FRE 306- Global Food Markets Dr. Nisha Malhotra-UBC Session Sept 11, 06 Dan Badulescu (guest instructor)

FRE 306 – Global Food Mkts. Agricultural Trade – What exactly is involved in Ag Trade? What kind of “goods” are part of ag trade? Food– non processed(?) eg. tomatoes, apples, coffee, cotton Food- processed (different levels) – coffee, milk, cotton, sugar, honey, orange juice, beef, lettuce Raw materials- oils, fats, starch, barbasco, dyes, Services- contract agriculture, advise, training, insurance, finance, warehousing, logistics

FRE 306 – Global Food Mkts. Agricultural Trade – What exactly is involved in Ag Trade? (slide 2) What kind of “goods” are part of ag trade? Inputs- fertilizer, pesticides, machinery, seed, plastics (greenhouse, mulching), growing media Tech services- agronomic, marketing, packing distribution, quality assurance, safety & health Marketing & retailing (super markets)

FRE 306 – Global Food Mkts. Agricultural Trade – What exactly is involved in Ag Trade? (slide 2) Exchanges (coffee in London), Chicago, CWB Labor-migrant/seasonal workers (fruit pickers from Quebec in BC), Mexican or Jamaican temps Information- technical, commercial, economic Technology-GM seed/foods/nutraceuticals Food chains-from grower to consumer

FRE Global Food Mkts. Market chains- the addition of value ? From farmer to consumer – how many chain links? Who are the chain links? Farmer-bulk buyer-broker-regional wholesaler-shipper-processor-packer- distributor-market-corner store/supermkt. Who plays a role in food production / who carries the risk of food production?

FRE Global Food Mkts. Market chains- the addition of value ? At each chain link, value is added (?) At each chain link, price goes up (down) Vertical integration – corporations which fill more chain links (from farm to consumer)

FRE Global Food Mkts. Market chains- the addition of value ? Prices goes up – price where? Farm gate price vs. price to consumer Coffee $ 0.50 CDN/Kg at farm in Ethiopia Coffee $1.90 CDN/cup in Vancouver 120 cups/kilo = price per cup: 0.50/120= 4cents a cup or $ 228 CDN/Kg to farmer?!!

FRE Global Food Mkts. Market chains- the addition of value ? Structure of market or industry (vertical/horizontal, national, global,concentrated) Competition – perfect/imperfect Monopoly, oligopoly, cartel – who holds power? Who carries the risk? Food production is seasonal - long

FRE Global Food Mkts. Market structure & control Main agrifood concerns – Nestlé, Kraft, Danone, Pepsi, Bunge, ADM, Cadbury, Conagra, Unilever, MacDonalds, Walmart Carrefour, Monsanto, Tate & Lyle Food sectors & niches in the market Government support – benefits for whom? Market segments ?

FRE Global Food Mkts. Market structure & control Trade- is it free trade ? Uruguay Round – Gatt (General Agreement on Trade and Tariffs), WTO Main ag trade blocks EU, NAFTA, ASEAN Tools/measures: quotas, subsidies, tech barriers (regulations) Cases of interest: butter mountain in EU

FRE Global Food Mkts. Markets – trends and concepts to watch Biotech; Food security Environment, welfare Trade blocks Energy costs Labor Hunger, safety & health, terrorism, aid, poverty R&D, Intellectual property (IP), Monopolies Economy, CSR

FRE 306 – Global Food Mkts. Trade & Global Economy trends Trade blocks formation & consolidation Push for “liberalization” (less state roles) Less subsidies (in theory) Global organizations- WTO, supra state Global Governance (rules / referees) Equitable? Fair?

FRE 306 – Global Food Mkts. Key Crops – Corn Largest crop in USA, mostly animal feed 5 regions:65% world production: 700M MT China, EU, Brazil, Mexico, Argentina Growth in yields in 05, (marginal) GM corn advancing in USA, EU non GM Prices stable in last few years

FRE 306 – Global Food Mkts. World Corn Plantings

FRE 306 – Global Food Mkts.

Comparative categories use of corn: USAMexico Export 19%5% Feed and residual 55%Food 65% Ethanol 15%10% Industrial 11% 20% –Approximate values

FRE – 306 Global Food Mkts. Corn trade dominated by 5 global regions Cargill & ADM control + 50% global mkt. Corn GM seed: Monsanto,Bayer,Syngenta MNC´s have are dominant in global trade Some examples of challenges (eg. US corn is has lower price than Mexican corn.. disruption of markets) (we will go into details later in October lectures)

FRE – Global Food Mkts. Coffee – origin Ethiopia (Robusta/Arabiga) Top countries Brazil, Colombia, Indonesia, Vietnam, Mexico, Guatemala; Uganda Top companies in trade: Nestle, Kraft, Unilever, Maxwell House, Harz Kaffee International Coffee Organization– London Price crisis- recurrent(last in 2000)Vietnam Organic-fair trade coffee –meaning/impact

FRE – Global Food Mkts. Coffee – origin Ethiopia (Robusta/Arabiga) Example: Mexico 2nd source of $ > remittances, ahead oil 300, 000 coffee farms-800,000 hectares 2 million people involved farming-harvest Pricing wars, fall of 40%-1982 to 2000 Trends: pricing, fair trade, husbandry (we will go into more details later in Oct 06 lectures)

FRE 306 – Global Food Mkts. Some info sites to read/consult pdic.tamu.edu/flags/macdonald.pdf k k