Record-high stock levels are set to keep worldwide food prices low during 2017 even as inflation starts to rise in many developed economies, according to a major report from Rabobank, the leading global food and agribusiness bank.
- High global stock levels expected to keep food prices low with ‘wildcard’ China potentially selling from huge reserves
- Trump presidency brings currency uncertainty which will translate into volatile food prices, while elections in Europe add further unpredictability
- Changing global demographics continue to underpin demand for meat, dairy and animal feed
Staple food commodities like wheat, corn and soybeans – a key part of livestock diets across the world – are being stored in record volumes, weighing on the prices which are expected to be paid to farmers next year.
In the Rabobank Global Outlook 2017 report, which looks at the prospects for 13 crucial food and agricultural commodities, Rabobank highlights the role of China in creating further uncertainty in the market. The world’s most populous country has huge stocks of many key commodities, with estimates suggesting it holds 60% of global cotton supplies, over half of corn, 40% of wheat and 21% of soybeans.
If China decides to begin selling some of these reserves, this could depress global prices for commodities including cotton, sugar, corn, soybeans and vegetable oil, according to Rabobank.
It expects US inflation to increase to around 2% during 2017, while prices are also expected to rise in the UK and, to a lower extent, the Eurozone. Even these small increases may be enough to attract attention later in 2017 to commodity index funds, which offer a hedge against inflation while agricultural prices remain low.