Rethinking the F&A Supply Chain - Impact of Agricultural Price Volatility on Sourcing Strategies
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Rethinking the F&A Supply Chain Impact of Agricultural Price Volatility on Sourcing Strategies
Rethinking the F&A Supply Chain
Impact of Agricultural Price Volatility on Sourcing Strategies
#ONTRIBUTING AUTHORS
#AREL VAN DER (AMSVOORT 4IM (UNT
#ARELVANDER(AMSVOORT RABOBANKCOM 4IM(UNT RABOBANKCOM
*OHN "AKER $IRK *AN +ENNES
*OHN"AKER RABOBANKCOM $IRK*AN+ENNES RABOBANKCOM
2OSS #OLBERT $AVID # .ELSON
2OSS#OLBERT RABOBANKCOM $AVID#.ELSON RABOBANKCOM
"ILL #ORDINGLEY 3EBASTIAAN 3CHREIJEN
"ILL#ORDINGLEY RABOBANKCOM 3EBASTIAAN3CHREIJEN RABOBANKCOM
.ICHOLAS &EREDAY *USTIN 3HERRARD
.ICHOLAS&EREDAY RABOBANKCOM *USTIN3HERRARD RABOBANKCOM
#YRILLE &ILOTT (ARRY 3MIT
#YRILLE&ILOTT RABOBANKCOM (ARRY3MIT RABOBANKCOM
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Contents | i
Contents
Page
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
This time is different! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1
Higher and more volatile prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
How did we get here? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
So where are we heading? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2
Maintaining control in an era of scarcity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Gaining control of sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
A continuum of sourcing strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Strategies for success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
In short: Managing supply risk but not at any cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3
Strategic options being implemented . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Strategic sourcing as a competitive advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Real-life examples: Sourcing strategies in eight sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
CASE 1: Plantation sector investing in agricultural land as a strategic asset . . . . . . . . . . . . . . . . . . . . . . . . 18
CASE 2: Supply-contracting to manage food safety risks in Chinese poultry . . . . . . . . . . . . . . . . . . . . . . . 20
CASE 3: Locking in raw sugar volumes through long-term supply contracts . . . . . . . . . . . . . . . . . . . . . . . 22
CASE 4: Barter trade as solution to soybean origination in South America . . . . . . . . . . . . . . . . . . . . . . . . . 24
CASE 5: Securing long-term sustainable cocoa supply by putting the ‘farmer first’ . . . . . . . . . . . . . . . . . 26
CASE 6: Global diversification in grains and oilseeds driven by demand/supply dislocation . . . . . . . . 28
CASE 7: Brewers adopting a wide range of sourcing solutions in malting barley . . . . . . . . . . . . . . . . . . . 31
CASE 8: Dairy processors opting for substitution to limit impact of milk price . . . . . . . . . . . . . . . . . . . . . 34
Section 4
Turning the sourcing challenge into opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
F&A companies gearing up for scarcity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
When and how to respond: A framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Nature of the agri commodity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Internal company considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
External market conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Alternative sourcing strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
In short: Picking winning strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Conclusion: No shortage of challenges and opportunities in sourcing . . . . . . . . . . . . . . . . . . . . . . . 45
Global food companies with market power to strengthen their position . . . . . . . . . . . . . . . . . . . . . . . . . 45
Smaller and midstream players to come under most pressure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Global and regional trading houses to strengthen their positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Primary production to gravitate towards larger players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Beyond the next decade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Executive summary | 1
Executive summary
Feast and famine cycles are not a new patterns in developing countries, and
phenomenon. World history is littered changing biofuel policies throughout the
with examples of cycles of agri-commodity world. Furthermore, the supply side is facing
abundance and scarcity and the impacts limitations as productivity gains have stalled,
they have had on food systems and indeed farmers — ironically — face weak price
on civilisations. As the world’s food systems signals, and new frontier agricultural land
have steadily moved towards becoming a awaits substantial investment. A strong
single global system, it was assumed that supply response is not expected soon. As
the risk of a scarcity cycle having a profound a result, the global food system has been
and lasting effect on the way food is brought to a tipping point, and the battle
produced and supplied to consumers for agri commodities will only intensify.
around the world was diminished.
Securing sufficient supply of safe, high-
Yet this is not the case; the world is facing quality raw materials at a price that allows
increased agri-commodity scarcity. an adequate risk-adjusted rate of return is
becoming inherently more challenging.
In Rabobank’s view the world is facing a
This new challenge has changed the risk
period of significant agri-commodity scarcity
parameters for many, if not all, food and
that is set to last for at least this decade.
agribusiness (F&A) companies for the
A number of important factors might change
foreseeable future. Companies that understand
in the coming months and years such as
the significance of this transition — and the
a double-dip economic recession or the
associated risks and opportunities — are
rolling back of biofuels legislation. Although
responding by making step changes in their
these changes may impact the timing of
approaches to sourcing.
the outlook, they do not undermine the
conclusion that global agri-commodity Judging by the adjustments being made to
prices are expected to shift higher and F&A companies’ business strategies, the sector
become more volatile. This in itself is not a is recognising that we have entered an era
new phenomenon — there are many prior of scarcity. The battle for agri commodities is
instances of agri-commodity price spikes rapidly gaining momentum. Notably, larger
being met with a strong supply response F&A players, and even governments, are
and a subsequent re-levelling. looking into minimising their risks by securing
their current and future agri-commodity
But what is happening this time is
supplies, while at the same time dealing
genuinely different.
with higher price-risk levels. In doing so, they
Higher prices and increased volatility are may well raise the stakes for companies that,
products of strong demand drivers such so far, have remained on the sideline.
as economic growth and shifting dietary
2 | 2ABOBANK Rethinking the F&A Supply Chain
When and how to respond are still open Increased cooperation throughout the
questions — whether to respond is not. supply chain based on transparency, trust
and sharing responsibilities, may provide
Not surprisingly, given the complexity and
a solid alternative for establishing control.
interconnectivity in the F&A world, there
Such alternative sourcing strategies are
is no silver bullet. It is unlikely that one single
currently being implemented with support
sourcing strategy will work on all occasions
from Rabobank to overcome some of
and for each company. An F&A company may
the challenges that this era of scarcity
well need to develop a portfolio of sourcing
brings along.
strategies for each of its key agri commodities.
