Weather event among threats to global food price stability in 2018
Staff Writer |
Weather phenomena, trade headwinds and currency fluctuations could disrupt the global food price environment during 2018, according to research from Rabobank.
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There is currently as much as a 75% chance of La Niña conditions strengthening and lasting the northern hemisphere winter, according to the U.S. National Oceanic and Atmospheric Administration (NOAA).
The phenomenon could bring extreme heat and dryness to grain areas in the Americas and flooding to Asia’s palm oil plantations.
In its annual Outlook report, Good Buy, Low Prices, which analyses prospects for 13 agricultural commodities, Rabobank says that while global stocks are historically well-supplied, balance sheets are tightening, exacerbating the potential impact of shocks.
Alongside weather, other factors pose a risk to the stability of global food prices, according to Rabobank.
Trade is set to continue to play a key role in price volatility. Global freight costs – in the form of the Baltic Dry Index – and oil prices are both rising and there remains uncertainty over US policy towards NAFTA and the UK’s future trading relationship with the EU and other nations.
In currencies, the prospect of further interest rate increases in the US raises the chances of the dollar appreciating, making American exports of key commodities such as wheat and soybeans less competitive.
Among individual commodities, Rabobank expects global demand for coffee to continue to grow, leading to a slightly bullish view on 2018 prices despite a potential 3m-bag surplus in 2018/19. Demand for cocoa also continues to rise, driven by developing nations’ taste for luxury commodities, though large global stocks mean price spikes are unlikely.
The outlook for wheat is bullish relative to today’s prices due to an expected 7.5m-tonne global deficit (excluding China), driving a trend towards rebalancing after record-low planted acres in the US this year. ■
Residents in coastal North Carolina and Virginia braced for potential flooding after Tropical Storm Ophelia made landfall near a North Carolina barrier island on Saturday morning, bringing rain, damaging winds and dangerous surges of water.