SOFT COMMODITY PRICES TRIPLE
PRICES COULD RETURN TO A MORE
STANDARD LEVEL IN 2 OR 3 YEARS' TIME
The European wheat price has tripled from 110 euro per ton to a record level of 290 euro per ton in the
short space of just one year. The Food Agribusiness Research and Advisory operations of Rabobank
International intuitively feel this is quite possibly a temporary affair - prices are currently easing and could
return to more Standard levels within the next 2-3 years.
10 ISSUE 15 JANUARY 2008 THE WORD
TEXT Guus Peters PHOTOGRAPHY Getty Images
This is the firm view of Dirk Jan Kennes (Director Commodities Feed
Food Ingredients) and Paul Braks (Senior Commodities Associate)
of Rabobank International. According to Braks, there has recently
been a surge of interest in soft commodities*, which he explains is
"particularly due to the arrival of bio fuels, a increasing demand for
food, and rising incomes and population. However, adverse weather
and low stocks have also played their part. Some of our clients
- particularly growers and traders - feel this is actually a good thing;
while other clients such as processors face the challenge of high and
volatile input costs".
Sugarcase study
Grains and oilseeds are two extremely important world commodities,
and prices are exploding. It has already led to a boycott of pasta in Italy
and to a tortilla crisis in Mexico. According to Dirkjan Kennes, a recent
case study by Andy Duff (FAR's sugar specialist in Rabobank Brazil)
examined whether there were any similarities between the current
surge in grain and oilseed prices and the sharp increase in sugar prices
in late 2005 and early 2006. In early 2006, prices were the highest they
had been in 25 years but they reverted to long-term average levels less
than a year later. The analysis revealed that one of the key differences