CHS helps Students connect with Industry at the World Conference

By Timothy Meyer, Instructor, South Dakota State University

In 2013 graduate students from South Dakota State University traveled to Atlanta, Georgia to compete in the International Food and Agribusiness Management Association’s annual case study competition.  The students attending the trip were like most students, unaware of their own potential and a bit naïve with regards to the industry presence at the conference.

South Dakota State University’s Economics department has majors in Economics, Business Economics, Agribusiness, and Resource Economics; making an annual trip to the IFAMA world conference a logical travel experience.  The case study competition, along with the academic and industry presence make the conference a vital component of the students’ curriculum.  Luckily, our students made a specific connection in 2013 that has strengthened South Dakota State’s involvement with IFAMA, and the title Sponsor, CHS.

That connection was started by William Nelson.  Mr. Nelson’s enthusiasm for student engagement is contagious.  His questions and conversation with our students heightened their awareness of the potential their training in economics, business, and agriculture provided them for the future, even if they were from a small rural town in South Dakota.  Our students gained confidence, as many of them remarked that while South Dakota has a small population, it is in the center of the Agribusiness Universe.

CHS’s support of the conference has allowed SDSU students to be able to attend the conference each year since.  Through the generosity of the company, our students are now able to experience a truly unique conference every year, no matter the location.

This year the conference has added an undergraduate section to the case competition.  The timing of this change is serendipitous as SDSU has made experiential learning and travel an immediate priority.  With this in mind a travel course was been created with attendance of the conference and Case Study Competition participation a cornerstone of the course and the trip.

At present time four undergraduate students and five graduate students are slated to participate.  With the help of CHS the trip is financially feasible, even for graduate students living off ramen noodle.  The exciting part of the trip for most of the students is the ability to travel internationally and apply what they’ve learned in 3+ years At SDSU.

The 3 credit hour course has even been beneficial for the faculty members involved as well, two of which of have limited experience with Europe.  Over the course of the spring, we have all learned about the history of the European Union, agribusiness in the region and more.  The students have been giving reports on various topics much in the manner they will give their case study presentations, gaining confidence in their knowledge, the ability to apply their knowledge, and speaking in front of a group.

The IFAMA World Conference is an incredible experience for our students to learn how small the world has become, but also how much potential there is in the agribusiness sector of the economy.  Through the encouragement of CHS, William Nelson, our department head Dr. Eluned Jones, and the involved faculty, our students will be rewarded with the privilege of conference attendance this year, and many years to come.

Join us at the conference, June 19-23, 2016 in Aarhus,  Denmark.  Details are online at http://www.ifama.org or http://www.ifamaeurope.org.

 

 

 

Long-Term Commodity Prices: Moderate Strength

By Yelto Zimmer, Senior scientist at the Thünen Institute of Farm Economics

As commodity prices soared from 2008 to 2012, global concerns mounted that the expanding population and rapid economic growth were out Yzimmerstripping our capacity to feed the world as it heads for nine billion in 2050. Now, prices have fallen – in some cases by as much as 50 percent. “A New Paradigm for Global Agriculture Commodity Markets?” explains why both the demand and supply sides suggest long-run price levels are likely to average only modestly above those of the pre-boom period.

  1. Demand-side growth is slowing: After increasing by an average of 2.2% between 1970 and 2007, global annual growth in food demand is projected to ease to 1.4% between 2007 and 2030 and to 0.8% between 2030 and 2050. Causes include slower population growth; an increase in the elderly population, who tend to consume less food; and an increasing share of the global population whose diets have reached the saturation level and from whom no significant increase in food demand can be expected.
  2. Global supply potentials are higher than many estimate. We still have massive untapped yield potentials. For example, average wheat yields average 40% of the agronomic potential.

Also, land is not in short supply globally: About 1.7 billion acres or 700 million hectares of arable land are still available, without touching the rain forest or other ecologically sensitive areas.

  1. Cost of production and transport are the deciding factors. Globally, it is cost of production of the marginal producer that counts – that is, the producer who represents the production system or site with the highest cost of production, who contributes the last unit of output on the global supply schedule needed to match supply and demand. Further, it is the cost at a port that serves global markets that matters.

A few factors might suggest a higher cost of production as new land is brought into production: It may be lower yielding, for instance. Data from agri benchmark farms indicate low-yielding wheat farms – which account for as much as 80% of global trade – have direct production costs of about $25/ton above high-yield farms. However, in some cases, mechanization and economy of scale compensate. In addition, recent agricultural growth has been in countries where natural conditions for arable production and good yields are excellent—Argentina, Brazil, Mozambique, Angola, and Myanmar, to name just a few.

