FRE 306- Global Food Markets Dr. Nisha Malhotra-UBC Session Sept 11, 06

1. FRE 306- Global Food MarketsDr. Nisha Malhotra-UBCSession Sept 11, 06 Dan Badulescu (guest instructor) columbus@columbus-grp.com 604-6123986

2. FRE 306 – Global Food Mkts. • Agricultural Trade – • What exactly is involved in Ag Trade? • What kind of “goods” are part of ag trade? • Food– non processed(?) eg. tomatoes, apples, coffee, cotton • Food- processed (different levels) – coffee, milk, cotton, sugar, honey, orange juice, beef, lettuce • Raw materials- oils, fats, starch, barbasco, dyes, • Services- contract agriculture, advise, training, insurance, finance, warehousing, logistics

3. FRE 306 – Global Food Mkts. • Agricultural Trade – • What exactly is involved in Ag Trade? (slide 2) • What kind of “goods” are part of ag trade? • Inputs- fertilizer, pesticides, machinery, seed, plastics (greenhouse, mulching), growing media • Tech services- agronomic, marketing, packing distribution, quality assurance, safety & health • Marketing & retailing (super markets)

4. FRE 306 – Global Food Mkts. • Agricultural Trade – • What exactly is involved in Ag Trade? (slide 2) • Exchanges (coffee in London), Chicago, CWB • Labor-migrant/seasonal workers (fruit pickers from Quebec in BC), Mexican or Jamaican temps • Information- technical, commercial, economic • Technology-GM seed/foods/nutraceuticals • Food chains-from grower to consumer

5. FRE 306 - Global Food Mkts. • Market chains- the addition of value ? • From farmer to consumer – how many chain links? • Who are the chain links? • Farmer-bulk buyer-broker-regional wholesaler-shipper-processor-packer-distributor-market-corner store/supermkt. • Who plays a role in food production / who carries the risk of food production?

6. FRE 306 - Global Food Mkts. • Market chains- the addition of value ? • At each chain link, value is added (?) • At each chain link, price goes up (down) • Vertical integration – corporations which fill more chain links (from farm to consumer)

7. FRE 306 - Global Food Mkts. • Market chains- the addition of value ? • Prices goes up – price where? • Farm gate price vs. price to consumer • Coffee $ 0.50 CDN/Kg at farm in Ethiopia • Coffee $1.90 CDN/cup in Vancouver • 120 cups/kilo = price per cup: 0.50/120= 4cents a cup or $ 228 CDN/Kg to farmer?!!

8. FRE 306 - Global Food Mkts. • Market chains- the addition of value ? • Structure of market or industry (vertical/horizontal, national, global,concentrated) • Competition – perfect/imperfect • Monopoly, oligopoly, cartel – who holds power? Who carries the risk? • Food production is seasonal - long

9. FRE 306 - Global Food Mkts. • Market structure & control • Main agrifood concerns – Nestlé, Kraft, Danone, Pepsi, Bunge, ADM, Cadbury, Conagra, Unilever, MacDonalds, Walmart Carrefour, Monsanto, Tate & Lyle • Food sectors & niches in the market • Government support – benefits for whom? • Market segments ?

10. FRE 306 - Global Food Mkts. • Market structure & control • Trade- is it free trade ? • Uruguay Round – Gatt (General Agreement on Trade and Tariffs), WTO • Main ag trade blocks EU, NAFTA, ASEAN • Tools/measures: quotas, subsidies, tech barriers (regulations) • Cases of interest: butter mountain in EU

11. FRE 306 - Global Food Mkts. • Markets – trends and concepts to watch • Biotech; Food security • Environment, welfare • Trade blocks • Energy costs • Labor • Hunger, safety & health, terrorism, aid, poverty • R&D, Intellectual property (IP), • Monopolies • Economy, CSR

12. FRE 306 – Global Food Mkts. • Trade & Global Economy trends • Trade blocks formation & consolidation • Push for “liberalization” (less state roles) • Less subsidies (in theory) • Global organizations- WTO, supra state • Global Governance (rules / referees) • Equitable? Fair?

13. FRE 306 – Global Food Mkts. • Key Crops – Corn • Largest crop in USA, mostly animal feed • 5 regions:65% world production: 700M MT • China, EU, Brazil, Mexico, Argentina • Growth in yields in 05, (marginal) • GM corn advancing in USA, EU non GM • Prices stable in last few years

14. FRE 306 – Global Food Mkts.World Corn Plantings

15. FRE 306 – Global Food Mkts.

16. FRE 306 – Global Food Mkts. • Comparative categories use of corn: • USA Mexico • Export 19% 5% • Feed and residual 55% Food 65% • Ethanol 15% 10% • Industrial 11% 20% • Approximate values

17. FRE – 306 Global Food Mkts. • Corn trade dominated by 5 global regions • Cargill & ADM control + 50% global mkt. • Corn GM seed: Monsanto,Bayer,Syngenta • MNC´s have are dominant in global trade • Some examples of challenges (eg. US corn is has lower price than Mexican corn.. disruption of markets) (we will go into details later in October lectures)

18. FRE – Global Food Mkts. • Coffee – origin Ethiopia (Robusta/Arabiga) • Top countries Brazil, Colombia, Indonesia, Vietnam, Mexico, Guatemala; Uganda • Top companies in trade: Nestle, Kraft, Unilever, Maxwell House, Harz Kaffee • International Coffee Organization– London • Price crisis- recurrent(last in 2000)Vietnam • Organic-fair trade coffee –meaning/impact

19. FRE – Global Food Mkts. • Coffee – origin Ethiopia (Robusta/Arabiga) • Example: Mexico • 2nd source of $ > remittances, ahead oil • 300, 000 coffee farms-800,000 hectares • 2 million people involved farming-harvest • Pricing wars, fall of 40%-1982 to 2000 • Trends: pricing, fair trade, husbandry (we will go into more details later in Oct 06 lectures)

20. FRE 306 – Global Food Mkts. • Some info sites to read/consult • www.agr.gc.ca/misb/fb-ba/index_e.php?s1=proc-... • http://www.sandiegometro.com/1996/oct/connection.html • pdic.tamu.edu/flags/macdonald.pdf • www.converge.org.nz/pirm/ctrlfood.htm - 31k • www.globalexchange.org/economy/coffee - 42k