Australia: Fundamentals of supply and demand shifts are largest risk to global agri sector
Last Updated: 26 July 2014

Norton Rose Fulbright survey finds investment and innovation required to meet demand

  • 59% of respondents expect to increase their investment in agribusiness in the next 12 months
  • 71% say there will be an increase in take up of genetically modified food over the next two years as consumers and retailers become more receptive
  • 51% say the availability of finance has improved in the last 12-18 months
  • 80% believe it is possible to increase food productions while meeting renewable energy targets
  • 97% say BRIC nations will continue to have a significant or very significant impact as producers and consumers, and note the roles of Africa and South East Asia becoming more prevalent.

A survey on food and agri-businesses by global legal practice Norton Rose Fulbright, entitled Risks and opportunities in a changing global market, reveals that the fundamentals of supply and demand are causing concern. Increasing consumption in emerging markets, climate change and natural disasters affecting supply, and urbanisation in emerging markets leading to a decline in the agricultural workforce are seen as significant factors.

Despite concern, 59% of respondents expect to increase their investment in agribusiness in the next 12 months with 48% considering investing in transport and other infrastructure to support food production. This is necessary to suffice a continually expanding middle class and growing appetite for meat, dairy and protein rich foods, which have a significant impact on demand.

Almost three quarters of respondents (71%) believe there will be an increase in take-up of genetically modified foods or inputs over the next two years, with an acknowledgment that innovation is necessary. Over half (53%) believe consumers and retailers have become more receptive to genetically modified food over the last two years.

Half of respondents (51%) have seen improvement in the availability of finance. Varied sources of capital such as through private equity, bank debt, sovereign wealth funds and the capital markets have allowed this.

The vast majority (97%) of respondents believe BRIC nations will continue to have a significant or very significant impact as producers and consumers, and note the roles of Africa and Asia becoming increasingly prevalent. Respondents point to the huge demand coming from China, while also expecting China to be the biggest investor in the global food and agribusiness sector, followed closely by the United States.

Martin McCann, global head of infrastructure, mining and commodities comments:
"Clearly there is an increasing global demand for food and agricultural products, which continues to be principally led by rising middle class in emerging markets. Alongside this are factors such as natural disasters which are causing concern in the global industry.

"While there are a number of challenges, there can also be rewards. Increasing participation from Africa and Asia will play a key role in global growth of the market."

Glenn Hall, partner comments:

"Increasing access to diversified sources of finance is encouraging for the agri sector. Further investment and the rise in popularity of innovative products will continue to support the industry.

"Africa is still seen by the industry as a risky place to do business, although there is growing appreciation of the variation between different parts of the continent. But the long term potential is clear as both a producer and a consumer market for agribusiness."

The results of the survey are contained in a report entitled Risks and opportunities in a changing global market, which is available at www.nortonrosefulbright.com.

The survey:
The figures quoted above are from a survey conducted by Norton Rose Fulbright of 80 senior executives from organisations across the sector in the period December 2013 to March 2014. Respondents included agricultural producers, chemical producers, equipment suppliers, major food retailers, commodity traders, banks, consultants and not-for-profit organisations. The survey was conducted via individual telephone interviews and online and respondents were given the option to remain anonymous.

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