LA NINA WEATHER and higher oil and freight costs will be the major impact on agricultural prices in the next year, according to global rural banker, Rabobank.
In its latest global forecast, Rabo says drier conditions in the southern USA, Brazil, Argentina, China and the Black Sea (Russia and Ukraine’s grain belt) should support some price increases in grains, but mainly corn.
Despite grain prices rising, pork (hog) prices should also rise after a lean year as demand, especially from Asia, grows.
But cattle prices should ease after a few good years, although the global herd is still rebuilding.
The worst commodity price-wise should be palm oil, as lots of new acreage comes on-stream in what should be a wet south-east Asia while demand is soft (largely because it is not taking-off as a biofuel).
The dry grain belt and wet Asian tropics is largely a product of La Niña, which Rabobank backs the major weather bureaux (including Australia’s) in saying is increasingly likely.
Already corn planting in north and south America have been affected by La Nina dryness. And the Black Sea grain belt is affected not just by dry, but ergot disease and high ruthenium levels from a nuclear leakage.
Sugar will struggle to hold current prices as supply is in surplus, with good Indian, Thai and European production and soft world demand.
Overlaying all this could be a squeeze on farmers as oil prices rise and the surplus in global shipping dissipates.
Shipping rates have been extraordinarily low, with major shipping lines in financial strife because of a huge surplus over the last five years, plus low oil prices.
Surviving shipping lines have been at the behest of their bankers lifting rates up to staunch their losses, then raising them again to account for rising oil prices.
This impacts on some of the price-disruptive long-distance ag trading, such as Brazilian and European sugar into Asia and Middle East, Black Sea and Argentinian grains into Europe and Africa, and the frozen and chilled beef and lamb trade. Food miles may be reduced as freight rates return to normal.