Some believe adoption of more intensive production practices increases cost of production. Data from agri benchmark farms from all different intensity levels globally do not support that view. We found absolutely no correlation between use of nitrogen fertilizer or crop production products as proxies for input intensity and direct cost, operating cost, or total cost of production per ton.

The possible reason for this: In the long run, farmers not only use more fertilizers but modify the entire production system, using better seed, higher plant population, etc.; i.e., they move to a more efficient production function. Hence, the hypothesis that intensification’s effects on cost of production are the cause for a strong increase in prices is unfounded.

Finally, some believe that higher oil and fertilizer prices led to higher cost of production and hence higher commodity prices. agri benchmark figures from 23 typical farms from all major wheat-producing countries, from 2008-2012, when crude oil prices were near $100/barrel, suggest that the increase in energy and nitrogen prices (which are energy-price driven as well) led to a fairly modest $25-$35/ton higher production costs compared with the pre-2008 period. Of course energy and nitrogen prices have fallen dramatically more recently.

On the other hand, new lands’ longer distances to export harbors and less developed infrastructure mean free on board (f.o.b.) costs inevitably rise. A case study from Brazil suggests this increase could be in the range of $30/ton.

Land rent may absorb some of these increases in cost of production. As the current United States case illustrates, when farm profit margins tighten, land rents and values adjust downward. Figures from two Brazilian agri benchmark farms with similar yields support the view that higher transport costs are reflected in lower land rent: A farm in Parana is relatively close—435 miles (700 km)—to the port at Santos and rent is about $89/acre ($220/ha); one in Mato Grosso is about 1,367 miles (2,200 km) and land rents there are about $57/acre ($140/ha).

The bottom line. Assuming long-run increases in costs of $65/ton, and assuming only about half this increase is compensated by reduced land rents, $180/metric ton might be a reasonable estimate for long-term wheat prices; corresponding corn prices can be assumed in the range of $140/metric ton. That is well below the extreme scenario of $270/ton wheat some have portrayed. And, of course, if crude oil prices stay at or below $60/barrel, the long-term price level would be at least $10/ton lower.

This is not to say supply-side shocks have no effect. During the recent price boom, yields in the United States were below trend for several years, and the major drought in 2012 resulted in very tight supplies. However, as we have seen, stocks have rebuilt rapidly and prices have adjusted accordingly.

We conclude that long-run equilibrium prices might be modestly, but not dramatically, above pre-boom prices and also dramatically lower than some forecasting institutions have suggested.

For More Information

The full working paper is available at www.agribenchmark.org/fileadmin/8-Cash-Crop/Working-Paper/cc-1502-commodity-markets.pdf

agri benchmark methodology: www.agribenchmark.org/cash-crop/publications-and-projects0/methodology.html. Typical farm approach is explained in more detail here: www.agribenchmark.org/fileadmin/Dateiablage/B-Cash-Crop/Misc/SOP-cashcrop-0512.pdf

Yelto Zimmer is coordinator of the agri benchmark Cash Crop Network, senior scientist at the Thünen Institute of Farm Economics; e-mail: yelto.zimmer@ti.bund.de; www.agribenchmark.org.*

*agri benchmark is a global, nonprofit network of agricultural economists, advisors, producers and specialists in key sectors of the value chains who use internationally standardized methods to analyze farms, production
systems and their profitability.

Honoring Founder Ray Goldberg with the 2015 IFAMA Distinguished Service Award

The IFAMA Distinguished Service Award was presented to one of its founding fathers, Dr. Ray Goldberg for a lifetime of pioneering contributions to the field of agribusiness. We presented Dr. Goldberg with the award at the 25th Annual World Conference President’s Award Dinner in Saint Paul, Minnesota. The IFAMA Distinguished Service Award honors an individual whose pioneering contributions have made significant, transformational impacts to the global food and agribusiness system.

Through his acceptance speech, Dr. Goldberg talked about the effect of how collective support can encompass more people, discipline, non-profit and private sectors, and consumer activists to acknowledge the economic struggle in the food system.  By cooperating with AAEA (American Agriculutral Economics Association) we will be able to provide security, sustainability, and manage water and land resources effectively.

Dr. Ray Goldberg not only evoked the audience with a profound message valuing the chain of food production and consumption in the world but also drew awareness to the global food and agribusiness system impact.

