Global agri prices to rise in first half of 2016

This despite global inventories being at very high or even record levels

Triggered by weather concerns and a rising dollar, prices of agricultural commodities are likely to remain volatile in 2016, says Rabobank, the Dutch multinational financial services company. With a rise in the first half of the calendar year, before erasing its entire gain by the end of the year. It forecasts agri commodity prices in the world market to rise up to 12 per cent by the end of June 2016. This would reflect a strong dollar's pressure, crude oil price weakness and potential for considerable weather-related production risks.

The forecast indicates that excess supply of agri commodities due to record production in past years might not prevent a price rise but the gains could be capped.

“Agri commodity stocks remain comfortable and are expected to limit price gains to modest levels through 2016. But, weather and foreign exchange rates will remain volatile and are the key variables, presenting both opportunities and challenges for producers and consumers alike. With improved stock levels, we expect price volatility to remain below that of earlier years in most markets,” said Stefan Vogel, head of agri commodity markets research at Rabobank.

Global inventories are at very high or even record levels, as a result of several large harvests in a row and the greater adaptive capacity of modern crops. Most crops saw very good production levels in 2015, despite challenging growth conditions across regions. Despite large stocks in both origin and destination markets, prices are likely to remain susceptible to supply-side shocks.

The Food and Agriculture Organization (FAO) of the United Nations has also forecast lower foodgrain output due to change in climatic conditions. Its latest study, issued early this month, shows world cereal production in 2015 around 2,530 million tonnes, about 1.1 per cent below the 2014 record.

Raising global environment concerns, Shenggen Fan, director-general of the Washington– based International Food Policy Research Institute, said: “The 3.9 per cent rise in global food prices, fuelled by a particularly powerful El Niño (weather condition), should serve as a reminder of the changing landscape of food security. By implementing long-term investments such as irrigation, drought tolerance varieties, diversification of food baskets, and social protection, and discouraging export restrictions that lead to food scarcity and hostility, we can focus on helping the millions in every country who remain hungry and malnourished.”