Farmers can expect higher prices for most products during 2008/09 but will have to guard against high volatility.
According to a recent United Nations Food and Agriculture Organization (FAO) report, agricultural commodity prices increased by 9% during 2006. Since then they’ve increased even faster. By September 2007, prices were already 37% higher than a year before. D airy prices increased the most, followed by cereal and oilseed prices. Meat prices increased at a slower rate, and since January the US wheat price has doubled. Historically, high-price periods are shorter than low-price periods in agriculture. current high-price period differs from previous periods in that it affects the prices of nearly all food products.
The higher grain prices resulted in higher prices for basic foods such as bread, pasta, meat and milk. Given the very high food prices there is worldwide concern and debate about food inflation and food security. Production shortfalls in Australia limited the total wheat supply and resulted in price increases of 50% to 80% on a year-on-year basis to September 2007. Maize prices increased from mid-2006 to February 2007, but have since then decreased slightly. However, by September 2007 maize still traded at 30% above the previous year’s values. The sharp increase in global maize prices was caused by the increase in demand for biofuel production. Higher plantings in the US subsequently decreased global prices.
The higher demand for grains also affected oilseed prices, which increased on average by 40% year-on-year. S ince then oilseed markets have experienced further price buoyancy, caused by lower acreage under oilseeds as maize planting increases, higher demand for biodiesel and feed use of oilseeds. airy product prices increased by between 80% and 200% compared to the previous year, mainly because of higher animal feed costs and lower stock levels, especially in the EU, lower production in Australia and the sharp growth in demand from developing markets.
Meat prices also increased on the back of higher feed prices. However these did not increase at the same rate as other commodity prices. Outlook for 2008 he US
Department of Agriculture (USDA) expects a record increase in US grain and feed exports to US,7 billion (R263,2 billion), mainly due to higher product prices as a result of lower supply and higher demand.
Higher soya bean prices will also result in increased oilseed export values. Exports of livestock, poultry and dairy products are forecast at a record US billion (R144,9 billion) in 2008, US,7 billion (R13,7 billion) higher than during 2007. The Food and Agricultural Policy Research Institute (FAPRI) expects maize prices to remain robust until 2010, but they may level off thereafter. Oilseed prices will do likewise, with some easing after 2012. Higher maize prices have a positive effect on wheat prices, which are expected to move sideways during the next decade.
Livestock product prices are influenced both by the higher grain prices and increased demand for protein foods in emerging markets. FAPRI expects constant or higher prices for beef, poultry and dairy products. For South African grain and livestock farmers the outlook remains positive. Grain prices are determined by local supply and demand factors as well as import and export parity prices. he current (February 2008) import and export parity for some livestock products are shown in Table 1, which is based on a R/US$ exchange rate of R7,67/US$. Any further weakening of the rand will result in higher prices. Price volatility E ven if we produce more maize than we need this year, chances are that
