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Agrifood Records Steady Growth Despite Higher Input Costs and Labour Shortages

Agrifood is a highly integrated value chain, spanning from upstream farming to food processing downstream, including both alcoholic and non-alcoholic beverages. Agrifood manufacturing is set to occupy an important position in the agenda for the decades ahead. Throughout the Covid-19 pandemic, the fundamental challenge for the sector remains meeting global demand amid supply chain bottlenecks along with the powerful downstream retail sector. Allianz Trade publishes a report dissecting into the sector’s outlook for 2022 and beyond.

Historically speaking, agrifood has rarely suffered from any sudden increase in level of uncertainty because of its steady consumption nature, driven by the rise in global population and disposable income. Evidently, global food and beverage sales registered a growth of 11% in 2021 and eyeing another 9% increase in 2022.

After three poor performing years leading up to the pandemic, agriculture has been benefiting from the recovery in food commodity prices, especially cereals and oilseeds. However, new trends in the sector have surfaced which may steer the agrifood sector going forward:

  • Consumer preferences moving towards local products
  • Limited pricing power for downstream packaged food companies
  • Online distribution channel gaining popularity
  • Climate change weighing on crop yields
  • Ongoing lockdowns impacting agrifood global supply chains
  • Major commodities and costs pressure brought by the Ukrainian crisis

Speaking on the sector’s outlook, Françoise Huang, Senior Economist for Asia Pacific at Allianz Trade, says, “The Covid-19 pandemic has had a dual impact on the industry: online food deliveries have been skyrocketing while the sector is grappling with the hardship of out-of-home food services. In addition to key sector risks such as impact of climate change on crop harvests and resumption of trade feuds between Europe, Americas and Asia, the most direct effects of the invasion of Ukraine could be felt in rising grain commodity prices and costs of fertilisers, energy and shipping.”

Paul Flanagan, Regional CEO at Allianz Trade in Asia Pacific, says, “Demand for agrifood in Asia Pacific is fueled by the region’s new middle-class and higher disposable income, which translates into higher demand for niche products such as organic food and those that follow and produce from responsible farming principles. We maintain an optimistic view for the region’s outlook in this space, particularly after the Regional Comprehensive Economic Partnership (RCEP) officially came into effect early this year which is expected to boost regional trade for years to come.”


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