Although the transition is inevitable, it is
Control over supply is being pursued through
not the endgame. While the next decade
two strategic options — establishing direct
will be dominated by a battle for agri-
control over agri-commodity supplies or
commodity supply, we conclude that this is
focussing on market power to align the
only the beginning of a profound transition
supply chain. For companies that lack scale,
in the global F&A sector. In the next 40 to
another strategic option would be to focus
50 years, the F&A sector will need to double
on market power or financial headroom
agri-commodity supply with access to only
to achieve control, the emphasis being on
about half of the current land, water and
adapting their own businesses to circumvent
mineral resources. Delivering this four-fold
exposure to the increased risks.
improvement in output is the over-riding
Control may help manage supply risks, but challenge facing the incoming generation
it may also come at a price. of F&A leaders.
These three strategic options break down F&A companies that are able to successfully
into multiple sourcing strategies ranging tackle the challenges in the battle for agri
from backward integration and land commodities will be best geared to capitalise
investments to substitution and tolling. In on the opportunities in the middle of this
an attempt to simplify the diversity in century. The best way for farmers to benefit
possible responses, we have identified a from this new reality is by considering
continuum of response strategies, reflecting increased cooperation with other farmers
the balance struck between accepting higher and becoming active partners in the chain.
risks and the extra effort or investment
Our message to all farmers and F&A
required to offset those risks.
companies is simple: act now!
Piet Moerland
#HAIRMAN OF THE %XECUTIVE "OARD
OF 2ABOBANK .EDERLAND
This time is different! | 3
This time is different!
Twice in the past five years, global agri- prices over the next five to 10 years. This
commodity prices have spiked significantly, is a significant break from the past when
catching companies, policy makers and ever-declining real prices for agri
consumers off guard and creating significant commodities were the norm.
disruptions in the global food industry
This new age of scarcity has caught many
supply chain. When such extreme market
governments, companies and consumers
disturbance occurs in other industries,
short and has already resulted in painful
analysts are quick to reach for interpretations
adjustments. It highlights the increasing
of paradigm shifts. ‘This time is different’, they
interdependence of global agricultural and
claim, reaching for apocryphal metaphors of
food markets and reveals the risks of the
brave new worlds. Rarely do they view rapid
relentless march of the global F&A sector
price rises as bubbles waiting to burst.
towards supply-chain efficiency.
In the world of agriculture, calls of ‘paradigm
Supply-chain strategies of just-in-time
shifts’ and ‘new eras’ are less common. With
inventory management or horizontal
its colourful history from 17th-century
integration made perfect sense in an era
tulipomania to 21st-century boom-and-bust
of low and declining commodity prices and
price cycles, as well as extreme weather
limited volatility. Today, these strategies are
events and government policy shocks, the
under review. Traditional views on strategic
food and agribusiness (F&A) sector has seen
stock-holding and vertically integrated supply
it all before. But even with a historical
chains seem to make more sense now than
perspective, the events of the last few years
they did over the past 30 years, a period
provide strong arguments that this time
in which the search for economies of scale,
things really are different. We are moving
convenience, consistency and safety
into an era of scarcity, with higher prices
dominated corporate strategies.
and increased volatility the new standard
for a more globalised food industry. These strategies worked well in times when
value was created in developed markets by
Driven by economic growth and shifting
brands offering increasing convenience,
dietary patterns in developing countries,
functionality and value for the consumer.
and changing biofuel policies around the
However, in these times of higher and more
world, the acceleration in demand for agri
volatile prices the power balance is beginning
commodities which began at the start of this
to shift, especially given the recessionary
century has brought the global food system
trends evident in the major Western markets.
to a tipping point. The ability of the system to
Companies that control the supply chains are
adjust production to meet growing demand
now increasingly wielding market power and,
has been structurally altered, suggesting a
as a result, will start drawing margins away
continuation of higher and more volatile
from the other players in the chain.
4 | 2ABOBANK Rethinking the F&A Supply Chain
In this report, we highlight a diverse range of
strategies that F&A companies have adopted
to deal with the higher, more volatile agri-
commodity prices and increased scarcity.
Three distinct categories of sourcing
strategies are identified — increasing control
of physical sourcing, focussing on market
power and adapting business strategies to
reduce and possibly circumvent supply risks.
To illustrate our analysis, we have included
eight case studies which highlight several key
sourcing strategies. Furthermore, we examine
the changes in business strategies already
visible and set out a rationale for how
these companies can determine the most
appropriate strategies to adopt.
An era of scarcity is upon us that represents
a new order for the global food system
and will require new strategies both from
companies and policy makers. There is no
simple way for companies to navigate this
new era, no silver bullet. There will be winners
and losers. Those who grasp the change first
will have the best prospects for turning the
new reality into an opportunity.