IFAMA is delighted to recognize an honorable man whom not only showed the strength of a vigorous hard-working individual but one that evoked a heartfelt passion for helping the millions of people who get left behind in the food system today. Let him be a reminder, that even in today’s society with our advancing technology, we can too make a difference and excel to work towards Food Security in 2050.

Watch a recording of Dr. Ray Goldberg’s speech below:
 

IFAMA Governance Updates

IFAMA is governed by a Board of Directors and an Executive Committee. Its officers include a President, President Elect, and Past President. The association’s programs and activities are administered by the IFAMA Business Office in Washington, DC. The IFAMA Board of Directors convened at the 2015 Annual Conference in Saint Paul, Minnesota, where four new members were nominated and elected to the Board. At the Closing Session on the last day of the conference, Thad Simons, 2015 IFAMA Board President, passed the torch to the new 2016 IFAMA Board President, Johan von Rooyen. Thank you to Thad Simons for your work during your term as IFAMA Board President.

Thad and Johan pass torch

 
2016 Board President

Johan von RooyenJohan von Rooyen
Professor in Agricultural Economics
Stellenbosch University
Stellenbosch, South Africa

 
 
 
 
New Board Members

Esteban BrenesEsteban Brenes
Professor of Strategy and Agribusiness
INCAE Business School
Alajuela, Costa Rica

 

Shane MastersShane Masters
Investment Manager
ARG Partners
Visalia, CA

 

William NelsonWilliam Nelson
Vice President, Corporate Citizenship
CHS Inc.
Inver Grove Heights, MN

 

Eugenia SerovaEugenia Serova
Director FAO
United Nations
Rome, Italy

 

2016 Executive Board Committee

Vincent Amanor-BoaduVincent Amanor-Boadu
Professor
Kansas State University
Manhattan, KS

 

Onno-OmtaOnno Omta
Professor
Wageningen University
Wageningen, Netherlands

 

Johan von RooyenJohan von Rooyen
Professor of Agriculutral Economics
Stellenbosch University
Stellenbosch, South Africa

 

Mary ShelmanMary Shelman
Director, Agribusiness Program
Harvard University
Boston, MA

 

thad-simonsThad Simons
Managing Partner
The Yield Lab
St. Louis, MO

 

Raj-Vardhan (1)Raj Vardhan
Senior Vice President
Olam International Ltd.
Moscow, Russia

 

>> Click here to see the complete list of the IFAMA Board of Directors

Greetings from IFAMA’s Board President

Dear Friends and Colleagues,

I am delighted to announce exciting organizational changes and a brand new initiative for IFAMA in 2015. We have embarked on a new partnership with the Global Business School Network (GBSN), a nonprofit that works to improve management education for the developing world. As of January 1, IFAMA operations are embedded with the staff at GBSN. Page Buchanan – IFAMA’s new Director of Operations, Dale Baker – Program Officer, and Nicole Zefran – Administrative Coordinator, are working closely with the IFAMA Board  of Directors and IFAMR Administrative Editor, Kathryn White to plan a dynamic and innovative program for the coming year.

Key in those plans is the new IFAMA Become the Solution: Food Security 2050
initiative, a three-year effort to address major issues our global community faces in providing food security for the estimated 9 billion people that will inhabit the planet by 2050. IFAMA’s core mission remains to unite industry, students, academics, government leaders and other key stakeholders across the value chain of food production and consumption to improve the global food and agribusiness system in response to the changing needs of the world. Become the Solution: Food Security 2050will use the IFAMA platform to address the intersecting issues of People, Climate and Big Data in achieving food security in the developed and developing world.

Become the Solution: Food Security 2050 will officially launch at our 25th Annual IFAMA World Conference in St. Paul, Minnesota June 14 – 17, 2015. I look forward to the important conversations we will have there about how industry, academia and future leaders in the food and agribusiness sector will tackle the challenges ahead.
Our goal is to make IFAMA an organization that engages and serves its members year-round.

The new IFAMA team is based in the GBSN offices in Washington, DC. The IFAMA phone number will remain +1-202-429-1610 and you can use it to reach Page, Dale and Nicole directly, or feel free to email them at the addresses listed below.

Page Buchanan: pbuchanan@ifama.org
Dale Baker: dbaker@ifama.org
Nicole Zefran: nzefran@ifama.org

Kathryn White remains the key contact for the Symposium and Student Case Competition for the 2015 World Conference, and will  continue her work managing and growing the  IFAMA journal, The International Food and Agribusinesss Management Review.  Kathryn can still be reached at mkwhite@ifama.org.

