GLOBAL BUSINESS ENVIRONMENT

Global Business Environment



Global Business Environment

Part - 1

Introduction

World prices for wheat, coarse grains, rice and oilseeds were almost doubled between the 2005 and 2007, which continued to increase during the initial months of 2008. This escalation of prices of agricultural products played a key role in the increased prices of global food industry and has also raised many problems of food security and hunger in the developing countries especially. The causes of this price spike are complex and are explained by a combination of factors mutually reinforcing, including droughts that have hit large areas cereal, low stocks of grains and oilseeds, developing the use of agricultural raw materials for bio-fuel production, and the rapid increase in oil prices and finally. These changes in the market products have occurred in a context of instability in the global economy, which seems to have significantly contributed to the interest of speculators in the futures markets for agricultural products. The narrowness of the markets for key agricultural products is a real challenge to both national governments and international organizations. If we want to make the right decisions, we need to understand the causes of the current price surge, which could be the consequences for future prices and price volatility, and the impact on different countries.

Prices rise when the market is tight. Between 2005 and 2007, the major producing regions the world simultaneously experienced adverse weather conditions that have depressed yields below their average levels of long-term. World cereal production recorded in 2007 was just over 3% to 2005, while total production oilseeds was down, however, the production of vegetable oils has jumped 7% on the rapid growth in the production of palm oil. In addition, demand growth has been strong. Thus, the demand for wheat and grain secondary has increased almost twice as production, while oil demand plant increased by two percentage points higher than the production. More than half of the increase in consumption of coarse grains and vegetable oils is due to the development use by streams of biofuels. Meanwhile, the use of cereals and oils Plants for human consumption has continued to grow, as well as that of cereals for animal feed. This growth in demand for food and feed, which accounted for nearly 50% of the total increase in demand was mainly due to the country outside the OECD area.

Prices of agricultural products rose sharply in 2006 and 2007 continued to rise even more marked during the first quarter of 2008. Although the rate of food prices by FAO grew an average of 8% in 2006, it increased by 24% in 2007 compared to 2006. Currently, the increase in the average index of the first quarter of 2008 compared to first quarter of 2007 stood at 53%. Vegetable oils, which are more expensive on average more than 97% during the same period, leading the continued rise of prices, followed by cereals with 87% more expensive, products milk with 58% and rice by ...