Section 1 Higher and more volatile prices | 5
1 Higher and more volatile prices
How did we get here? The food mountains are now gone, subsidies
The world of agriculture has changed have been scaled back or restructured, the
significantly over the past 30 years. It was not world population is now approaching
so long ago that farmers were lamenting the 7 billion, and the Asian economy has taken
enormous food mountains in the United off on a trajectory which has surprised many,
States (US) and Europe resulting from the with forecasts suggesting that robust growth
overproduction of food commodities under can be expected for the foreseeable future.
protectionist agricultural subsidy regimes. Add in the impact of the current biofuel
Such conditions weighed heavily on world revolution and the route to the current
agri-commodity markets and resulted in tipping point begins to emerge. The Goldman
extended periods of low prices with relatively Sachs Agricultural Commodity Price Index
low volatility. At that time, the world over the last 40 years illustrates this trend
population was considerably smaller than it (SEE &IGURE ). By this measure, nominal agri-
is today, the emerging markets in Asia were commodity prices are at record highs, and are
much less developed, and economic growth perhaps more importantly, extremely volatile.
had yet to take off. Although each agricultural crop has its own
unique set of supply and demand factors,
Figure 1.1: Agri-commodity prices and volatility, Feb 1972-Jul 2011
percent percent
600 36
500 30
400 24
300 18
200 12
100 6
0 0
Feb-11
Aug-91
Feb-81
Aug-73
Aug-76
Aug-79
Aug-82
Aug-85
Aug-88
Aug-94
Aug-97
Aug-00
Aug-03
Aug-06
Aug-09
Feb-72
Feb-75
Feb-78
Feb-84
Feb-87
Feb-90
Feb-93
Feb-96
Feb-99
Feb-02
Feb-05
Feb-08
Goldman Sachs Agricultural Price Index Series 2 = 180-day volatility
Source: Goldman Sachs, 20116 | 2ABOBANK Rethinking the F&A Supply Chain
many leading arable and tree crops have $EMAND DRIVERS
shown similar price rises (SEE &IGURE ). In the last half of the 20th century, the real
price of agri commodities — taking into
Remarkably, the world’s agricultural resource
account the general rise in prices — trended
base has maintained its capacity to
downward at about 1 percent to 2 percent
accommodate accelerated global demand
per year. As the cost of producing commodities
growth. While global food balance sheets
fell following technical advances in improving
show that there are sufficient reserves of
yields and economies of scale, so too did
staple commodities to meet world demand
prices. But all that changed at the turn of the
at present, there are some warning signs that
century, with prices trebling in just 10 years.
global food production will come under
further demand pressure in the future. The Three main drivers have caused agri-
existence of these warning signs, or the threat commodity demand to surge and pushed
that they will materially impact supply, is prices above their long-term value trend in
encouraging agricultural prices to rise and this century. Firstly, on top of an already
behave in a more volatile manner. growing global population, per capita
incomes have risen along with growing
Understanding the key historical demand
economic prosperity in developing countries,
and supply drivers and pricing trends
particularly in China. Secondly, rising incomes
which led to rising and more volatile agri-
and increasing urbanisation have led to a shift
commodity prices creates a clearer picture
in dietary preferences away from grains to
of what actions supply-chain players,
meats and other higher value, calorie-rich
consumers and governments should take to
foods. Thirdly, the world-wide proliferation
mitigate, or at least manage, the impacts of
of government-mandated biofuel policies
scarcity on global agri-commodity markets.
has created a huge new source of demand for
agri commodities. In the US alone, 40 percent
Figure 1.2: Index of US wheat, corn, soybean and cocoa prices, 1957-2011
2005=100
Wheat US gulf ports price index, 1957-2011 Corn price index, 1957-2011
300 300
250 250
200 200
150 150
100 100
50 50
0 0
2011
2011
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
Soybean price index, 1957-2011 Cocoa price index, 1957-2011
350 300
300
250
250
200
200
150
150
100
100
50 50
0 0
2011
2011
1981
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
1957
1960
1963
1966
1969
1972
1975
1978
1984
1987
1990
1993
1996
1999
2002
2005
2008
Source: IMF, 2011Section 1 Higher and more volatile prices | 7
of the corn harvest is now consumed by the changed around 2000 when continuous
ethanol industry, representing the equivalent declines in yield growth began to have an
of an estimated 150 million acres of land. effect on supply, which has since fallen
There is no sign that these demand drivers are behind the acceleration in demand
abating. Rather, they are expected to continue (SEE &IGURE ) This lag in supply has occurred
and likely strengthen over the coming despite the fact that about 175 million acres
decade. For example, the number of middle- of new land have been drawn into agriculture
class households in the world is expected to mainly in South America (soy and corn),
double over the next decade, with most of South East Asia (oil palm) and Russia/Ukraine
the expansion taking place in developing (wheat). It is often said that the cure for high
countries (SEE "OX ). Finally, although the prices is high prices. Although it is true that
rate of global population growth is slowing, high prices generally trigger a supply
the overall population is still rising and response that ultimately brings prices down,
forecast to hit 9 billion by 2050 compared given the challenges of declining yields and
to 7 billion today. growing demand, this time around higher
prices are unlikely to bring prices down to
3UPPLY STRUGGLING TO CATCH UP
previous levels. Another uncertain factor is
Prior to 2000, increases in demand for agri
the time lag between the higher price signal
commodities were mostly met by growth in
and a market response in the form of increased
the global capacity to deliver supply. Overall,
production; the longer the time lag, the longer
the existing amount of land dedicated to
the upward pressure on prices will last.
agriculture was able to meet the world’s
growing demands, despite large amounts Over the last two decades, a growing
of high-quality arable land being lost to imbalance has emerged between the relative
urbanisation each year. However, things market power of farmers and the F&A
Box 1.1: Demand growth from Asian consumers
The middle-class populations of China and India are expected to treble over the next decade. This
growth is expected to have a significant impact on the F&A sector because dietary shifts away from
grain-based diets towards more protein and dairy are typically driven by middle-class households.
With food consumption growth running at between 1 percent and 2 percent per year throughout
Asia, the F&A supply chain’s Asian segment is expected to grow up to 20 percent over the next decade
(SEE &IGURE ). Rabobank expects that the value-added processing sector will develop at an even faster
rate as Asian consumers demand more sophisticated food products and regional capacity builds to
support local market opportunities.
