‘Record-high’ food stocks keep prices low: Rabobank

Stefan Vogel, Rabobank’s head of agri commodity markets, said the prospect of low global food prices next year was good news for manufacturers and consumers.

That was especially true for manufacturers grappling with higher import costs due to currency fluctuations following the Brexit vote.

However, Rabobank warned China’s huge stocks of key commodities –  more than half of the world’s corn and 40% of its wheat ­– meant any decision it makes to export or reduce its imports could hit global prices.

 ‘China as the wildcard’​

“While the outlook is generally stable, we see China as the wildcard,”​ added Vogel. “It has massive reserves of many of the world’s most important food commodities.​

“Any decision to tap into these or a major change of policy could have a profound effect on prices, creating further uncertainty.”​

Record-volumes of food commodities like wheat, corn and soybeans were being stored, pushing down prices to be paid to farmers in 2017.

Meanwhile, the report highlighted pork, sugar and dairy as commodities most likely see prices increase during 2017.

Dairy prices in particular were predicted to rise thanks to rising global demand and the EU’s intervention supporting prices by removing 4Mt from the market.

Volatility in the global currency markets​

However, volatility in the global currency markets would move agricultural commodity prices during 2017, predicted Rabobank, with the euro likely to depreciate as a result of French, Dutch and German elections.

“The potential impact of such currency fluctuations can be seen in the UK where the decline in the value of the pound since the Brexit vote in June has pushed up the price of food imports by as much as 16% while boosting agricultural exports,” ​claimed Rabobank.

The organisation was cautious on the outlook of the US, warning that president-elect Donald Trump’s protectionist economic policies suggested in his campaign could have “wide-reaching effects on ​American imports and exports of commodities if trade agreements are revised”.​

More information about the Rabobank report is available here.​