Dutch cooperative bank Rabobank has predicted strong growth in the global agriculture industry as the combined effects of increased demand for food and fuel put pressure on the sector to operate more efficiently and to invest more widely.
In new report entitled 'The Boom Beyond Commodities' published by Rabobank's Food & Agribusiness Research division, the company says improvements to transportation networks around the worldwide is making it easier to reach certain countries where natural resources are extensive but access has traditionally been problematic.
This is set to further boost investment in agriculture and increase the value of inputs, particularly in South America, eastern Europe and south-east Asia.
Despite recent shocks to the global economy caused by the credit crisis and soaring food and energy prices, companies operating in the food production and agricultural sectors are expected to achieve extremely strong growth in the years ahead, particularly in Asia.
'As income growth drives demand for more protein foods, a multiplier effect for commodities and commodity inputs will support prices,” said the report's author Brady Sidwell. “Expanding urban populations which prefer convenience and variety will bring growth to food processing and food retail — which will again boost demand for commodities and inputs and thus growth for players in these businesses.”
The Asian region clearly has the greatest potential for further expansion, the report finds. 'Despite the short-term threats to growth ensuing from increasing inflation and a slowing world economy, growth in income, population and urbanisation will lead to strong fundamental demand. This will create new opportunities that will change the way agriculture is seen as an investment and valued as an asset. Commodity prices are expected to ease in the years ahead. Companies that are well positioned to respond to growth and changes in lifestyle, which will be most pronounced in developing countries, will be able to achieve strong success,' says the rerpot.
Rabobank also expects there to be a high level of rural-urban migration over the next ten years, particularly in China and India. The forecast is that every day around 50,000 people will move to the cities where the demand for food and energy is even higher than in the countryside.
Industries affiliated with biofuel will also require increasing volumes of crops, says the company. They will consequently also be a key driving force behind the growing demand for commodities, inputs and natural resources.
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