90/91


93/94


96/97


99/00


02/03


05/06


08/09


11/12


14/15


17/18


2050


2065


2080


2095


Based upon moderate economic growth of 2.7 percent per year for the global economy, the UN forecasts an additional 436mlnt demand for wheat, corn, rice and other coarse grains, as populations expand over the next 23 years. By 2050, the UN anticipates global grain consumption at 3,009mlnt having already increased 50% from 1,720mlnt consumed in 1990 to 2,555mlnt in 2017.


This continued demand for food, comes in the context of increasing scarcity of natural resources which require protection to prevent a destructive loop whereby resource degradation leads to further increasing competition for remaining resources. Paradoxically, land use for growing first generation biofuels targeted with reducing greenhouse gases emissions is just one example of additional intensification of land that, in some regions of the world, has resulted in deforestation and destruction of habitats. Interim 2025 targets from the UN, call for a 10.66% increase from 2017 of grain and oilseeds globally to 3,372.4mlnt harvested from a limited 2% increase in hectares.


Policy complexities are added through public opinion of GMO use agro-chemicals are under scrutiny following Europe’s controversial banning of the insecticide neonicotinoids, with the even more critical herbicide glyphosate also under debate of the European Commission.


With land, water and nutrients in limited supply, the numbers, therefore, call for significant growths in yields and productivity, suggesting for a moderately bullish outlook to agricultural commodities and feedstocks over the coming years. Growing dependence on technology, efficiencies and modern practices will be required but not without their own further detrimental impact on small farming operations. The UN calls specifically for a 50 percent increase in production in Sub-Saharan Africa calling for sustainable growth ensuring access and income growth for all.


Agriculturally developed nations of the world have, however, already shown their ability to step up to future needs with nowhere more pronounced this year than Russia. Over the previous 5 years, Russian wheat yields have grown a significant 80 percent, with record wheat production in 2017 at 86mlnt. Once an importer of grains in 1990 (15mlnt), Russia has evolved from collective farming practices to large modern scale enterprises accessing investment, education and technology.


Chart 2: World population is UN forecasts Global Population


10 12


0 2 4 6 8


Source: UN forecasts


In the US, corn and Soybean harvests have surpassed expectations following a troubled a difficult planting and going season bringing crop stresses which, in previous year’s, genetics would have failed.


Despite 2017 recording the first decline in stocks of the world’s major grain stocks of wheat, corn and soybeans, it follows 4 successive years of continued oversupply since 2012.


The intensification of developed agricultural producers and urbanisation of global populations in expanding lower to middle income nations will only serve to increase the reliance in many regions on large scale distribution systems. Critical parts of food systems are becoming more capital intensive, vertically integrated and more concentrated, with the commodity quartet of the ABCD’s positioning themselves accordingly. In the face of consecutive years of diminishing return, the agricultural commodity giants continue to invest in infrastructure and upstream processing and ingredients capabilities, positioning themselves as ‘value chain managers’ and closer to the consumers.


Whilst it might be easy to criticise the concentration of commodity value chains, the infrastructure they provide are our only hope in delivering the capabilities needed to meet tomorrow demand. Relatively new entrants to the ABCD quartet of Glencore and COFCO have shown that competition is strong but the forecast for global trade of commodities remains robust, seeing 10% growth in the next 8 years alone across grains and oilseeds and a massive 17% expansion in global trade of Soybeans. Plenty of reasons, therefore, to be optimistic.


George Eddell E: george.eddell@admisi.com T: +44(0) 20 7716 8054


5 | ADMISI - The Ghost In The Machine | November/December 2017


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