In the report authored by Rabobank’s global Food & Agribusiness Research and Advisory, the bank’s analysts look at how the operating environment for F&A companies is becoming increasingly complex, as new external influences compound traditional pressures such as rising agri commodity prices.  Rabobank says that the dedicated supply chain model has potential to revolutionize the F&A industry, by making it more productive, innovative, safe and sustainable.  The bank’s report stresses that all of these outcomes are vital if the sector is to deliver food security to a future global population of 9 billion.

Limitations of the current structure

Rabobank says that traditional pressures on the F&A industry (supply and demand dynamics, a burgeoning population, and rising agri commodity prices) are being compounded by a new set of external influences. The direct use of agri commodities for biofuel production and an increased awareness of the energy intensity of food production, for example, have embroiled F&A companies in an ongoing food vs. fuel debate. Similarly, speculation in agri commodity markets and the regulatory responses this has triggered from governments worldwide have added to the complexity of the environment in which the F&A sector operates.

These new pressures also serve to exacerbate the flaws in the current supply chain model, Rabobank says. The dominant supply chain model is currently structured in a linear fashion, in which suppliers, processors and retailers form short-term partnerships independent from the influence and interests of other members of the chain. This model is highly inefficient, restricting F&A companies’ ability to respond to changes in supply and demand dynamics, while fleeting partnerships limit productivity and restrict innovation. This system also results in wasteful processes that cause more environmental degradation than is necessary.

Adding value through closer cooperation

Rabobank believes that switching to a new supply chain model – the dedicated supply chain – has the potential to transform the F&A industry. In a dedicated supply chain structure, upstream suppliers and processors enter into long-term partnerships with each other and a downstream chain leader. Crucially, information and insights are shared along the chain’s length for the benefit of all members.

Justin Sherrard, Rabobank Global Strategist, says "Closer cooperation of this sort will transform the nature of F&A partnerships from transactional ones that are centered around chasing price, to a system focused on creating value."