AGRICULTURE – A US$13,400 BILLION BUSINESS
Food inflation is unfortunately likely to remain for the foreseeable future, especially with no end in sight to the Russian aggression in Ukraine. The impact is driving combined revenues in the global food industry to more than $13 Trillion (€12 Trillion) in 2023 according to The Business Research Company’s latest report. It also estimates the market will reach $19,007 Billion by 2027 exacerbated by population growth and agricultural land being turned over for housing, especially in China and India, with the knock-on effect being increased deforestation across Latin America and Africa.
Which is why key companies in the food chain are turning to data and analytics to give them a competitive edge. Data & Analytics are now available from farm to plate, where the whole value chain can be broken down into segments to realise trends and better manage risk.
CHINA IS CHANGING MARKET DYNAMICS
China has become the world’s indispensable food producer and consumer. Once able to produce enough to feed its own population, since becoming a net importer of agricultural products in 2014 (Soybeans, Rice, Wheat, Corn & Dairy) the sheer size of demand has radically altered trading flows globally. The table below demonstrates the sheer size of demand from Asia, and China in particular.
More and more western agri-businesses are forming alliances and partnerships with Chinese companies, encouraging active M&A. Prominent Chinese companies such as retail giant Alibaba are now involved in the agricultural supply chain of fruits and vegetables. This has stimulated China based manufacturers of chemicals and seed suppliers who are busy establishing footprints across the western agri-world. Additionally, China is home to one of the biggest commodity traders around, COFCO. According to research house AgFunders in 2022 China invested $2.7 Billion in agri-techs, second only to the US, especially targeting biotechnology and bioenergy.
The increasing size of the market in dollar terms, sophistication in trading activity, is creating demand from market participants for better data and analytics to be able to function effectively.
DATA, ANALYTICS & BENCHMARKING AGRI-TRADING
Global food industry and agricultural markets have been irrevocably changed by China’s commodities and energy activities. This has fed through to how agricultural trading functions creating high value opportunities for Data & Analytics companies to supply data services to Billion dollar companies affected by China and its supply chain. This is allowing specialist data providers to offer products which act as trade enablers for the brokers and trading houses building the chain that ultimately links Producers to us, the Consumers.
For example, CTD Indices, (www.ctdindices.com) has created a range of ‘LIVE’ China based Agriculture & Energy focused indices enabling data and analytics companies to better benchmark and model trends correlating between actual supply and physical demand. These indices are derived from independent tradable China financial futures market prices thereby offering unbiased insights and macro indicators. CTDI is just one of a new breed applying quant based analysis to deliver leading insights.
This can be seen by the use of CTDI’s indices by global food supply chain facilitators active in both selling to China or buying from China.
SUMMARY
The result is data and analytics with benchmarks are transforming the mechanics and dynamics of global commodities trading, especially when it comes to that indispensable market China where the government is returning to more central planning led strategies.
Also as the human population explodes, fallout from the Russian invasion of Ukraine continues, and climate change alters traditional growing seasons, it increases the issue of food security which means the role of data and analytics in global commodities trading will only become more fundamental.
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Keiren Harris 12 July 2023
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