Agriculture commodity prices seen taking a beating this year, mild recovery seen in 2017

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Most agriculture commodity prices are expected to fall this year, the World Bank said in its latest quarterly report, painting a grim picture of the global commodities sector.

“Specifically,grains are expected to decline 3.4 percent, and oils and meals 2.2 percent, while raw material and beverage prices will decline by 1 percent. Prices are expected to recover marginally in 2017, but even that mild recovery is subject to numerous downside risks,” the report warned.

It said agricultural prices continued their broad-based declines, with the overall index down 2.3 percent for the fourth quarter of 2015 and 12 percent lower than a year ago. The two key sub-indices both declined: grains fell 2.5 percent, and oils and meals 4.1 percent.

“The price declines were driven by favourable supply conditions (despite a strong El Niño episode currently under way), with a number of food commodities such as wheat and edible oils expected to reach record production levels,” the report said.

Other factors, including a strong U.S. dollar, low energy prices, high stock levels (in turn a reflection of good crop yields during the past two seasons), and weak growth of biofuel production have also contributed to the softness of prices, it added.

The report said the World Bank’s Food Commodity Price Index is expected to decline 1.7 percent in 2016 before rebounding 2 percent the year after.

“This assessment is subject to a number of short- and long-term risks. The most important center on the evolution of energy prices (especially the likelihood of remaining low for an extended period of time); weather patterns (given the ongoing El Niño and, possibly La Niña episodes); trade policies (especially the reversal from export restrictions to domestic support); and biofuel consumption (in view of lower energy prices),” it said.

 

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