Posted on 06/21/2021 7:50:31 AM PDT by blam
Before the plunge in commodities late in the week, top executives from Cargill, Cofco, Viterra, and Scoular said this week at the FT Commodities Global Summit that a “mini-supercycle” in agricultural commodities could be on the horizon, boosted by China demand and increasing use for biofuels.
These execs forecasted corn, soybeans, and wheat markets will remain robust over the next two to four years.
“We certainly see a mini supercycle,” said David Mattiske, chief executive of Viterra, majority-owned by Glencore, told the FT Commodities Global Summit.
“We’re in a demand-driven environment with the themes of a growing population, growing wealth, people consuming more. And added into that we’ve got increased demand for plant-based fuel,” Mattiske said.
Taking a look at the S&P GSCI Agriculture Index, a sub-index of the S&P GSCI which provides a broad basket of wheat, corn, soybeans, coffee, sugar, cocoa, and cotton, has been on an absolute tear since the virus pandemic began, up currently 56.6% but down 15% from an eight-year high.
Higher commodity prices are great news for farmers who can boost incomes and reinvest into operations. Many farmers have seen their net incomes deteriorate over the last decade. But rising agriculture prices mean higher food inflation will hit low-income countries the hardest first, then ripple across the world.
Back in December, SocGen’s resident market skeptic Albert Edwards shared with the world why he is starting to panic about soaring food prices. And since that was before food prices really erupted amid broken supply chains, trillions in fiscal stimulus, and exploding commodity costs, we can only imagine the sheer terror he must feel today. He has noted social instabilities have begun around soaring food inflation.
According to the latest United Nations index of world food costs, it climbed for a 12th straight month in May, its longest stretch in a decade, rising to the highest in nearly a decade, heightening concerns over bulging grocery bills.
Alex Sanfeliu, head of Cargill’s world trading unit, said the bumper harvests for corn and soybeans in the US and Brazil means that supercycles in grains and oilseeds will be shorter in the past. Though he predicted an upward swing in ag prices could be sustained for two to four years. “The characteristics of the supercycle are there,” he added.
Last year, China imported a record amount of soybeans and grains from the US as it rebuilt its swine population. The US was among the largest beneficiary of the buying. China is expected to continue purchasing US farm goods this year as it needs to “restock” after the pandemic shock.
Marcelo Martins, head of grains and oilseeds at Cofco International, the trading arm of the Chinese state conglomerate, said supply imbalances around the world would persist due to some areas that sustained poor harvest. But, he warned, “[The supply deficit] is here to stay.”
As we’ve previously noted, parts of South America and the Western half of the US are in a drought, affecting future harvest yields. Especially in the US, a megadrought is crushing farmers as reservoirs dry up, with many unable to water their crops.
Meanwhile, the Biden administration set the 2030 greenhouse gas pollution target aimed at increasing biofuels – this means the agricultural product is being diverted for fuel rather than food, driving up prices.
Paul Maas, chief executive of US agricultural trader Scoular, said biofuels drive “unprecedented” demand for soyabean and soya oil prices. As countries reduce their carbon footprint, many turn to the food supply for answers to reduce fossil fuel usage by mixing biofuels into petrol blends.
“The increased demand is real and we’re on the front end of seeing how that all plays out,” said Maas.
While there are several factors top execs point to for higher future ag prices, prices have fallen in the last couple of months and may continue to correct.
Gary McGuigan, head of global trade at Archer Daniels Midland, added some caution to the mini supercycle, indicating significant uncertainties around China’s 2021 demand.
Perhaps this is more evidence that the Fed’s illusionary narrative of “transitory” inflation is tearing apart at the seams as food prices are likely to remain elevated for some time due to the various demand dynamics mentioned above.
I remember wanting one of those for Christmas back in the 70s.
I’m in grocery stores a lot. Food prices are rising sharply. And in many cases the quantities are shrinking.
Food shopping at Target and Walmart help to keep the bills down. I only go to the higher end stores when I need very specific items.
You don’t get much for a hundred dollars anymore. I wonder what the average cost of food for a family of four is compared to two years ago pre-pandemic? This is all because of forcing worldwide closures and destroying thousands of “non essential” workers and businesses?
I am NOT going to start stocking up on tofu, come what may.
“And added into that we’ve got increased demand for plant-based fuel,”
Should be a criminal offense.
As for food inflation, get used to it.
And develop a mitigating strategy.
Few have the land to be self sufficient, but everyone can take mitigating steps.
