The last two years have been an incredible roller coaster ride for participants in the food and agricultural sectors. Agricultural prices began to rise in 2006 and culminated in record levels by 2008. The economies of China, India and other countries have grown rapidly which gave rise to a flourishing middle class with more disposable income. The emerging U.S. ethanol industry evolved at an astonishing rate with government incentives and petroleum prices exceeding $100 per barrel.  Speculation mushroomed in both the petroleum and agricultural commodity markets.  Reduced harvests in several major exporting countries exacerbated the food supply/demand balance. A weak dollar stimulated large agricultural exports from the United States. All of these factors drove agricultural prices to extremely high levels.

But the precipitous drop in petroleum prices, the U.S. financial crisis and the global economic slowdown caused demand for many commodities to drop and prices to fall dramatically. USDA’s 2009 trade forecast for U.S. agricultural products predicts a $17 billion decline in exports. U.S. import growth for the year also will turn downward due to weaker demand.

Although recent events have been dramatic, somewhat similar conditions have occurred in the past.   Consider the impact that the Asian financial crisis had on U.S. exports in the late 1990s. In 1996, U.S. agriculture exports to East Asia totaled about $26 billion, and by 1998, they had dropped to $19 billion. It took nearly 10 years to recover from that shock; it was not until 2007 that export levels reached $32 billion.

Planning for the Rebound

How should the U.S. agricultural sector position itself for a future rebound, given the world economic situation and other shocks experienced in 2008? While the recovery’s timeline and pace are uncertain, food demand will again grow as the world economy recovers. This year is certainly a time to tighten one’s belt, but it’s also a time to reposition for what will be a burgeoning export market when the economy recovers. The following are suggestions that organizations could employ to assist their industry in preparing for the future.

  • Build on strengths: Taking a broad look at the U.S. food industry, we can cite several areas of major competence. While not perfect, the system is transparent. It is designed to discover problems quickly, trace problems back to the source, take corrective action and, when necessary, take action against those responsible.

    Furthermore, we have driven food costs down in this country as a result of efficient production and distribution systems. The rule of law and the use of sound legal and financial institutions give importers more confidence and reduce their risks when sourcing food and agricultural commodities from the United States.

  • Focus on population growth: The United States is not a major growth opportunity.  Furthermore, it is becoming recognized as an obese nation.  The United States needs very few additional calories, but our food industry has not yet come to grips with this reality.

    Today, 95 percent of consumers live outside of the United States and are generally younger than U.S. consumers.  The United States’ median age is 36 years compared to the world’s at 28.

    According to the U.S. Census Bureau, the world population is estimated to increase by more than 1.9 billion people, to 8.4 billion from 2005 to 2030.  The United States will account for   only 78 million of that growth.  The Asia region will face the largest population growth — an additional 942 million people — with India contributing the most at 439 million people.  In contrast, the population of Eastern Europe, the Baltics and the Commonwealth of Independent States is expected to decline.

  • Target the growing middle class: An opportunity for U.S. companies to realize meaningful growth lies in the growing populations of emerging economies, particularly in their middle class, which is expected to rise sharply.  In 2005, the middle class in developing countries represented roughly 400 million people; by 2030 it will triple to 1.2 billion people, according to the World Bank. This extraordinary growth will greatly increase global food demand.   As incomes rise, people shift their food consumption habits toward more meat, fruits and vegetables.  According to a Centre for World Food Studies’ estimate, as income rises by 10 percent, meat consumption is estimated to increase 15 percent.
  • Tailor products for international customers: The U.S. food and consumer product industry is highly advanced in meeting U.S. consumer preferences, whether for convenience, taste or dietary needs.   However, the same is not necessarily true when serving our foreign customers.  Some U.S. food companies still view export markets as incremental sales on the margin.  Exports are little more than a way to get rid of excess volume.  International customers should no longer be treated with a “take it or leave it” mentality.