Figure 1.3: Per capita food consumption growth in Asia by food commodity, 2008-10* to 2020f
percent
15
12
9
6
3
0
-3
Sugar Poultry Vegetable Milk Sheep Pork Coarse Rice Fish Beef Wheat
oils grains
f=forecast
*Three-year average
Source: OECD, Food and Agriculture Organization of the United Nations, 2011
The current rate of growth is further complicating already difficult strategic and competitive challenges
for F&A companies. This demand growth will inevitably lead to increased dependence by the global food
industry on the agricultural production regions of Australia, the Americas and the Black Sea region. The
interdependence of the world’s ‘food bowls’ and the major demand growth regions is intensifying as
every year passes.8 | 2ABOBANK Rethinking the F&A Supply Chain
Figure 1.4: Global yield trends for wheat and rice, 1965-2009
percent
7 5.0
6 4.5
5 4.0
4 3.5
3.0
3
2.5
2
2.0
1 1.5
0 1.0
-1 .5
-2 0
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Wheat Trendline Rice, paddy Trendline
Note: Percentages based on 5-year moving average Note: Percentages based on 5-year moving average
Source: Food and Agriculture Organization of the United Nations, Rabobank, 2011
companies that dominate the downstream trade flows and stock positions. As the rapid
food supply and upstream farm inputs ends pace of consolidation in the global F&A sector
of the supply chain. As F&A companies at continues, market power will concentrate in
both ends of the chain see their market the hands of relatively few, but larger players.
power increase, they seek to squeeze margins. As these key players are strengthening and
Farmers are squeezed between food integrating various market segments into
companies wanting the lowest farm-gate proprietary supply chains they are also
prices and input suppliers wanting the taking ownership of information flows. If
highest price possible. As a result, despite this remains the exclusive domain of the
elevated global agri-commodity prices, the large players, it will become more difficult
supply side response has not been strong for others to evaluate the fundamental
enough to bring these prices down. supply and demand situation across the
agricultural complex.
/THER MARKET FACTORS SUPPORTING HIGHER
PRICES AND INCREASED VOLATILITY 'OVERNMENTS ALSO CONTRIBUTING
With agri-commodity supply failing to match Government involvement in the F&A supply
rising demand, stocks have been winding chain is not a new phenomenon but is now
down and the result has been higher and having an increasing influence on not only
more volatile prices. In addition, a number the trade flows of agri commodities, but also
of other factors have been supporting higher on the pricing of F&A products at many
prices and increased volatility. All of these stages in the supply chain. Whether through
factors are accentuated by the tight global state ownership of farm-inputs procurement
stocks situation. New land brought into and distribution, minimum support prices
agricultural production is often in remote at the farm level, import tariffs or retail
areas with more volatile yield profiles and price caps, government influence should
higher long-term production and logistic not be ignored.
costs. Since most agri commodities are priced
The main F&A policy objectives for
in US dollars, the weak US currency has also
governments in developing markets are to
impacted prices, as has the linking of agri-
protect those segments of the supply chain
commodity prices and energy prices through
perceived to be the most vulnerable, namely
biofuels and farm-input prices. Extreme
the farmer, rural communities and urban
weather events — possibly a result of climate
populations. Governments need to strike
change — and the government responses
a welfare balance to ensure that rural
they often inspire, such as the recent Russian
communities remain viable. In this way,
wheat export ban, have also caused prices to
they can protect farmers’ margins, improve
rise. Furthermore, the financialisation of agri
national food self-sufficiency rates and
commodities and speculation only add to
manage rural-urban migration levels, while
market liquidity and risks (SEE "OX ).
also minimising inflationary pressures in
Volatility is also being fuelled by a gradual urban areas.
decline in the public flow of information onSection 1 Higher and more volatile prices | 9
Policy initiatives designed to reduce affordability for the general population, may
the threat of food scarcity are typically the deny farmers access to the superior farm-gate
domain of governments and the United returns needed to foster improved social and
Nations. In emerging-market countries, economic outcomes, including agricultural
where self-sufficiency levels are lower, productivity. Security of food supply is of
these initiatives need to strike a balance paramount importance to countries that
between fostering economically and are not self-sufficient and, over time, as
socially sustainable conditions in farming concerns around food security intensify,
communities and managing food inflationary policy changes which disrupt trade will
pressures in the general economy for become more common. The inevitable
urban populations. result will be upward pressure on prices
and increased volatility.
The use of trade policy often illustrates the
contradictions in finding this balance. For Concerns about rapid urbanisation and
example, export bans, which are implemented shortages in local food supplies in many
to insulate domestic food prices from global developing countries keep the dynamics
food-price inflation and maintain food of primary agricultural production high on
Box 1.2: Managed money in agri-commodity markets — another source of volatility?
The increased transparency through the US Commodity Futures Trading Commission’s weekly
Commitment of Traders report has brought to light speculative investors’ presence in agri-commodity
markets in recent years. Speculative money is a critical component to futures and options markets as
it adds liquidity. However, due to the often shorter term holding period, speculative investors can
influence short-term market direction and increase price volatility. In instances of bullish underlying
fundamentals, speculators tend to increase their net long position in agri commodities in expectation
of capital gains. Similarly, when speculators hold a bearish view of the market they will take a net short
position in order to profit from falling prices. When these noncommercial or speculative traders build a
position which is a relatively large net long or net short position, their subsequent unwinding of
positions can pressure prices as everyone generally moves for the exit at the same time. This can cause
agri-commodity prices to disconnect from underlying fundamentals in the short term. However, we
believe that underlying fundamentals will continue to be the primary driver to long-term agri-
commodity prices.
