Agricultural commodity markets would begin 2021 with high prices but prices were expected to hike further, according to Rabobank’s annual outlook report.
Wheat, soybeans and corn were expected to see the biggest rises, with increased global demand from the coronavirus pandemic expected to boost wheat prices further.
Speculators have invested in the agri-commodity markets which has supported prices and Rabobank expected many would remain in the market until economies normalise.
Governments around the world were looking to avoid food inflation and secure supplies of wheat, buying up exporters’ stocks.
Rabobank expected the 2021/22 season to bring another global wheat surplus, but La Nina will likely continue to pose a challenge for the development of wheat crops around the world.
In the oilseed markets, soybeans saw the biggest price decrease of all commodities tracked in 2020 following two years of oversupply and trade war-induced low prices.
Prices jumped to a four-year high following a Chinese-led import programme. This was expected to continue into 2021 led by continued demand from China.
Stefan Vogel, global strategist and head of agri-commodity markets at Rabobank, said 2020 had been a year like no other but the agri-commodity food chain had ‘fared well’.
“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 Nina has the potential to hit crop yields across the world,” he said.
“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.”
He said there was an uncertain outlook for 2021 as trade to China hung in the balance and an expected improvement in the US dollar could dampen demand for US products.
Mr Vogel added there was also a question mark over the relationship between the US and China under the new administration and how this would impact markets.