    New food products should be tailored for international customer segments, just as the industry does for different U.S. customers.  If companies stop viewing foreign markets as “dumping grounds” and start viewing them as valuable markets with customers of growing affluence, the United States would find even greater opportunities in foreign markets.

    While food exports from the United States may decline in 2009, now is the time to prepare for the turnaround.  Instead of being a time to just gut it out, this should be a time to reposition your industry and your firm for growth and success when economic conditions improve.

Turning Information into Strategy

The world is overwhelmed with data; however, companies fail despite massive amounts of data.

The biggest challenge is not gathering information, but rather sorting through it and keeping what’s useful and relevant. Next is the task of analyzing the data and turning it into useful intelligence. Of course, it’s only intelligence if it can be used to make informed decisions and develop sound strategies.

It’s critical to identify and prioritize markets, know your customers, understand the constraints and opportunities in meeting their needs and, finally, develop and implement a strategy for moving forward.  Some of the steps in that process include:

  • Identify foreign markets with the best export sales and growth potential. To do this, review supply-and-demand data, overall economic growth, population level and growth, per-scapita income levels and growth, size and growth of the middle class, consumer demographics, local and third-country import competition, size of tourism industry and so forth.
  • Understand customers’ needs and preferences within the priority markets. The second step involves examining customer trends,  such as preferences, tastes and needs, including food safety, health and nutrition; trends toward Western-style food and restaurants; eating out versus eating at home; growth in modern supermarkets, hotels, restaurants and tourist resorts; the demand for organics; and perception of products made in or originating from the United States.
  • Recognize the constraints and opportunities in meeting your customers’ needs. The third step is an assessment of potential limitations as well as the areas of greatest promise in addressing your customers’ needs. When resources are limited, it’s critical to focus on areas with the greatest potential to reach your marketing objectives.  For example, corruption at the ports creates inefficiencies and adds to the cost of doing business, but it’s not a constraint that you can realistically expect to change.
  • Develop and implement a sound success strategy.  Once you identify the constraints and opportunities to meet the key customers’ needs in your priority markets, the last step then is to develop and implement the right strategy.   There are many factors to consider for this process such as the resources that are  available to you as well as the current economic environment.  At a time when both of those variables are in flux, it is a good time to assess whether your current strategy is appropriate or flexible enough to achieve your goals and objectives over the next few years.

Key Questions and Conclusions

Some key questions that food and agricultural organizations should be asking themselves given the current economic environment include:


  • How important is the domestic market versus the export market for your future?  For example, what share of current production is consumed in the United States versus exported?  What is that share today versus 3 to 5 years from now?
  • Which markets will be hit the hardest by world economic declines? The least?


  • To what extent are you (or the industry) currently meeting the needs, tastes and preferences of overseas customers?
  • Should you be investing more research and development in new products to better meet international customers’ needs?
  • Which customers will be most impacted by the economic tsunami?
  • Which consumer groups will recover quickest?
  • How will customer needs and preferences change?
  • When the economy recovers, will consumers return to previous habits?


  • What will the U.S. stimulus package mean for agricultural and trade programs?
  • What will be the domestic impact on production and business income?
  • Are there any new constraints/opportunities that you can foresee (in the United States or internationally) that will impact export abilities?
  • How can you get a jump on the competition when the world economy begins to turn around?


  • What will you stop doing if your funding resources fall by 25 percent? Or 50 percent?
  • Which marketing themes and strategies will remain relevant to the target audience and which will not?
  • Knowing the United States cannot compete on price in some markets, what role will food safety play? Will overseas consumers pay a premium for a safer product?
  • What lessons can be garnered from similar recessions or economic crises in the past?

Accurate research and a planning process that results in a well-thought-out business plan will serve as a guide for making tough funding decisions and decisive repositioning.  Without a strategy, decisions are reactive and aimed at short-range solutions.

To discuss this topic further or learn how The Hale Group and SIAM Professionals can help you position for the economic rebound, contact Robert Ludwig at (800) 229-4253,; or Kent Sisson at (703) 444-5330,