White Papers Analytics to Address Agricultural Market | Page 3

Analytics to Address the Increasingly Complex Global Agricultural Market

A ComTechAdvisory Whitepaper

FALLING PRICES AND INCREASING
VOLATILITY
Driven in large part by economic growth in the Asia Pacific region, and particularly China, in the last decade,
investors began pouring money into developing the infrastructures to support increasing demand for commodities
of all types, from ags to energy. However, with the slowing of the Chinese economy in the last year, falling from
double digit growth to possibly well below 7%, the supply chain in almost all commodities has become significantly
overbuilt, with supply of almost all commodities outpacing demand and driving global prices to record lows.

In over-invested and over-supplied markets, particularly those as complex as the ags and softs markets, price
movements will be particularly unpredictable. With uncertain prospects for increasing demand in the short- or
mid-term, prices will be increasingly sensitive to regional
events, such as extreme weather, or the tenuous market
forecasts that are seemingly based on nothing more than
speculation. Further, given that production in many of these
agricultural and soft commodities are centered in developing countries, political instability and limited market liquidity can further contribute to significant price movements.

GROWING COMPLEXITY IN A GLOBAL
MARKET
Over the last decade the markets in ags and softs have seen a period of consolidation, with many companies
pursuing growth, and price risk amelioration, by acquisition of assets both up and down the ags and softs supply
chain. Trading companies, initially focused on securing supplies from producing regions and transporting those to
the areas of increasing demand, such as China, began to acquire upstream assets such as farms, plantations, elevators, and export facilities. Large food processors too saw advantage in controlling the inputs to their business
and acquired trading companies, merchant ag firms, and many upstream market components as well.

These growing companies that now trade, manage, and
transform physical agricultural commodities, the merchants,
food processors, and consumer package goods (CPG) companies, face a particularly complex value chain, potentially
including farms or plantations, elevators or silos, processing

facilities, manufacturing plants, warehouses, distribution facilities, and numerous transportation assets, including trucks,
trains, barges, and ocean going vessels. Maximizing the value
of both the physical assets within that value chain and the commodities as they traverse it is a complex balance that requires

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