Agri-commodity markets are expected to begin 2021 with high prices and a range of factors that are likely to see prices hike further, according to Rabobank’s annual Outlook report.
The specialist food and agribusiness bank forecasts that the fallout from the Covid-19 pandemic, which saw countries across the world stockpile goods, along with expected poor harvests due to dry weather conditions, are set to increase agri-commodity prices and create a period of agri-commodity inflation which won’t ease until at least mid-way through 2021.
Coffee has seen a rare global drop in demand – the first since 1995 – driven by lower out-of-home consumption as a result of global lockdowns. However, demand is expected to pick up by 2 per cent in 2021 but remain below 2019 levels.
Sugar demand was dampened, though production benefited from the decline in ethanol prices which saw sugar outputs accelerate through 2020 to make the most of favourable the circumstances. As a result, 2020/21 looks like a relatively balanced year.
Wheat has reached its highest price since 2014 but while stocks have increased during the 2020/21 season, this could be offset by increased global demand brought on by the pandemic as countries look to secure strong supply.
Soybeans prices saw the biggest price decrease of all commodities tracked in 2020 following two years of oversupply and trade-war induced low prices which in the US were below the cost of production. Prices increased following a Chinese-led import programme which saw them jump to a four-year high. This is expected to continue into 2021 led by continued demand from China.
“2020 has been a year like no other, but the agri-commodity supply chain has fared well, ensuring the global food supply has remained intact during the pandemic despite stockpiling by both countries and consumers,” said Stefan Vogel, global strategist and head of agri-commodity markets at Rabobank.
“The current circumstances have given farmers some respite after years of stubbornly low prices but 2021 brings its own risks. Even with rising hopes of a vaccine, Covid-19 remains a difficult to predict risk, while La Niña has the potential to hit crop yields across the world.
“Wheat, corn and soybean prices are set to remain high and could increase further, with farmers continuing to take advantage of the favourable production and exporting conditions. Yet cotton, coffee and cocoa have hit a wall driven by reduced consumer demand due to Covid-19”.