Financial Crisis 2008 January 2009
The financial crisis has hit cross-border Food & Agribusiness (F&A) trade flows severely over the past few months. Confidence in markets is lost for the short term. Nevertheless, demand for food is expected to keep growing due to the long-term drivers that are little affected by the financial crisis. In the current situation of low stocks for the important grains, a rise in prices of agricultural commodities is possible as soon as the situation normalises. The recent events — the commodity boom, the subsequent sudden decline in commodity prices, a similar boom in farm input prices, increased price volatility, a wave of highly leveraged consolidation deals — have, in one way or another, deteriorated the buffer capacity and/or the outlook of many players in the F&A value chain. In combination with financial institutions tightening their credit standards, this has raised today’s risk profile of many F&A companies. At the same time, opportunities arise for those that look to strengthen their strategic position and can rely on a strong balance sheet. Strengthening the sourcing strategy may well be one of those opportunities. The credit and trust needed to build long-term positions will remain scarce in 2009. As a result, mitigating price risks will be difficult. The increased overall uncertainty will negatively impact investments in the F&A value chain over the next couple of years and may have a depressing effect on food supply, which will make it even more challenging to meet the future world food requirements.
Would you like to read more? Being a business client of Rabobank means access to our complete reports. Please contact your nearest Rabobank office via the service and location finder.
