, and non-genetically modified”. Disclaimer, there is absolutely no attempt of criticism towards this statement, it is only a way of showcasing the –apparent–  increased interest from the part of the consumers to actually get to know what enters their plate and palate. Consumers are getting more educated on health issues; they are interested in the origins of their food, its quality, and safety. Furthermore, dietary habits are becoming more prominent, as, for example, the shift from carbohydrates to proteins & fats.

“About a third of the world’s malnourished population could be fed by using resources now used for biofuel production.”

Biofuels increase competition for resources
Fuel VS food? Instead of serving just one master (food production) agriculture nowadays serves two (food and fuel production). About a third of the world’s malnourished population could be fed by using resources now used for biofuel production (biofuel = any liquid fuel that contains energy derived from recently living organisms, mainly plants). Biofuel production can intersect with agricultural production, market prices, the environment and food security-related welfare measures. There are some impacts of biofuels growth on agricultural commodity prices, and those impacts can translate into changes in consumption, calorie availability, and food security. For example, there is a linkage between biofuels expansion and land area that is used by agriculture; there are pressures on land resources that might have impacts on either loss of natural cover, competition with grassland, or other uses for land like habitat and loss of soil carbon. The situation gets trickier, since there is also a…

 

Growing importance of sustainability to stakeholders
Gone are the times when sustainability was an academic-ish word uttered by chaps wearing green T-shirts protesting naked on bikes.  Nowadays, Corporate Social Responsibility is a separate department in many businesses, and CSR has turned away from being focused solely on environmentally-related issues, but has to face economic and social problems as well. Namely, according to the Triple Bottom Line, a practice is sustainable when it is environmentally friendly, socially fair, and economically prosperous for all of the parties involved. Therefore, in order for an agri-business to be sustainable now, it has to fulfil the following: green-wise, it has to adopt environmentally-friendly techniques (such as crop rotation, cover crops, soil enrichment, natural pest predators), address key emissions from agricultural production, find alternative plantations if possible etc. Socially-wise, agri-businesses need to cater for animal (in case they are involved) and farmer welfare. Finally, economically-wise, agri-businesses need to offer a fair living standard to the communities they do business with.

 

“CSR has turned away from being focused solely on environmentally-related issues, but has to face economic and social problems as well.”

Logistical inefficiencies and storage bottlenecks
There is a lot of room for improvement with regards to bureaucratic and practical aspects of the agri-sector. Since this industry involves so many collaborating parties, many agribusinesses find it hard, for example, to manage their supply chain and data. In which case, commodity solutions provided by Allegro, DataGenic might prove to be helpful.

 

Increased interest in agri from financial investors, as well as increasing importance in geopolitics
Agriculture land is a necessity, since it produces the basic human needs of food and clothing. With the rapidly increasing world population, the demand for agriculture commodities will soar. Here are a few reasons why investors find agriculture attractive: grain inventories are falling to their lowest levels, grain consumption is on the rise, biofuels are driving agricultural demand up to new levels, arable land per person is declining, low water supplies cut down farm productivity (and, therefore, any way to secure better water supplies will be worth its weight in gold).
 

ComRisk 2016
Jagdish Parihar, Managing Director & Chief Risk & Compliance Officer at Olam International Limited

 

 

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