Recently, speculative money’s net long position in agri commodities has reduced from its record
high, but it remains elevated (SEE &IGURE ). Noncommercial traders’ net long position in total agri-
commodity futures and options has averaged 385,558 contracts since 2006. During the commodity
boom of 2008, their net long reached 810,304 contracts at the end of August 2008 and subsequently
fell to net short 110,194 contracts by December 2008. In the recent price rally in 2010/11,
noncommercials’ net long position in agricultural futures surpassed the high of 2008, reaching
more than 1,000,000 contracts in September 2010.
Figure 1.5: Managed money position in agri commodities vs. S&P GSCI agri index, Jun 2006-Aug 2011
thousand contracts S&P GSCI Agri Commodity index
1,500 600
1,200 520
900 440
600 360
300 280
0 200
Jun-11
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Managed money net long position S&P GSCI Agri Commodity index
Source: CFTC, Bloomberg, 201110 | 2ABOBANK Rethinking the F&A Supply Chain
governments’ agendas. The political voting
power of the rural population is also a key
reason for governments to keep supporting
the many small-holders. Due to the small
farm size and general absence of scale in
many developing countries’ agricultural
production systems, governments have
to subsidise farming costs to ensure that
targeted self-sufficiency levels for essential
agri commodities are maintained at
targeted levels.
So where are we heading?
The drivers supporting higher prices and
volatility that are in play today are likely to
be with us for some time to come. We believe
it will be at least a decade before we see the
full impact of a strong supply response in the
form of a new ‘green revolution’ style boost to
productivity and frontier land development,
and a marked change in biofuel policies to
free up more grains for human uses.
As scarcity increases over time, governments,
industry players and consumers will need to
make adjustments to attempt to mitigate the
extent to which scarcity impacts the supply
and pricing of agri commodities around
the world.Section 2 Maintaining control in an era of scarcity | 11
2 Maintaining control in an era of scarcity
As CEOs and Boards of F&A companies commodities, manage price risks and, in doing
around the world contemplate how to best so, protect cash flows and margins.
position their business models in response
to the structural changes across the global Gaining control of sourcing
supply chain, the questions highest on their F&A companies wanting to respond to
agendas are how to secure a sustainable increased supply risks and price volatility
supply of agri commodities and how to have a range of options. They could either
deal with increased price risk. reduce the impact by increasing control over
sourcing or circumvent exposure by looking
The preferred responses used to be based
for alternative strategies.
on ‘optionality’ in sourcing (the flexibility
and agility to buy or sell from or to many Control does not come for free; it implies
suppliers or customers) and the use of lowering risk, which as we learn from the
market-based risk-management tools such as world of investments may lead to a lower
hedging. Optionality and hedging tools gave reward. The risk/reward trade-off for sourcing
companies the agility to deal with unexpected strategies is not as clear-cut as it is for
factors such as sudden government policy investments. Increased control over sourcing
changes and other supply shocks. can also lead to higher returns. For example,
control over a commodity or a supply chain
In the era of scarcity that we are entering,
may lead to better margins and a better
these solutions will likely not suffice. In theory,
return on capital employed.
ownership of the entire supply chain from
‘farm to fork’ may seem an obvious solution, In addressing the increased risk outlook,
but in practice that is often difficult to achieve. F&A companies will need to balance these
Assembling and coordinating the mix of higher risks against the extra effort required
expertise required in farming, trading, to offset them. Such efforts range from
logistics, processing and marketing is a major operational aspects such as lower utilisation
challenge, not to mention the size of the rates, increased red tape, reduced flexibility
capital requirement for achieving this and more management time to financial
strategic position. parameters such as cash investments, lower
profitability margins and larger cash-flow
Addressing the needs associated with
swings. This trade-off between risks and
supply-chain management and strategy
efforts can be visualised as a continuum
development will require some degree
(SEE &IGURE ).
of control, but not at any cost. The term
‘strategic sourcing’ encompasses the
A continuum of sourcing strategies
different approaches that F&A companies
Numerous F&A companies are already
are adopting to secure access to agri
adapting their sourcing practices to the12 | 2ABOBANK Rethinking the F&A Supply Chain
Figure 2.1: Sourcing continuum
Increasing control over Focus on market power Adaptive strategies
physical supply
Price volatility
and supply
insecurity risk low high high low
Efforts
(operational
and financial) high low low high
Commodity
high – unique and high value to production processes low – not critical to production processes
Source: Rabobank, 2011
higher risk outlook to keep their competitive stage in the supply chain. This can currently
edge. As different groups of F&A companies be seen in the sugar industry, where some
have different inherent abilities to capitalise manufacturers have sought to vertically
on the changes underway, and as the risk integrate upstream in order to secure supply
profile for each commodity is developing (SEE CASE STUDY ON PAGE ).
differently, it should not be surprising that
‘Farmer first’
a variety of different sourcing strategies are
In some sectors, such as cocoa and beer,
being implemented.
companies are actively assisting in the
)NCREASING PHYSICAL CONTROL OVER SUPPLY production process by working directly with
Securing supply of agri commodities of farmers. For these players, ensuring quality
the right quality and at the right time is of supply is a key motive. For this strategy to
becoming more difficult. However, this is work, investments in infrastructure (physical,
an increasingly important success factor for technological) are usually required (SEE CASE
both F&A players and governments given STUDIES AND ON PAGES AND ). Other
that food scarcity will eventually constrain companies are trading farm input raw
physical markets. This is particularly the case materials against physical delivery of agri
as the majority of new demand from Asia commodities (SEE CASE STUDY ON PAGE ).
is not necessarily co-located with existing Other examples include F&A companies
production. Supply chains will need to be providing working-capital financing for
developed or enhanced to accommodate farmers in return for agri commodities or
the resulting trade flows. Furthermore, there creating farmer loyalty by providing services
are other factors currently affecting the task such as training.
of securing sustainable supply, including
Regional diversification
supply-chain ownership, government
One way to ensure supply is to use multiple
intervention, scale, influence and capital
suppliers in one region, or in extreme
efficiency. Individual sourcing strategies
instances, establish a presence in relevant
within this category are investing in land,
production regions in order to better match
backward integration, ‘farmer first’ and
demand/supply and keep closer track of crop
regional diversification.
conditions to be able to reduce risks in case of
Investing in land supply shocks. This strategy involves building
Investing in land involves companies or and maintaining many relationships, which
governments buying the prime production would obviously require a considerable effort.
asset of any crop — land. Buying up land In the more extreme instances, even capital
makes it possible to exercise direct control investments could be required in order to
over crops and commodity output, which make diversification strategies successful.
can be used directly for further processing Diversification has become increasingly
without having to deal with any other party important for grains and oilseeds companies
in-between (SEE CASE STUDY ON PAGE ). (SEE CASE STUDY ON PAGE ).
