'COMMODITY PRICES MAYTAKE
SEVERAL YEARS TO NORMALISE'
Francesca Kleemans, Head of Research
Nidera Handelscompagnie ÉV
SECTOR SPECIAL THE FOOD CHAIN
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Nidera Handelscompagnie BV, located
in Rotterdam, is the international trading
and shipping group of Nidera, with offices in
the US, Europe and Asia. The group trades
grains, oilseeds, vegetable oils, oilseed
meals, bio-energy and ocean freight.
Cycles
Francesca Kleemans, Head of Research Nidera Handels
compagnie BV explains: "With current spiralling prices
and high volatility we see that market participants
increasingly need to manage counterparty risk and want to
deal with well-respected counterparties more than ever."
"A key tooi Nidera leverages to manage the challenges
of present business environments, is its best-in-class
Risk Management systems. In keeping with its corporate
tradition and values, Nidera continues to strengthen
the Risk Management function at all levels."
The current volatile commodities market has positive,
as well as more negative sides to it. Positives can be
regarded as the world-wide attention for agriculture;
increased ability of farmers to make investments in
machinery and technology, which are required to set
proper bases for the long-term ability of agriculture to
meet food, feed and energy demands. Government
interventions could turn out to be negative, as they tend
to limit free trade, and badly-engineered government
actions may harm farmers' incentives to invest."
"When taking a future outlook on the commodities
market, I think a well-known phrase is applicable: 'the
cure for high prices is high prices'.
"Agricultural commodity prices go through cycles that
tend to span multi-year time-horizons (historically 10-30
years). The current cycle is fuelled by global demand
growth, especially from the Asian markets; demand-
led cycles tend to take a longer time to 'normalise'. High
prices today set the basis for agricultural investments,
which drive the expansion of production and enable
agriculture to meet growing food, feed and energy
demands for tomorrow."
"In this context, we believe that commodity prices may
take several years to normalise and the fundamentais
may not go back to the comfortable levels that we have
been accustomed to seeing as 'normal' in previous years."
'This opinion also takes into consideration that there is
now a link between agricultural and energy commodities
(bio-energy)."
"Lastly, agricultural commodities have increasingly
become a main-stream asset class, which means that
their prices are co-determined by the influx of invest-
ment money and are, therefore, linked to the price
trends of other asset classes."
18 issue 16; THE WORD
