When a few million people want to buy more and better food, it is seen as a nice little trade. But when a billion do so, as US investor Jim Rogers recently said, “It’s time to trade in that Mercedes for a tractor.”

Constant advances in farming technology and the underlying fundamentals of a growing demand for food are putting the agricultural and food industry in an economic position not seen since before the industrial revolution.

But the bull-run on agri- related shares may be running out of steam as the global economy struggles to recover, with slowing growth in China, a stagnant EU market and the US battling to kickstart its economy, despite printing huge amounts of dollars.

And while financial markets were obsessed by rising geopolitical tensions in Russia, and what central banks across the US, Japan and the EU might do next, oil was overflowing out of the central plains in the US.

With oil prices now reaching lows not experienced since the financial crisis of 2009, there could be a seismic shift taking place. Furthermore, a number of new trends are emerging that are causing companies to look at their growth strategy and future direction.

Changed consumer habits

The supermarkets appear to be the first victims of power transferring into the hands of the consumer. Lower-income consumers are migrating away from the traditional supermarkets such as Tesco and Walmart. They are now starting to push virtual trolleys on websites such as Amazon Fresh.

The traditional giants have been caught off guard and, with demand low, are struggling to grow. They have saturated their home markets and have tried to expand internationally to drive growth. International operations at Walmart, for example, had long been seen as the driver of growth. But sales growth has halved in the past year and it has decided to ratchet down its expansion programme and plans to close stores in Brazil and China this year.

Similarly, Tesco, currently on an operating table since the wheels came off its trolley, is struggling to figure out why more people are deciding to shop elsewhere. It has been slow to adapt, preferring to keep shareholders happy in the short term.

Tesco, which saturated the UK in the great supermarket space race, is now left with a legacy portfolio of poorly performing out-of-town hypermarkets. The retail giant needs to find a solution fast to turn around the ship.

And it is not just the supermarkets. McDonald’s, the world’s largest fast-food chain, is also struggling, with sales falling almost every month in the past year. While a lagging economic recovery is a factor, consumer tastes are changing. Traditional McDonald’s customers are abandoning the golden arches looking for more up-market fast food experiences such as gourmet burger outlets. Consumers also want to eat healthier and even with its healthy choices menu, McDonald’s is struggling to change its image.

Cheaper dairy and grain commodities could bode well for some agri companies. Fertilizer producers such as Yara and K+S Kali could be ideally positioned to take advantage of low oil prices and increased cropping. The demand for fertilizer is expected to grow between 1% and 2% per annum over the coming years.

Yara’s position as the world’s largest producer of ammonia, nitrate and NPK fertilizers, along with about 20% of global ammonia trade, gives it unique opportunities to leverage economies of scale. The other essential element, potash, which is controlled mainly by two large marketing groups around the world, is also likely to be in high demand in the future.

On the machinery side, things don’t look so good. Deere & Co, the world’s largest maker of agricultural equipment, recently joined rivals in warning that demand for machinery is likely to fall as lower crop prices take their toll. Having experienced huge growth in recent times, each company is now reducing production. Deere, Agco and Case New Holland’s (CNH) have seen sales slide recently, with CNH reporting a 12% drop in sales in the last few months.

Scale and deep relationships

Ireland has a long history of being a world leader in food. But food and beverage producers face a new world order of poor demand growth and an increasingly complex supply chain along with regulatory and consumer dynamics.

This is causing companies to get closer to customers and producers across the supply chain to drive product innovation that can be leveraged as a competitive advantage over time.

This is particularly true of Kerry Group, the world leader in ingredients and flavours with sales in excess of €5.8bn. The combination of this dominant position, along with a stable revenue stream provided by consumer foods, makes Kerry ideally positioned to handle this changing dynamic.

Greencore too is slowly starting to see the benefits of scale through prudent expansion. The key to its success has been in building long-term partnerships with blue-chip customers such as Starbucks and Seven-11. Focusing mainly on the US food-to-go market, the company’s prepared food manufacturing platform has been built up mainly through four acquisitions. Over the past year, it has deepened its US food-to-go manufacturing footprint through a series of organic investments and a small acquisition.

Aryzta has also grown aggressively. It has repositioned itself to become more involved in manufacturing, bringing it closer to its customers. With bakery now making up 68% of revenue, over the past two years it has mopped up Klemme AG in Germany, Pineridge Bakery in Canada and Cloverhill Bakery in the US to establish it among the largest bakery companies in the world.

Glanbia also opened its chequebook during the year and added further muscle to its performance nutrition business, paying some $153m for Isopure. This ensures Glanbia remains the leading sports nutrition company in the US. Last year the division accounted for 20% of the group’s revenue. By investing in regions with fast-growing milk supply, and operating large-scale plants, it is also building leading positions in cheese in the US which not only provides a feedstock for the performance nutrition (whey), but also ensures a strong position across a diverse range of customers.

Since 2009, agri-commodities have experienced a revival. But in the past year, low demand and huge increases in supply have caused prices to fall. Near perfect weather created the largest global harvest on record and high milk prices due to last year’s tight markets drove milk flows around the world. An abundance of cheap money with few options to invest added further fuel to the fire. Therefore many commodities have fallen up to 50% over the year.