Backward integration These strategies deal with the issues of
This strategy involves buying or setting up security of supply, managing risk and
(greenfield) production, logistical or storage volatility, and structuring funding
assets along the chain. The reason companies requirements. In a world of scarcity of supply,
would pursue this strategy is similar to the companies pursuing one of these sourcing
drivers for investing in land: getting direct strategies have made sure they have secured
access to farmers/crops and controlling supply, have control over quality and have
quality of commodity output in an earlier control over price. Importantly, this removesSection 2 Maintaining control in an era of scarcity | 13
the volatility of prices. However, all of this contracts and other financial derivatives to
comes at a cost. Investments are required to hedge out the risk of price changes are well-
make these strategies work. Therefore the established. In other markets, such as for
F&A companies involved have to look very malting barley and dairy products, these
carefully at their balance sheets before financial instruments are under development
pursuing any of these strategies. but remain in their infancy. In all cases, players
with market power and stronger balance
&OCUS ON MARKET POWER
sheets will be best placed to make full use
The second category, focus on market power,
of these tools.
is another way to gain control and mitigate
supply risk. In the increasingly volatile agri- Reliance on brand power
commodity markets, F&A players are seeking Another strategy used to deal with increased
new approaches to managing price-risk commodity prices is to rely on brand power
exposure. These new strategies are mostly to pass on the increased prices to the next
driven by relationships between players in company or consumer in the supply chain.
the F&A supply chain, which are becoming Branding can be seen as a key tool to achieve
more important in order to secure supply this. Nespresso is a good example; premium
or make sure risks are under control. Supply- beer brands are another, as agri commodities
contracting, horizontal partnerships, market- are less than 10 percent of total costs.
based risk-management tools, reliance on However, this strategy can be, or should be,
brand power and forward integration are combined with other sourcing strategies.
common strategies within this category.
Forward integration
Supply-contracting A forward integration strategy can be used
Supply-contracting is commonplace. Many if a company believes it cannot achieve a
F&A companies strike agreements with other sustainable competitive advantage or is
companies within the supply chain to make unlikely to achieve a competitive sourcing
sure supply of commodities is secure and safe. strategy. It may work for this company to
Supply-contracting is mainly a business-to- buy or set up processing assets in a later
business agreement, though sometimes stage in the supply chain. This is done
agreements are between farmers and in order to grab a larger portion of the
companies. The Chinese poultry sector value-add of the processed product and
is a striking example of when companies to improve negotiation positions vis-à-vis
enter certain agreements to ensure supply food distributors. In effect, this will further
(SEE CASE STUDY ON PAGE ). Recent greater strengthen market power by locking in
price volatility and fears about sourcing additional margin.
supply have encouraged companies with
These five strategies make sure that control
market power to revisit the terms of current
over supply is achieved and that risks are
agreements to increase certainty and
lowered. In most cases, not a lot of investment
duration of supply. For example, long-term
is required, or at least much less than in the
supply contracts have become more
physical control category. However, the
common in an attempt to secure origination,
control is less direct and less certain than in
i.e., lock in supply.
the first category. As a result, risks are higher
Horizontal partnerships and prices may not be as clear. For example,
Establishing horizontal partnerships is a long-term contracts can be breached; this
strategy frequently seen in the food retail happens frequently. The customer may then
market. Food retail companies expand have to scramble to get access to a certain
their relative market positions through commodity, which may have to be purchased
cooperation with competitors in regard at inflated market prices.
to procurement to reinforce their negotiation
position vis-à-vis suppliers. This strategy
of entering into horizontal partnerships is
another way of exercising market power,
by combining purchasing forces.
Market-based risk-management tools
This strategy is, or used to be, very
straightforward — using financial market
instruments to lower/mitigate price and
volume-supply risks. In some F&A sectors,
such as the grains market, the use of futures14 | 2ABOBANK Rethinking the F&A Supply Chain
!DAPTIVE STRATEGIES of an issue than before. However, some of
The third category is a different solution to these strategies may not come cheap —
improving control over sourcing: adapting investments in R&D or tangible assets may
the internal organisation of a company to be required.
mitigate supply risks. The strategies in this
category have a more internal focus on what Strategies for success
can be changed in the business model or Given the dynamics around higher prices
in the procurement strategies of a company and increased volatility, we have identified
to achieve more control and/or to reduce four groups of companies as those that
the risks. appear best placed for success: those with
the best access to agri commodities, those
Finding niche markets
with market power, those with the greatest
This strategy of finding niche markets goes
agility or ability to adapt to the changing
along the same lines as reliance on brand
market conditions and companies with
power. However, it may be more applicable
sufficient financial firing power. A common
for smaller companies. Negotiation power is
denominator for success in each of
achieved through selecting a smaller target
the groups is financial strength and
market in which a substantial share is
structured funding.
achieved, rather than large-scale marketing.
'LOBAL AND REGIONAL TRADING HOUSES WITH
Ingredient substitution
PREFERENTIAL ACCESS TO AGRI COMMODITIES
In this strategy, alternative ingredients
Global and regional commodity traders,
are researched and even sourced to lower
especially those with access to new growth
direct dependency on one particular agri
drivers, i.e., those with the most influence
commodity. The dairy industry is a good
over supply chains in Asia, are relatively
example of where this strategy is being
well-placed for success in an era of scarcity.
implemented (SEE CASE STUDY ON PAGE ).
