Agri commodity markets impacted by unprecedented incidents and severe conditions in 2019: RaboBank


IAC Photo by Parivartan Sharma

In 2019, agri commodity markets were impacted by several unprecedented incidents and uncommonly severe conditions, says RaboBank’s 12 month outlook report. As macro, political, and climate risks continue to make their mark on agri commodity markets in 2020, producers, processors, traders, and retailers need to prepare, the report warns.

China’s hog herd declined significantly, as a result of African swine fever (ASF). This drastically weakened demand for feed and, combined with the US-China trade war, resulted in a significant slowdown in the global soybean trade.

ASF culled about 55% of China’s hog herd, creating a global pork and animal protein deficit and slowing global feed consumption growth. In 2020, China’s feed consumption is expected to rebound slightly, amid a concerted move toward large industrial farms, commercial feed rations, slowing herd losses, and growth in other animal proteins. The increase in less feed-intensive pork replacements (like poultry and aquaculture), however, will restrain feed use.

Meanwhile, record US corn- and soybean-planting delays drove corn prices from three-year lows to six-year highs within a few weeks. Then, improved weather, strong export competition, and lacklustre global demand saw prices collapse again. These circumstances will continue to challenge markets and impact global supplies and prices in 2020.

Meanwhile, global feed growth outside of China will remain steady in 2020. Importantly, a replenished wheat and barley crop in Europe, along with more competitive corn prices, will result in large-scale switching in feed distribution.

A ‘phase one’ US-China trade deal appears to be in play, though a comprehensive deal looks unlikely. Under these auspices, China will buy increasing quantities of US agricultural products in the hope that the US will delay introducing new tariffs and possibly lower existing ones. In this context, emerging markets may see some short-term respite.

However, Rabobank foresees a significant risk of a mild US recession in second half of 2020, in which case emerging markets are unlikely to perform well. We remain sceptical that a US-China trade truce will prove to be sustainable. When trade tensions resurface, risk aversion will increase, leading to depreciation across emerging-market currencies.

“In Brazil, we see decent GDP growth and a forecast for an appreciating Brazilian real,” the report predicts.

On the Asian side, a deceleration of the Chinese economy may result in a further depreciation of the renminbi, which would lead to the depreciation of Southeast Asian currencies.

Unusual weather events across the globe resulted in significant price volatility in 2019. The US experienced the wettest spring planting season on record, resulting in harvest delays and challenges in planting crops. European crops were impacted by short, intense heatwaves. Good rainfall in western Europe allowed for plantings of winter crops, yet parts of southern and eastern Europe still lack rainfall.

The Indian Ocean Dipole Index (IOD) reached record levels around September/October, causing the wettest September in India in 100 years and exacerbating the drought in Australia and Indonesia. The IOD will likely remain the primary climate driver for Australia and Indonesia until the end of Q1 2020. We see a small rainfall deficit developing in Brazil.

However, there is time for recovery, RaboBank infers.

Shekhar Ghosh is consulting editor, He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at

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