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Food and Agriculture Global Growth Trends Review

  • September 2013
  • -
  • Frost & Sullivan
  • -
  • 50 pages

Cheap Natural Gas will Ensure Sustainable Profits in the Fertilizer Markets for the Next 20 Years

Over the last 10 years, global food and agriculture have experienced many events that have, and will continue to have, irreversible social, economic, and political consequences—both positive and negative. This report looks at the increasing attractiveness of urea-based fertilizers, which are driven by key global trends that are expected to expand into sustained forces of development to transform fertilizer businesses, the food and agriculture economy, and society as a whole. Frost & Sullivan expects companies with a truly global market and product strategy and that fully exploit opportunities driven directly and indirectly by global trends’ long-term force will rise to the top of the industry as leaders in the food and agriculture sector.

Research Service Introduction

•Over the last 10+ years, global food and agriculture have experienced a significant number of events that have, and will continue to have, irreversible social, economic, and political consequences—both positive and negative. These events include but are not limited to the following:
- Draughts and other adverse weather events in the United States, Russia, and Australia.
- Food shortages and riots leading to coup d'états in the Middle East.
- Historically high growth in food and agriculture inputs and the subsequent historic drop in prices following the Great Recession of 2008.
- Natural gas from shale boom.
•Participating companies in the food and agriculture sector need to track effectively and anticipate these evolutionary and revolutionary events.
•Companies can then make better business decisions in terms of investment time and resources and whether it will be worth it given the risks involved.
•However, many companies continue to struggle with tracking and anticipating evolutionary and revolutionary events. Specifically, many companies have limited knowledge of global event dynamics and how they relate to their local markets, which could potentially put companies at a significant competitive disadvantage.
•For example, the rapid rise of average incomes in emerging economies combined with the recent natural gas boom in the United States suggest that market participants selling nitrogen-based fertilizers will begin experiencing stable (sustainable), long-term gross margins. Thus, key recent and sustainable global trends link directly to specific attractive opportunities for fertilizer companies.
•This research service looks at the increasing attractiveness of urea-based fertilizers, which are driven by key global trends that are expected to expand into sustained forces of development to transform fertilizer businesses, the food and agriculture economy, and society as a whole.
•Frost & Sullivan expects companies with a truly global market and product strategy and that fully exploit opportunities driven directly and indirectly by global trends’ long-term force will rise to the top of the industry as leaders in the food and agriculture sector.

Research Service Scope

Region Scope—Global

Europe, the Middle East, and Africa (EMEA)
Africa (Sub-Sahara)
Central Europe
Eastern Europe and Central Asia
Middle East and North Africa (MENA)
Western Europe

The Americas (AMER)
North America
Latin America (LATAM)

Asia-Pacific (APAC)
East Asia
South Asia
Oceania

Products/Technologies of Focus

Urea
Ammonia
Ammonium Nitrate (AMNIT)
Potash
Sulfur
Phosphates
Urea-ammonium Nitrate

Research Methodology

Key Takeaway: Frost & Sullivan’s food and agriculture team developed an interactive and econometric-based price model based on a sound and substantiatable microeconomic theory.
•To figure price determinants of urea fertilizer and related products in the fertilizer value chain, it is important to understand how the complex interaction of supply, demand, and market prices that operate in the global market work and are interrelated.
•With this understanding, why certain price scenarios emerge can be determined by observing market dynamics such as the effect of production capacity expansion, the impact of adverse weather events on cereal production demand, and the impact of global economic and political events.
•In general, the mechanics of this model are based on a pragmatic econometrics-based systems model that leverages Frost & Sullivan’s demand forecast methodology. The model’s current state is subject to some variance and would require monitoring and continual updating as new information emerges.

Research Methodology: Impact of Top 4 Global Trends

•With respect to key Global Trends that are directly relevant to sustainable growth of the fertilizer market, economic development and urbanization, especially in the high population regions of East Asia and South Asia, will be the primary engines of growth.
•As these and other emerging economies become richer in income, demand for richer, higher protein, and healthier foods will also increase, which will drive up per capita cereal demand in respective nations and, consequently, the derived demand for nitrogen fertilizers.
•Key sub trends include the North American shale gas boom that is expected to decrease feedstock costs of urea and the growing demand for more nitrogen fertilizer products.

Table Of Contents

Food and Agriculture Global Growth Trends Review
Table of Contents

1. Executive Summary
2. Price Drivers
3. Urea Price and Gross Margin Analysis
4. Appendix
5. The Frost and Sullivan Story

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