Insight

Agribusiness M&A newsletter

Read more about the growing global agriculture market

Robert Glowniak

Robert Glowniak

Managing Director, KPMG Corporate Finance LLC

+1 312-665-2614

The Growing Global Agriculture Market

Demand for agricultural commodities is forecasted to grow consistently in the coming decades, driven primarily by a steadily expanding global population and changing income patterns across the world.

Globally, the agricultural sector extends beyond just farming to include a range of farm-related industries. Food consumption by humans is the primary end-use of agricultural commodities, representing 52% of calories produced. Animal feed comes in second place with 31% of total calories produced followed by biofuel, seed, and raw products used for industrial applications with 17%.1 Demand is influenced by several macroeconomic factors including population dynamics, urbanization, disposable income, consumer preferences, regulatory policies, and international trade.

Trade is a key component of the global agricultural sector. In 2019, it represented 21% of global production, up from 15% in 2000.1 The increase has been driven by gradually declining agricultural trade barriers between countries across the globe. Trade flows between countries reflect the diverging demand and supply developments among the trading partners, and will continue to evolve depending on the countries’ comparative advantages. Despite growing nationalism and border closures caused by COVID-19, agricultural trade has been impacted to a lesser extent compared to the broad economy. The U.S. Department of Homeland Security designated the agriculture industry as “essential” in order to keep a safe and accessible food supply chain

Significant Agribusiness Opportunities in the Next Decade

Global population 2 of 8.5 billion in 2029, an increase of 683 million from 2020

Cereal production to increase 14% to reach 3 billion metric tons

12% increase in meat production to 366 million metric tons

Milk production to grow by 20%

85% of global crop output growth attributed to yield improvements

Cropland area expansion to account for 5% of crop output growth


Market Performance


After reaching their peak in 2012, prices of key agricultural commodities declined between 2014 and mid-2019 as illustrated in the chart below, driven by both demand and supply side pressures. Demand for agricultural commodities declined due to limited global economic expansion and slowing growth across the biofuels market. On the supply side, continued expansion of cropland acres in conjunction with improved yields led to higher global commodity supplies. Although prices of major grains have recently recovered from their lows due to an uptick in demand, the overall supply and demand trends point towards further decreasing commodity prices in the next couple of years. Protein prices are expected to perform better driven by strong demand from emerging markets, a growing disposable income, as well as a gradual recovery of foodservice sales

Footnotes

  1. OECD-FAO Agricultural Outlook 2020-2029 (July 2020).
  2. Worldometer (www.Worldometers.info).

Sources: OECD-FAO Agricultural Outlook 2020-2029 (July 2020); United States Department of Agriculture, “Factors Contributing to Changes in Agricultural Commodity Prices and Trade for the United States and the World” (January 2020); Capital IQ as of September 30, 2020.


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