Buying the farm.
Demand for food (human), feed (animal) and fuel crops will continue to increase with a growing world population (especially in major cities), industrialisation in developing countries and rising incomes. Additionally, future reductions in the supply of oil will increase demand for plant based plastics and chemicals.
Within this framework, Australia is currently experiencing some frantic manoeuvring in finance and political circles about bids by international companies to buy domestic food producers. One is a milk products company, the other a grains exporter.
But why should the purchase of two agribusinesses be of interest to logisticians? The discussions surrounding possible acquisitions is highlighting the effects of supply pressures in the global soft commodities markets and who will gain and lose. These constraints will restrict supply, increase prices and put pressure on logisticians and logistics service providers (LSPs) to improve their performance.
Soft commodities are grown – hard commodities are mined. The main groups of soft commodities are:
- Course grains and cereals grown on large farms. The crops comprise corn, wheat, barley and soya beans; rice is grown on large or smaller properties depending on the country
- Speciality products grown in plantations. Crops such as coffee, cocoa, rubber, sugar and palm oil
- Proteins such as dairy products, beef, pork, chicken, fish and nuts
- Horticultural products such as vegetables and salad items
- Forestry products
Reducing waste in soft commodity supply chains
The supply of land suitable for most soft commodities has not increased in the past 50 years and the yields from corn, wheat and rice could be reduced by 10% for each 1 degree increase in temperature caused by global warming. So what remains to increase the quantity of agricultural products? It is in three areas: improving the yield from current farms (milk production per dairy cow in Victoria, Australia has more than doubled since 1980, meaning that milk powder prices have increased by only 5 percent), increasing the yield of products produced from soft commodities and reducing waste in agricultural supply chains.
For logisticians, the task of reducing waste affects the whole of an agricultural supply chain; not only the outputs from the farm and through the handling, conversion and delivery processes but also the farm inputs, such as fertilisers, water and power.
The countries where these improvements can be most effective are those with a lower population density and therefore less pressure on agricultural land; examples are: Australia, New Zealand, South Africa, Russia, Canada, America, Brazil and Argentina. As these countries supply more agricultural items to Asia, future demand for logistics infrastructure will change the current imbalance between inbound manufactured goods and empty outbound containers. It will also increase the demand for specialist logisticians in agriculture.