Rabobank has confirmed the price surge is unlikely to calm down as 2021 continues to unfold, due to four main factors: the US dollar, weather, global demand and speculation.
Rabobank expects the US dollar to remain soft throughout 2021 — largely caused by investors turning their interest abroad after the country's poor handling of the pandemic.
Weather is another big factor, with the Americas and Russia suffering poor seasonal conditions.
Global demand is another factor which is also partly affected by COVID-19 uncertainty.
Rabobank said the balance sheets of large public food companies revealed many were operating with higher than normal stocks because of threats to their supply chains.
“Even though we may not see 40 km of trucks waiting at EU borders again, like in March 2020, there have been recent delays in several ports,” the Rabobank report said.
“Moreover, there has been an astronomical increase in container shipping costs, particularly from South-East Asia, with prices more than doubling since November as Chinese exports run high.”
China’s efforts to rebuild its pig herd after an African swine flu outbreak is another factor driving a surge in global demand.
This high Chinese demand for feed grains is expected to continue for years to come.
Speculation is the last factor, and it is being driven by extremely low interest rates, inflation concerns and momentum trading.
“The use of agri commodities by speculators as a hedge against inflation is evident,” the report said.
“Although the speculative appetite for agri commodities may seem exaggerated, it is hard to see it going down too much.”
The report was put together by Rabobank's head of agri commodities market research Carlos Mera and commodity analyst Andrew Rawlings.
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