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Rabobank Offers 2009 Outlook

“The downturn in the economy has reversed the way consumers shop. Five years ago, there was a growing trend of U.S. consumers willing to pay more for high-quality, luxury goods.

“The downturn in the economy has reversed the way consumers shop. Five years ago, there was a growing trend of U.S. consumers willing to pay more for high-quality, luxury goods. Today, there’s been a 180° turn.”

That’s the analysis of Stephen Rannekleiv, vice president, Rabobank Food and Agribusiness Research and Advisory team, based on consumer shopping trends. A growing consumer preference trend toward discounters such as Wal-Mart and Costco, and away from more expensive retailers like Whole Foods, is pressuring retailers to keep prices low. In addition, demand for private-label products has increased as consumers seek greater value for their money.

“There’s a generalized return to frugality across all levels of society,” Rannekliev says.

Not only is the trend affecting retailers, but restaurants are feeling the pinch, as well. Consumers are bypassing white-tablecloth restaurants in favor of the quick-serve and fast-casual outlets. “The percent of total food budget spent away from home is the lowest in 20 years,” he says, and restaurants are responding by cutting portion size and minimizing waste.
Meanwhile, volatility in the grain market continues.
“Market whiplash has presented the grain and oilseed complex a tough prognosis,” says Karol Aure-Flynn, executive director of the Food and Agribusiness Research and Advisory team. “Crude oil, investor speculation and exchange rates continue to generate unpredictable swings.”

Moving forward, however, “once the market resumes focusing on the fundamentals of low stock levels and increased demand for food, and the strong de-leveraging process coming from investors slows down, it is expected that commodity prices will partially recover from the levels reached in October 2008.”