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Global Ag View: Food price stability under threat

Trade wars, disease and extreme weather threaten global food price stability in 2019, according to Rabobank’s annual outlook report

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Global Ag View: Food price stability under threat

US soyabean farmers faced a bleak outlook unless the trade war with China was resolved, with livestock diseases threatening the global meat markets.

 

Stefan Vogel, head of agri commodity markets at Rabobank, said while the environment was currently ‘relatively stable’, it was difficult to remember a time with so many threats to commodity prices on so many fronts.

 

Rabobank looked ahead at the key trends expected to dominate 2019.


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Trade Wars

 

Trade wars and currency headwinds were expected to hit US farmers, but Brazilian soyabean farmers were looking to benefit.

 

The trade war between the US and China has shaped 2018 and if it continues into 2019, as expected, it will alter global trade flows, with soyabeans most affected.

 

Rabobank forecasts China’s soyabean intake will fall below 90 million tonnes in 2018/19, and with China buying from elsewhere, US farmers face an oversupply, but Brazilian soyabean farmers will benefit while putting heightened feed cost burdens on the livestock sector.

 

But Mr Vogel added US soyabeans were cheaper than Brazilian, with farmers turning to other importers to sell stocks.

 

“China might partly switch back to buying from the US if and when the dispute is resolved, but a full recovery of this trade flow seems unlikely.”

 

US meat exporters will also be looking for new markets outside of China, providing opportunities for Brazil, Canada and the EU in China.

 

Markets would also be watching to see if the dollar continues to appreciate, with implications for trade.

 


Biosecurity

 

Global pork production will continue to be impacted by African Swine Fever (ASF), especially in China, with declining supply, rising prices and higher imports.

 

Europe has an oversupply, which could become more of an issue if ASF hits production levels and results in a drop off in export opportunities.

 

Demand could also be hit if consumer perceptions were hit by the disease, with avian influenza also likely to cause concern.


Weather

 

Weather could also drive further uncertainty across the commodity markets with an 80 per cent chance of El Nino being declared by the end of winter in the Northern Hemisphere.

 

Many parts of the world, including Australia, have been experiencing dry weather over the past few months, although Southern Brazil has been wetter than usual, with dry weather over the Amazon basin.

 

It would be expected El Nino would make the US Southern Plains wetter, which was positive for wheat production, and there could be dry spells in northern parts of the Midwest.

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