These companies are already moving
Switching away from certain commodities
further upstream in an effort to secure
that may be scarce or volatile in price could
supply at the source. In some cases they
be a good strategy, but this may not be
have directly acquired production assets,
without risk. For example, replacing milk fat
while in other cases they are strengthening
with vegetable oil runs the risk of reducing
relationships with producers as a basis for
the quality, taste and shelf life of the product
locking in supply.
in question. Much of the success of this
strategy will depend on the skill of food 'LOBAL FOOD COMPANIES WITH
scientists to reformulate food products MARKET POWER
without too many compromises. The emergence of China and India as
overwhelming demand forces and the sheer
Tolling
scale of their requirements is one of the most
Becoming a tolling company could be a very
remarkable changes seen in the global trade
interesting strategy for F&A companies that
of agri commodities in recent years. The range
are struggling with their competitiveness.
of players that facilitate this massive trade
Tolling involves offering processing steps
flow is becoming more concentrated as
as a service provider without direct profit
F&A companies seek to achieve the scale
and loss exposure to raw material flow. As
needed to influence the supply chain. As the
the case studies show, companies have tried
trade flows grow, so too must a company’s
to insulate themselves from price volatility
scale if it wishes to use market power to take
by moving towards ‘cost-plus’ pricing
its share of the trade. In countries with high
agreements where price fluctuations are
demand, the role of government influence on
passed along the supply chain. In the latter
these companies should not be ignored. For
cases, whoever has the greater market power
example, China exerts enormous influence
gets to pass the costs on.
over the global trade in soybeans, due largely
Adaptive strategies are unlikely to secure to its annual import requirement of between
supply per se. Some may work to lower 50 million tonnes and 55 million tonnes
the risk of supply not coming through, but (about 60 percent of the annual world
real control is not achieved. However, these soybean trade). The sheer scale of China’s
strategies may work well to gain more control participation in soybean trade is enough
over price and price volatility. Given that these to influence the behaviours of midstream
strategies are effectively about moving away and upstream actors without having to
from the issues surrounding commodities, establish a tangible brick and mortar
supply and price volatility should be less presence in the country of origination.Section 2 Maintaining control in an era of scarcity | 15
Global food companies — manufacturers, • Focus on cost efficiencies, probably as a
retailers and foodservice companies — tolling manufacturer. Alternatively, focus
are well-placed for success in an era of on supporting major food retailers and
scarcity. Their main advantage is that foodservice companies.
due to their market power — with strong
#OMPANIES WITH SUFFICIENT FINANCIAL
distribution channels and brands in their
FIRING POWER
respective market segments — they
As F&A supply chains across the world
are relatively well-placed to pass on higher
continue to consolidate, scale and efficiency
prices to downstream customers and can
will be preconditions to participating in the
negotiate agreeable terms with upstream
global F&A supply chain, rather than the
suppliers.They have reasonable chances
differentiating factors they once were. One
of being able to protect margins. These
of the defining characteristics that will
companies have three major advantages:
differentiate the highly successful players
• Strong brands that customers support will will be the ability to structure equity and
keep these players in the game even if debt in ways which facilitate continuity of
faced with rising prices — they have greater trade flows and deliver maximum return
ability than most to pass on rising costs and on capital invested.
to protect margins.
In short: Managing supply risk, but
• Loyalty from suppliers, who may be locked
not at any cost
in legally, through long-standing
The questions of how to secure a sustainable
relationships or through unique product
supply of agri commodities and how to
specifications. Many food manufacturers are
manage price risk are central in shaping
adding specifications to their products that
corporate responses as we enter an era of
go beyond quality and price, e.g., carbon
scarcity. F&A companies will need to consider
emissions, water footprint and sustainable
the current and future dynamics around
production. These can have the effect
these issues as they build their supply-chain
of capturing parts of the supply chain.
management systems and develop business
• Scale that can leverage good margins strategies. The role of governments, markets
from suppliers and customers. and finance partners will all be important, as
the traditional drivers of competition. Market
3MALLER MIDSTREAM PLAYERS WITH ABILITY
power and other forms of control will be
TO ADAPT
increasingly sought after as F&A companies
Smaller midstream processors and traders
contemplate how to secure supply and
will face the greatest pressure from structural
manage risk without necessarily having to
changes in the F&A sector. Pressure will
take direct ownership of supply chains.
come from downstream major food
companies who are looking to squeeze
margins from midstream players or cut them
out of their supply chains completely, and
from upstream global trading houses that
are similarly looking to bypass the midstream
and focus on endmarkets.
Typically, midstream players are more
narrowly focussed, have less obvious options
for growth and weak balance sheets to
support alternative sourcing strategies.
Nonetheless, they do have options:
• Develop intellectual property that makes
them indispensible in the supply chain, for
example, specialised application
knowledge.
