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Rabobank Research Report Highlights Factors Influencing Food Prices


A recent report prepared by Carlos Mera, Head of Agri-Commodities and Andrew Rollins a commodity analyst with Rabobank outlined four factors driving an increase in commodity prices.  These include:-


  • U.S. dollar weakness with the currency remaining “soft” through 2021 although a marked deterioration is not expected.


  • La Nina could extend into the spring planting season in the U.S. affecting yields and hence ending stocks


  • High global demand for animal feed will extend through 2021


  • A considerable level of speculation is anticipated that will support prices through 2021. The report noted the lingering effect of La Nina producing drier weather in southern Brazil and Argentina affecting yields of soybeans, corn, sugar cane and coffee.


Rabobank noted disruptions in ports with specific reference to COVID that necessitated holding higher levels of stock as feed manufacturers move from just-in-time to just-in-case.  In the early phases of COVID during 2020, border delays were noted in Europe although these have largely been resolved. The advent of Brexit and then the emergence of the BR.1.1.7 COVID variant also disrupted transport between the U.K. and the EU.  A shortage of shipping containers on the West Coast of the U.S. has impacted exports of some agricultural commodities.


Fluctuation in shipping costs and availability of vessels influences orders and export volume of commodities. The Baltic Dry Index was at 1,584 on December 8th, 2020 with a rise to 1,811 in mid-January but on March 10th stood at 2,022.  The Baltic Index takes into account 23 different shipping routes and includes three categories of cargos: Cape size (150,000 tons iron, oil or coal), Panamax (60,000 to 70,000 tons of grain) and Supramax,  (48,000 and 60,000 tons of bulk cargo.)


Rabobank predict that speculation in agriculture commodities will continue, fueled by low interest rates, fiscal stimulus packages and high demand.  Investment in agricultural-related exchanged traded funds resulted in an 18 percent increase in investment in this category amounting to $430 million in 2020.