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Agricultural Marketing QUO VADIS?

Agricultural Marketing QUO VADIS?. “One of the great mistakes of the past 30 years of economic policy has been an excessive belief in he ability to forecast” Martin Feldstein. Prof. J.A. Groenewald Agri Outlook Conference 2007. INTRODUCTION.

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Agricultural Marketing QUO VADIS?

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  1. Agricultural MarketingQUO VADIS? “One of the great mistakes of the past 30 years of economic policy has been an excessive belief in he ability to forecast” Martin Feldstein Prof. J.A. Groenewald Agri Outlook Conference 2007

  2. INTRODUCTION • THE MARKETING ENVIRONMENT IS CONSTANTLY CHANGING AND • CHANGE IS ACCELERATING • THERE IS A MAJOR CHALLENGE FOR ALL INVOLVED IN AGRICULTURAL MARKETING TO ADJUST TO THIS CHANGING ENVIRONMENT.

  3. THE MOST IMPORTANT CHANGES: (PROBABLY) • Climate change • Biofuels • Power relationships in supply chains • Consumer demands • New products & technology • Government action • Developments in neighbouring states

  4. Change #1 –Climate Change • The Effects of Global Warming : • Increased production fluctuations; thus, greater price volatility; • More and larger storage facilities, leading to higher fixed costs; • Changed geographical agricultural production patterns, requiring new infrastructure (fixed costs), new organization, different procurement strategies & changed distribution modes • Movement towards biofuels

  5. Change #2- Biofuels • Effects: • Moves for increased subsidization in wealthy countries (e.g. current u.s. farm bill).Does this spell serious danger for the WTO? • Higher prices for grains, sugar cane products and some oilseeds. Thus,production expanding to more marginal areas, leading to more volatile production and prices; increased costs for animal production – poultry, dairy, meat. • Increased numbers of hungry people (perhaps up by 50%), and thus increased calls for food aid • Larger wealthy-poor differences (market segments)

  6. Change #3– Power realtions in supply chains • Increasing public debate: Power mostly concentrated towards distribution end • We now see signs of countervailing power movements in some sectors and more balanced vertical coordination in some others. • Are governments (including RSA) going to improve their anti-trust and pro-competition actions? • Will cooperatives revive? What will new age co-ops look like? (Will the errors of the past repeat themselves?)

  7. Change #4– Consumer demands • Niche-type markets for the wealthy are expanding • not only in Europe, North America & Japan, but also in the new rich, e.g. China, India and Brazil • Different niche markets have different product requirements. • What new trends? • How will those in India, China, etc. differ from the EU-USA characteristics? • How can these best be served? • At the same time, low-income population numbers are growing; they represent different needs, different product requirements, different methods of distribution. • In some countries, they mainly represent older people

  8. Change #5– New products, New technology • Will these be mainly aimed at the wealthy, or to poorer consumer groups? • Be more quality-enhancing, or quantitative? • Think for example of technology to reduce post-harvest losses in LDC’s • Useful mainly on large, or small scale, or both?

  9. Change #6- BEE • What is going to be the scale? • Will it materially influence marketing organization? • How?

  10. Change #7– Government Action • Will the RSA government continue its lack of support for agriculture? • If it is to provide some protection, what will be the nature thereof? • Will emerging farmers be able to access inputs, information and markets? • Will there be aid to small farmers in this respect?

  11. Change #8– Developments in neighbouring states • Disparate, ranging from complete collapse (Zimbabwe) to rapid economic growth (Mozambique, Botswana) to stagnation (Swaziland, Lesotho) • What opportunities? How to approach them? • Which unutilized potentialities can become opportunities? And who will grasp such opportunities? • What are going to be the respective roles of the private and public sectors?

  12. Probable Future Developments • More recognition of different final demand segments, nationally and internationally. • Will different segments be served by specialized firms, or more diversified firms? Do we have the management needed for the latter? Will we see parallel, or branching value chains? • Increased coutervailing power movement (struggles?) in agricultural value chains, with increased cooperation among primary producers. • New generation cooperatives among established commercial producers, and assistance to cooperatives serving small farmers

  13. Probable Future Developments… • Volatility in production and in prices. • This may lead to new hedging innovations; more infrastructure investment, higher fixed costs, increased importance of procurement & financial management. Also more intense market scanning! • Increased clamour from labour union & populist groups for government intervention. • So many people ask: What should the government do? But so few ask: What CAN a government do well?

  14. Advice • Be ever alert!!! • Remember: there is no place for greed in the market!

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