• Develop a differentiated offering for niche
or premium markets. Midstream players will
be better able to lock in margins in these
markets.Section 3 Strategic options being implemented | 17
3 Strategic options being implemented
Strategic sourcing as a of step changes being made. However, not
competitive advantage all companies are taking a strategic approach
Sourcing of agri commodities has always to sourcing, and those that are adopting a
provided a competitive advantage for F&A strategic approach are not all acting in the
companies. However, the global shift to same way.
higher prices and increased volatility has
pushed sourcing higher up the corporate Real-life examples: Sourcing
agenda. F&A companies will increasingly strategies in eight sectors
need to make choices between achieving The following eight case studies present
incremental growth through ongoing findings that highlight strategic approaches
efficiency gains at the margin level or by to sourcing (SEE &IGURE ). These case studies
making step changes to adopt a new have been selected to represent and reflect a
approach. Efficiency gains consolidate range of actual sourcing strategies which F&A
sourcing as an operational issue for F&A companies are currently adopting to navigate
companies, while step changes position the changing market environment as we
sourcing as a strategic issue for CEOs and transition into an era of scarcity. Each case
Boardroom discussions. features one or two distinct sourcing
strategies and also provides an alternative
In our analysis of the activities and trends in
strategy found in the same market.
global F&A companies, we can see evidence
Figure 3.1: Case studies and featured sourcing strategy
Case Featured sourcing strategy
1. Plantation sector investing in agricultural land as a strategic asset Investing in land
2. Supply-contracting to get a grip on food safety in Chinese poultry Supply-contracting
3. Locking in raw sugar volumes through long-term supply contracts Supply-contracting
4. Barter trade as a solution to soybean origination in South America ‘Farmer first’ and barter trade
5. Securing long-term sustainable cocoa supply by putting the farmer first ‘Farmer first’
6. Global diversification in grains and oilseeds driven by supply/demand dislocation Regional diversification
7. Brewers adopting a wide range of sourcing solutions in malting barley Supply-contracting
8. Dairy processors opting for substitution to limit impact of milk price Ingredient substitution18 | 2ABOBANK Rethinking the F&A Supply Chain
CASE 1: Plantation sector investing in agricultural land as a strategic asset
Interest in agricultural land has increased steadily in recent years, driven mainly by agri-commodity price rises and food-
scarcity concerns. Many larger corporate F&A players have invested heavily in securing and developing tracts of land across the
key agricultural production origins to strengthen their connections with the farm and attendant downstream supply chains.
"ACKGROUND TO AGRICULTURAL LAND INVESTMENT &OR DIFFERENT STRATEGIC REASONS
Agricultural production is typically still a family farming concern with large companies representing only a minor
proportion of total agricultural production. However, as interest in agricultural land investment grows, direct and indirect
stakeholders are seeking ways to strengthen their influence over the upstream agricultural production chain. Investors
interested in agricultural land comprise the entire spectrum of investor demographics, from primary producers to
sophisticated investors, and even sovereign governments. Despite the fact that the various parties invest in land for
different reasons, they all recognise the over-arching rationale that scarcity will become an increasingly regular feature
of agricultural commodity markets in the future.
&EATURED SOURCING STRATEGY )NVESTING IN LAND
Investors in agricultural land can be broadly classified into four groups: land fund investors, existing agricultural
production companies, midstream and downstream processors of agricultural commodities, and government-linked
companies/sovereign wealth funds with national interest imperatives.
Land fund investors
Land fund investors’ interest in agricultural land is driven by its increasing strategic importance and the preferred return
profile offered by fund managers selling these types of investments. In recent years, the agricultural land investment
rationale has achieved significant traction across the investment community and has given rise to the proliferation of land
funds which have focussed investing activities on the prime developed agricultural regions such as South America, the US,
eastern Europe, the Black Sea region, Australia and New Zealand, and also the emerging regions in Asia and Africa. Investors
in land funds are typically sophisticated, with patient capital and are interested in the favourable long-term investment
profile of agricultural land.
Existing agricultural production companies
Some companies which already operate in the agricultural production sector are extending core competencies through
the acquisition of existing farms/plantations, and development of greenfield farms/plantations in frontier agricultural
production regions. One example is Sime Darby’s plantation expansion activity in Liberia, which will allow the company
to better service export markets in Europe and other parts of Africa. Moreover, having recognised that suitable plantation
expansion opportunities in South East Asia are becoming increasingly difficult to find, Sime Darby and certain other
companies operating in the plantation sector are shifting their strategic focus to Africa. While Sime Darby’s Africa plantation
strategy is still in its early days, fortunately the prospects are positive for equatorial regions where highly profitable crops
such as palm oil and rubber thrive. This offers scope for the company to provide competitive labour conditions and
sustainable employment opportunities for local workers.
Midstream and downstream processors of agricultural commodities
Midstream and downstream companies seeking to achieve greater control over the volume and pricing of raw materials
is an emerging investor demographic. While there are limited examples of midstream/downstream companies investing
heavily in agricultural production at this stage, players in this segment are expected to become more involved in these
upstream activities in the future. In recent years, upstream acquisitions have been more prominent in the oil palm
plantation sector, as compared to annual broad-acre cropping sectors where net profit margins are more volatile and
therefore less appealing. Renowned for its biological production advantages, oil palm is arguably the most profitable
agricultural production sector in the world today. Wilmar International Limited (WIL), known for its activities in the
processing and trading of agricultural commodities worldwide, has heavily invested upstream in the oil palm plantation
sector in Indonesia and Malaysia over many years, to reinforce strategic supply continuity imperatives. In 2007, WIL
acquired, amongst other related companies, PPB Oil Palms (PPBOP) an oil palm plantation company with extensive
plantation assets located in Malaysia and Indonesia. At the time, PPBOP owned a land bank of 363,405 hectares which,
post-acquisition, more than doubled WIL’s land bank from 210,000 hectares to 573,405 hectares. As of end-2010, WIL’s
plantation portfolio was considerable, consisting of 244,965 planted hectares.
Government-linked companies/sovereign wealth funds with national interest imperatives
Government-linked companies and sovereign funds have similar immediate imperatives to midstream/downstream
companies. However, they also invest in upstream assets to ensure continuous and sustainable supply of agricultural
commodities to meet broader, longer term national interest mandates such as food security. For example, in order to
explore potential opportunities for joint investment in an agricultural food zone, Singapore established a cooperation
with the Jilin provincial government in 2010 through Singapore Food Industries (a subsidiary of Singapore Airport Terminal
Services (SATS), a government-linked company) along with other parties. The cooperation involves an estimated potentialYou can also read
