Infotech

Why the prices of agricultural products are soaring



Posted on Feb 22, 2019 2021 at 9:47Updated Feb 22, 2019 2021 at 14:33

Notice of tensions over agricultural products. On Chicago futures markets, corn hit $ 5.62 per bushel in February, its highest level since 2013, soybeans are trading at $ 14.36 per bushel, unheard of since 2014. In Paris , the tonne of milling wheat costs 238.5 euros. We have to go back to 2012 to find such prices. Palm oil, a vegetable fat widely consumed in Asia, has never been so expensive in ten years, sugar has climbed to 17.8 cents per pound and Thai rice costs 550 dollars per tonne, almost to the highest since 2013.

This trend in the markets has a direct impact on the budgets of consumers who see the supermarket bill getting higher. Food prices are at their highest since July 2014, according to the index of the United Nations Food and Agriculture Organization (FAO). The organization’s gauge stood at 113.3 points in January, an increase “ due to the sharp increase in the sugar, cereals and vegetable oils sub-indices », Specifies the organization.

Anti-inflation measures

The phenomenon is such that in some countries, the authorities are taking measures to curb the inflation of food. In the United Arab Emirates, which imports 90% of their food, the government, for example, plans to cap the prices of certain foodstuffs. To calm the surge in the price of bread, Russia has introduced export taxes to encourage producers to sell their stocks on the domestic market rather than selling their goods abroad. But this decision has the perverse effect of reinforcing the rise in prices on international markets.

This rise in prices is also partly explained by a tightening of global supply, linked to fears of drought in Brazil and Argentina with the La Niña phenomenon, a cooling of the waters of the central Pacific which disrupts the climate across the planet. . For palm oil, it was the torrential rains in Malaysia and Indonesia that hampered work on the plantations and therefore the harvest. In addition, a shortage of manpower in Malaysia – 80% of the workers are foreigners – weighs on the national production. Certain more fragile foodstuffs which are transported in containers, such as sugar or rice, are victims of the shortage of these metal boxes.

Shortage of containers

But the main reason for this tension in agricultural markets is China’s appetite. Beijing has indeed imported record volumes of grains during this campaign: more than 100 million tonnes of soybeans and 20 million tonnes of corn according to the latest Chinese forecasts. By way of comparison, in the previous season, it had bought 7.6 million tonnes of maize. This demand for grains aims to feed the rebuilding pig herd after being ravaged by African swine fever in 2019 and 2020. With these imports, Beijing is also trying to honor its commitments to purchase American agricultural products as part of the the Phase 1 trade war agreement signed just before the Covid-19 pandemic broke out.

A sustainable importing China

Is this trend sustainable? Dan Basse, president of AgResource, is convinced of this. “ We are in a bull market that will last for several years, and which is comparable to the 1970s », He declared during the Paris Grain Day organized at the end of January by Agritel. According to the economist, China will continue to buy massive amounts of agricultural products for several more months. Rosa Wang, from China JCI firm, goes in the same direction. Although Beijing is emphasizing food security by cutting waste and improving yields and soil quality, it will be a few years before these measures bear fruit. The marketing of new GMOs from corn and soybeans will only take place in two to three years. In the meantime, China will continue to import. The world’s largest agricultural commodities trader, the American Cargill, agrees. Its managing director Dave MacLennan explained to Bloomberg that China was still going to buy abroad massively “ for several quarters “.

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