The price of agricultural commodities traded on the global stage has shot up by 50 per cent since the middle of 2020, according to economists at Rabobank.

Key points:

  • Agri-commodity prices have risen 50 per cent since mid-2020
  • Global food prices have hit a six-year high
  • Rising import demand and limits on supply have sparked the price rises

In a new report, the bank pins the lift in the price of wheat, corn, soy, sugar, and a range of other commodities on the northern La Niña, a weakening US currency, market speculators, and rising demand from importing nations.

Its findings are echoed by the United Nations’ Food and Agriculture Organisation’s (FAO) Food Price Index which tracks monthly price changes for a basket of common staple foods.

The FAO revealed its January 2021 index of cereals, vegetable oils, sugar, dairy, and meat had risen to its highest level since 2015.

Rabobank senior commodity analyst Charles Clack said the higher prices will be around for some time to come.

“We don’t expect the US dollar to strengthen any time soon [and] we expect La Niña will continue to cause drier conditions in the northern hemisphere while global demand will stay strong,” he said.

Australian grain farmers harvested a bumper crop last summer and will reap the benefit of having a large crop to sell while prices are high.

“This is very positive for growers and rural communities,” Mr Clack said.

Analysis by Australian government commodity forecaster ABARES found local food prices had risen marginally in 2020, led mainly by red meat.

It warned there could be farmgate price rises for fruits and vegetables because of lower production this year.

Demand rising

The cost of getting agricultural exports onto ships is rising, as competition for them ramps up.

Port Kembla Grain Terminal at night.(

Supplied: GrainCorp


Import demand is rising as countries seek to build up their domestic stocks of commodities like wheat, corn, and soybeans.

Highest among them is China with its economy rebounding, spurring a high demand for grains used in animal feed.

Rabobank expects the demand to continue for “years to come”.

Coupled with the rising demand is the effort by major exporters to hold stocks back, such as Russia which introduced export taxes on wheat while Argentina placed quotas on corn exports.

Large, publicly-listed food companies are also increasing the amount of stock they hold in warehouses to avoid COVID-19 disruptions.

It is a shift from just-in-time to just-in-case inventory management, according to the report, and Rabobank estimated it caused a two per cent lift in global demand.

Food pressure

In 2007 and early 2008, sharp increases in food prices led to riots and civil unrest in around 37 countries across eastern Europe, South America, the Middle East, Africa, and both south and South-East Asia.

Women's hands sorting through green beans

Sharp rises in staple foods hurt those in the world’s poorest nations the most.(

ABC Rural: Brett Worthington


While the current upward trend in the cost of food is concerning to many, the scale has not yet reached that of the food crisis 13 years ago.

Mr Clack said in both instances of food price inflation, market speculators played a role.

“While more fundamental things like weather and demand are the trigger for prices rising, it’s without doubt speculation by non-commercial players in the market that exaggerate the move.

Currently, low interest rates are drawing money away from government bonds and into commodity markets as they search for higher returns.

“We are seeing particularly index traders who tend to be more passive and long term, like pension funds, are very interested in agri-commodities,” Mr Clack said.

“They’re not necessarily going to move out of these markets as quickly as traditional speculators would.”

Global food prices the highest in six years as countries compete to replenish stockpiles
Source 1


Please enter your comment!
Please enter your name here