The first, and easiest, is to eliminated prepared foods from your diet entirely and eat nothing but whole foods.
Then it scales from growing your own sprouts on the kitchen counter, up to a half section of land with gardens, orchards coops and small herds.
I have Asian neighbors who used EVERY square foot of their 8,500 sq ft lot (excepting the house) to grow fruit and vegetables. Enough for the full year with drying canning and freezing.
They think native Americans are stupid for letting all their dirt go to waste.
And they are right.
I've pondered that, too, especially with the younger folks' preference for the prepared type of food, which is just astonishingly expensive. But there always seems to be a pizza war, so I guess that becomes their staple. I don't see anyone willing to wean the population used to food stamps any time soon.
Food stamps are part of the problem.
Any and everything that is subsidized goes up in price rapidly.
True. Until they can see the benefits to getting off the government dole, they’ll remain on the plantation?
I always wanted a super minicycle.
Any and everything that is subsidized goes up in price rapidly.
No question about it. But this latest rise is on top of that already loaded situation. Another mess.
How can they publish a FEAR and PANIC article about food without using the words “desert” and “insecurity”?
"Itsa Italian soyabean"
I agree with you on some vegetables, but not fruit.
I will give you MY example.
I planted 2 apple trees, 2 cherry trees and 1 peach tree two years ago. The peach tree died and I replanted it last fall. The new is not looking too good right now. I am into these 5 trees for over $600 including soil, peat moss, fertilizer, etc. It will be 20 years before I recoup that in the fruit. I am 58 years old. Probably not a good investment unless I live at this house into my 70’s.
Three years ago I bought 7 mature blueberry bushes. The place selling them said they were twenty years old. I have gotten maybe three PINTS of blueberries off of them.
At my previous house I had 2 apple trees that the neighbor said were planted in 1973. I had more apples off of these two mature trees than I could ever eat. Some years I literally raked up three wheel barrows full that fell on the ground before I could pick them.
There are two issues:
1. horticultural practice (were they the right trees and were the properly cared for?
2. blueberries are notoriously screwed up. There a couples of major types (rabbit eye, northern highbush etc.) and multiple varieties within each type.
You have to plant 2 different varieties adjacent, of each type.
And you have to pick the type that grows well in your climate.
The trees were started and grown at a nursery 20 miles from my house here in NH. They were not brought in from another state. That is why I bought them there.
There were grown by a nursery where the owner went to the UNH for nursery/horticulture management. They are trees specifically for the NH climate.
My point is they take 5-10 years before they produce very much fruit. Macintosh apples are $.99/lb at the grocery store. Honeycrisp are $2.99/lb. Cheeries are $3.99/lb.
Do the math.
I have two different types of blueberry plants. Planted in rows about 8’ apart. They were growing for 20+ years on a farm about 30 miles from my house. He had 3 acres of blueberry bushes he was plowing under. I paid $20/plants that were 3’-4’ tall.
So, I am into these plants for $140 plus peat moss, fertilizer, etc.
You can buy blueberries for $3/pint at the grocery store. I need to grow 50 pints of blueberries just to break even.
I put in 2 varieties of rabbit eye (zone 9b) and get about 10 pints from each. I have to net to keep the birds out.
They cost $20 and a bag of peat moss each.
I’m surprised to hear your locally procured fruit trees died.
To make fruit trees pay, you have to preserve. Either dry or can.
The two cherry trees are doing fine. They both had fruit on this year.
The Macintosh and Honeycrisp apples do not have any fruit this year. They both did last year. The Honeycrisp is not a self pollinator. It needs the Macintosh. Apples tend to be cyclical. Some years hardly any. The next bountiful.
The two peach trees were supposed to do fine in this area. The second one has fruit on it, but has lost a lot of it leaves. I think it got some kind of blight or fungus. A lot of the leaves curled up and fell off.
All of my other plantings are doing well. We had a mild winter and a hot spring. The cherries have all come and gone already. Some of my blueberry bushes are loaded with fruit this year. The other variety have virtually none.
The flock of turkeys was eyeing them just yesterday.
“A lot of the leaves curled up and fell off.”
Anthracnose!
I’ve never seen a Sycamore without it, and it spreads throughout the neighborhood. It’s persistent and it sucks.
Eventually it gets everything, even your bush beans.
https://www.thespruce.com/how-to-treat-anthracnose-4777405
Clean horticultural practice, daconil and copper will get it under control. You have to be as persistent as it is.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.