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WORLD OSTRICH ASSOCIATION "To Represent The International Ostrich Industry Through Communication, Dissemination of Information and Provision of Industry Standards" |
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Newsletter No. 45 – December 2006
1. New Look Newsletter 2. Agricultural Outlook 3. Farm management 4. Commercialisation of Small Holder Agriculture 5. International Supermarkets
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1. New Look Newsletter This newsletter introduces a new look. Please let me know if you experience any difficulties downloading or reading. This move is to overcome the some spam filters blocking delivery of the newsletters published in the previous format.
2. Agricultural Outlook The web site of the FAO is always an excellent source of
information. They have recently published the Agricultural Outlook 2006
to 2015. This is a joint publication by the Organisation for Economic
Co-operation and Development (OECD) and the Food and Agriculture Organization
of the United Nations (FAO). The report benefits from the commodity, policy
and country expertise of both organisations. This annual report analyses world commodity market trends and medium term prospects
for the main agricultural products. It shows the influence of economic
developments and government policies on these markets and highlights some of
the risks and uncertainties that may influence market outcomes. In addition
to OECD countries, the market projections in the report cover a large number
of other countries and regions including the agricultural giants of
A short version of the report is available for download and the full version can be ordered from this web page: http://www.agri-outlook.org/document/12/0,2340,en_36774715_36775671_37040780_1_1_1_1,00.html
Their statistical database has gone through a major upgrade though the transition to the new database is not yet quite complete. This web site is a great source of information that is important to keep in touch with agricultural market and production trends.
3. Farm Management One section of the FAO web site makes this introductory statement under the heading of Farm Management:
Quote: Powerful driving forces are changing farming systems across the world. Globalisation and market development are opening up new opportunities for farmers and local markets are challenged and sometimes overwhelmed by lower priced imports; the result is rapid commercialisation of smallholder agriculture in many parts of the developing world.
Urbanisation is increasing the number of people for whom food must be produced by farmers, increasingly delivered through supermarkets. As a consequence, farmers are intensifying existing patterns of production, diversifying into new lines, seeking off-farm work, expanding business size and even existing agriculture in an attempt to improve their livelihoods and escape poverty. end quote
This statement makes two very important references that we will focus on in this newsletter as understanding them well helps to explain the challenges facing developing our industry.
4. Commercialisation of small holder agriculture Producers have tended to go in two different directions over the past few decades, driven by the “green revolution” and the effect of globalisation and changes in market delivery.
The progressive farmers have adopted the new technologies and management systems, consolidated and produce in volume with increasingly efficient methods of production. These efficiencies are a combination of:
- Production technology inputs (e.g. fertiliser, weed killers, vitamins, minerals, pharmaceuticals) - Management systems to support that technology (e.g. machinery, computers, records, systems, biosecurity) - Genetic improvement in livestock, fruit, vegetable and grain production (e.g. winter hardy seeds, high yielding grains, fast growing pigs, high yielding dairy cows)
The result of introducing these efficiencies in production is increased yields, reduced unit costs of production, and greater consistency of products required by the buyers of these supermarket giants.
Figure 1 is an illustration from the USDA Farm Policy 2001
to illustrate how markets have changed over a very short period. Note
how in a 10 year period selling has moved from 5%
selling direct to processors on contract to nearly 70% in the
Figure 1 - Changes in Marketing Methods
5. International Supermarkets Newsletter No. 20, Item 3, discussed the increasing power of the supermarkets and their impact on the agricultural market place.
Focusing on just 3 of the major International supermarkets illustrates how they are developing globally and remember they purchase globally from the most efficient producers capable of supplying the volumes they require. The “green revolution” has made this rapid growth possible enabling production of food at significantly reduced costs in real terms and available to increasing numbers of people.
WalMart WalMart, founded in 1962, is the largest retailer in the
world and a
Carrefour Carrefour, founded in 1959, is a French owned supermarket
chain, described as the leader in
Figure 2 - Carrefour areas of Operation
News item published on 20th November, 2006.
Quote: “Bharti ties retail knot with Wal-Mart In a scoop appearing in NDTV, telecom major Bharti has finally tied the retail knot with the world’s largest retailer, Wal-Mart.
Carrefour, the other contender was left in the lurch as a result of aggressive bidding by the former. To get around archaic Indian FDI rules, Bharti will take up the front-end retail operations while Wal-Mart will power the back-end supply chain. For retailing rights, Bharti will pay a royalty to Wal-Mart. As a strategy, an agreement is being sought with a large foreign real estate group for large investments in real estate that will be required.
The deal seems to have the
blessings of the Government and industry minister Kamal Nath even promised more
liberalized norms for foreign companies investing in the supply chain.
Wal-Mart already sources goods worth $1.5 billion. The deal is likely to
change the face of modern Indian retailing. The news has already paled into
relative insignificance, Reliance’s recent
Tesco Tesco, founded in 1919, is the largest British supermarket
chain. Figure 3 illustrates their international growth. In
addition, they are on target to enter the Figure 3 - Tesco areas of Operation
A news item published on 6th October, 2006
Quote: “Tesco & Carrefour exchange stores In an unusual but astute
business move, Tesco and Carrefour have agreed to swap stores and their
operations located in
As part of the deal, 11
Carrefour stores in the
The swap provides Tesco with the opportunity to grow its businesses in the highly competitive Czech and Slovak markets and exit the Taiwanese market where it is lacking critical size. Source: http://www.rvgonline.com/
This clearly shows how we are operating in a rapidly changing marketplace.
The statement in Item 3 referenced small producers diversifying. Many diversified into Ostrich production before development of markets, before identification and development of performance genetics and with no clear leadership. As can be seen, this move into diversification came at a time of dramatic change in the global agricultural marketplace.
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