You may have already noticed a new energy in our social media channels, which will be a key conduit for communicating with you throughout the year. I encourage you tofind us on Twitter, Facebook and LinkedIn for updates on the 25th Annual IFAMA World Conference, as well as the food and agribusiness management sector and member activities.

Our goal in making these changes is to increase our programs, services and support for you. Please don’t hesitate to reach out and let us know how we can serve you better.

Stay tuned for more information coming soon on the 25th Annual IFAMA World Conference plans and much more. It’s going to be a great year for IFAMA!

Thad Simons
Board President, IFAMA

Changing Paradigms and Scenarios for Sustainable Agricultural Development in Africa

By Johan Van Rooyen, Director, Standard Bank Centre Development and Leadership, Stellenbosch University

ImageTowards Africa’s Age of Opportunity

Agriculture, including agribusiness, is projected to be a US$1 trillion industry in sub-Saharan Africa by 2030 (World Bank, 2013). It is therefore understandable that agricultural development in Africa is back on the global development and investment agenda. With investments from sources around the globe, agribusiness started booming in the 2000s. In addition, soaring grain prices and global food inflation spurred investor interest in African farming. Africa has the land availability and space for farm production to grow significantly, which counts in its favor. Many farming projects, linked to the value chain through agrifood processing, food retail establishments and service networks, increasingly do business on the continent, due in part to growing private sector interest. African agriculture attracted more than US$100 million in private equity investment in the first half of 2012, compared with US$50 million for the whole of 2011. Standard Chartered invested US$74 million early in 2013 to gain a stake in the grain and fertilizer trade in sub-Saharan Africa, and another US$20 million in Zimbabwe’s horticulture sector.

Business and Society to Benefit

The strategic and societal importance of African agricultural performance is also clearly illustrated In September 2009, the G20 recognized agricultural development as a central activity for African development, echoing the calls of the World Development Report (World Bank, 2007, the “Our Common Interest” Report (Commission for Africa, 2005) and most recently the African Heads of State at World Economic Forum in Cape Town called for increased agricultural investment (NEPAD, 2013). All emphasized the notion that agriculture is a key driver of economic development and growth, poverty alleviation and food security on the African continent.

By its direct and indirect relationship to and impacts on all eight United Nations Millennium Development Goals (MDGs) (United Nations, 2009). This importance was also confirmed by the World Bank (2013) report, “Growing Africa – Unlocking the potential of Agribusiness”, which recognized that agribusiness, in particular, is positioned as a vital sector to overcome constraints and to encourage strategic “good practice” investments in African agriculture. At the 2013 World Economic Forum in Cape Town, South Africa, the African Union chairperson confirmed this view and stated “Africa is on the road of prosperity. African agriculture is the true driver of economic growth; but we need the private sector to kick-start this process” (NEPAD, 2013).

Towards a New Development Paradigm

From a development viewpoint, this rediscovery of the agribusiness sector provides an exceptional opportunity for the design and implementation of strategies and initiatives to support sustainable agricultural development and good agribusiness practices in Africa. The aforementioned developments call into question the continued application of conventional agricultural development approaches and policies, such as those influenced by the well-known and respected Johnston and Mellor paradigm of the 1960s and 1970s and by the structural adjustment and Washington consensus periods that followed.

The classic Johnston-Mellor paradigm still seems to have validity, as it underscores the role of agricultural productivity in rural poverty reduction, demographic change and economic development. The paradigm, which recognized the impact and the role of small-scale farming, generally directed agricultural development policy and strategy for development agencies and also (donor) funding. On the other hand, the paradigms of the 1980s and 1990s, while recognizing the importance and scope for agricultural productivity, under-played the multi-functional roles and impact of agriculture and drove a “free market and privatization” agenda with little support for the long term nature and risk complexity of sustained agricultural development. This left a somewhat confused state of affairs for agricultural development around the turn of the millennium. However, the focus has shifted again toward unlocking the agricultural potential of Africa.

