Challenges and Trends

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From the course by Technische Universität München (TUM)

The Economics of Agro-Food Value Chains

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Technische Universität München (TUM)

The Economics of Agro-Food Value Chains

71 ratings

Have a look at our trailer for a brief introduction to this course: https://youtu.be/GADAgxTHjgE In this course, you learn how the agro-food value chain approaches the challenge of constantly improving its competitiveness by producing high quality food and products and also aiming to attain greater sustainability. Some of the topics of this course are: • The notion of quality for food and agricultural products and consumer value. • How to conduct market research in this field. • Labelling, branding and pricing strategies, as-well as innovation in the agro-food sector. • How sustainability can be used as a competitive advantage through corporate social responsibility. • The role and different types of industrial standards. • The different forms of coordination in the chain, in particular with regard to the retailing and distribution sector. This course is taught by a group of international experts from Universities in Italy, Germany, Ireland, Scotland and the Netherlands. Each of them will give you insights into a specific topic related to food quality and the organization of the agro-food value chains.

From the lesson

Module 1: Introduction

This module will give you an introduction and overview of the course. In the second lesson of this module, we will talk about the current challenges and trends in the agro-food value chain. In the third lesson of this module, the concept of quality in the agro-food value chain will be introduced. The module finishes with the fourth lesson, which gives you an overview of the food value chain.

Challenges and Trends8:56

Meet the Instructors

Hannes Lang
Research Associate
Technical University of Munich
Luisa Menapace
Professor
Technical University of Munich
Faical Akaichi
Research Economist
Scotland’s Rural College
Francesco Bimbo
Research Economist
Wageningen University
Montserrat Costa-Font
Research Economist
Scotland’s Rural College
Carlo Russo
Associate Professor
University of Cassino and Lazio Meridionale
Chenguang Li
Research Economist
University College Dublin

Welcome to the 2nd lesson of module 1 - Challenges and Trends in the agro-food value chain.

In this lesson I'll give you an introduction to the challenges and

trends and the agro-food value chain in the European Union.

The agro-food value chain contributes significantly to the European economy.

In addition the sector plays an important cultural and societal role and contributes the vitality of rural communities.

It is critical for food security and food traditions.

The sector contributes 6% of all gross value added in the EU economy: Value added means

the value of goods and services produced minus the cost of the raw materials

and other inputs used to produce them. The sector generates 11% of

all EU employment with a large portion of this employment being in the distribution of its products.

In 2013 the sector's export was 120 billion euros

with a positive trade balance of almost 19 billion euros.

This means that the EU agro-food sector exported significantly more than what it imported.

Even though this sounds positive, the competitiveness of the EU agro-food sector

has been a matter of concern for several years.

In 2007 a study initiated by the EU Commission found that the competitiveness

of the European food industry is weaker than that of the US and the Canadian food industry

and approximately equivalent to that of Australia. The level of competitiveness in this study

was measured via a series of indicators that

capture various aspects of the growth in value added, export shares, and

productivity in the sector. These indicators are

the growth and real value-added of the manufacturing sector in the food industry.

The growth of the Balassa index. This index reflects the export specialization level in one category of goods from one country.

The growth of the export share on the world market.

The growth of real labor productivity.

This affects the unit labor costs and in this way the relative process.

And the growth of real value-added which reflects industrial dynamism.

In order to identify why the agro-food sector is underperforming, it is important to

understand the trends and challenges of the sector in the last few decades.

The agro-food sector has changed significantly over the last few decades.

This is manifested through important trends, which include: globalization, structural changes

(especially with regard to farms and the retail sector), changes in consumer preferences

and environmental awareness, advances in biotechnology and

in information and communication technologies, and finally demographic changes.

We will now explain and discuss these trends and the challenges they bring in more detail.

The agro-food sector is becoming increasingly global

This is driven by decreasing transportation and transaction costs and

by trade liberalization thanks to the efforts of the World Trade Organization.

With increasing globalization, many EU agro-food businesses face increasing

pressure from new competitors, specifically, from emerging economies such as Brazil and China.

While the EU is lagging behind, these emerging economies

are gaining shares on the food export market. In addition, there are still some

barriers for the sector within the EU: for example, the lack of harmonization of

regulations across countries makes it costly for some businesses to expand

into new markets. The agro-food sector is also undergoing important structural

changes, particularly in the primary and the retail sector.

EU agricultural statistics reveal that in the primary sector farm numbers are continuously decreasing.

At the same time one can observe a gradual transformation of

farms into small companies managing large operations.

In the retail sector concentration is also increasing but at a much higher level.

This is happening because large firms are growing even larger, and large firms are

acquiring smaller ones. This increasing concentration places retailers in a

strong position in their business relationship with suppliers.

The strong position of retailers towards suppliers is also reinforced by retailers forming buying groups.

An example of a buying group is CORE, a group formed by the

German retailer REWE, the Belgian discounters Colruyt,

the Italian cooperative CONAD and the Swiss cooperative COOP.

In the EU (as in other developed countries), consumers are the main drivers of the development of the agro-food value chain.

As the basic calorie needs for a large share of the population are satisfied

consumer demand is becoming more sophisticated.

The price continues to be an important element in consumer decision making when it comes to buying food.

However, consumers are increasingly interested in high quality,

diversified and healthy food. Consumers also show preferences for sustainable

and ethical production systems, partly because consumer environmental awareness is on the rise.

The fact that consumers environmental awareness is rising is

relevant for the agro-food value chain, because the chain contributes

significantly to the environmental impact in greenhouse gas emissions.

For example, it has been estimated that agriculture alone contributes 9% of the

total EU greenhouse gas emissions. At the same time 70 to 80 percent of deforestation

is driven by the conversion of forests into arable land.

Changes in consumer preferences and in environmental awareness

resulted in additional and more stringent EU legal legislation.

Aiming at preserving the environment, ensuring food safety, fighting obesity,

and improving animal welfare and working conditions for employees.

are at the center of these EU legislation. However stakeholder of the agro-food value chain

also indicate that the additional regulations have significantly increased

the administrative burden on firms. The possibilities of bio technologies and

information and communication technologies, short ICT, are growing.

These developments have the potential to reduce the environmental impact of the

agro-food value chain, improve consumers health, and enhance productivity.

However, taking advantage of these developments often requires an upfront

investment in infrastructure, which not all firms can afford.

Also not all kinds of bio technologies are accepted by the general public, as in the case of GMO in the EU,

and not all ICT are easy to adopt by an aging workforce.

Finally, the last trend identified is the demographic and labor supply change. EU statistic say

that by 2050 about 27% of the EU population is going to be older than 65.

The aging population implies that there are more people moving out of the

workforce then moving into it, which creates a shortage of labor supply.

This is particularly difficult for the agro-food value chain as young people

are more attracted by new industries. The farming sector is an

extreme example, in which currently the average age of EU farmers is already 55 years of age.

But this is not only a challenge, but also an opportunity, especially for

young people with an interest and a good education in the agro-food value chain.

The EU has recognized this problem and

sponsors initiatives to address it. This online course is one of them.

With this slide we conclude Lesson 2 of Module 2. Thank you for your attention

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