Redesigning Africa’s Agricultural Development Model

Looking toward the future development of African agriculture, a few questions need to be considered:

  • Is a new paradigm required to guide thinking, agricultural development opportunities and strategic investments? How does global trading and value chain management considerations impact on such a new paradigm?
  • What functions and actions should be prioritized for agriculture and who should drive or initiate them? What differences could be expected across the African continent?
  • What will be needed to enable African agriculture to contribute its full potential over the next decades without again turning into an exploitative scramble for Africa? What good practice models and good governance protocols will be required to strategically direct development paths towards sustainable and equitable growth? How is “community participation” designed into investment programs?
  • How should initiatives be structured, directed and implemented? What scenarios could emerge for African agriculture depending on the future directions taken?

The IFAMA 2014 Conference Agenda:

Keeping these issues and questions in mind, the following actions should intensively be debated at the 2014 IFAMA Symposium and World Forum, Cape Town:

  • Review the roles of agriculture, as defined by the classic Johnston-Mellor paradigm, in the context of the anti-agricultural biases of the 1980s and 1990s. Examine the renewed emphasis on African agriculture and the changed environment in which it functions, and discuss whether a paradigm shift is required.
  • Identify drivers and trends that will shape agriculture’s roles in Africa. These include: meeting the growing demand for food on a global, regional, city, and household level. Activate Africa’s immense untapped agricultural production potential and possible production and price scenarios, directing the evolving agrifood business systems and investments in African agriculture. Strengthen economic management and good governance practices, and opportunities for human capital development.
  • Consider strategic frameworks – comprising functions, thrusts and actions – in the context of different scenarios for African agricultural development and growth.

Johan van Rooyen is an IFAMA Board Member and a Co-Chair for the 2014 IFAMA | CCA Agribusiness & Food World Forum. You may contact him at: cjvr@sun.ac.za

30 Years after Live-Aid, a GLIMPSE of How Agribusinesses are Making a Difference in Africa

By Aidan Connolly, Vice President, Corporate Accounts at Alltech

In 1985, outraged by a famine in Ethiopia, ‘80s pop star Bob Geldof inspired 48 top music artists at the time to work together to produce the theme song “We Are the WoAConnollyrld,” which became a number one hit in both the US and UK.  The success of that recording led to the dual-venue Live-Aid benefit concert, which raised millions of dollars and the consciousness of millions of people. Fast forward 30 years, and Ethiopia is as likely to be featured on the front page of the New York Times for its corn fields as for its politics.  In fact, many investors believe the country may be considered the next “breadbasket” for its exports of corn, soybeans and, eventually, meat, milk and eggs.

So what has changed? Foreign investors have arrived into Africa and deployed massive irrigation projects.  Chinese, Israeli and Indian investors have negotiated long-term leases of land and see the potential of Africa to rival Brazil and Argentina as an important contributor to world food production.  African governments are waking up to the possibility of agriculture underpinning economic development and implementing policies that support commercial production. African entrepreneurship itself is also rising, buoyed by improved incomes and more readily accessible microcredit. Interestingly, it is not just Ethiopia that has changed.  Seismic shifts in land ownership are occurring all over Africa.  Kenya, Tanzania, Nigeria, and Sudan may seem unlikely candidates, but all are seeing dramatic changes in their agricultural productivity.

Critics point to the potential for massive social problems.  The movement of large numbers of small holders and subsistence farmers moving into the cities is a likely consequence.  Will the gains in food productivity and costs be offset by political unrest and swelling underemployed urban populations? Or will a thriving agribusiness sector provide new rural jobs, upskilling of labor, and pathways for growth?

What should investors, governments and agencies look for in food production opportunities? This special issue of IFAMR features 25 case studies of successful African agri-business developments. Analyzing these using the GLIMPSE framework (first proposed in IFAMR, Jan 2011) following interviews with 50 agribusiness experts, which consists of:

G = Government
L = Losses
I=Infrastructure
M=Markets
P= Policies
S= Science
E= Environment

Analysis following this format allows for the consideration of the real value of an individual market, country, or business in terms of the barriers it faces in achieving its true potential.

We may hope that drought and famines are a thing of the past in Africa, but it is unlikely that that is the case. However, it is increasingly clear that when freed from restraints defined by GLIMPSE factors, businesses can be a force for positive change, making it possible for Africa to produce food efficiently and cheaply, and therefore, feed itself…and perhaps feed the rest of the world as well.   This issue highlights examples of scalable African agribusiness successes and best practices that can be part of that optimistic vision.

Aidan Connolly is Vice President, Corporate Accounts at Alltech and a Co-Editor of the forthcoming IFAMR Special Issue publication: “African Agribusiness on the Move.” Look for this special collection of case studies featuring successful models of agribusiness in Africa on June 1, 2014.