Spend Matters welcomes this guest post by Abigail Green of Mintec.
When we welcomed 2014 with celebratory fireworks a year ago, very few could have seen what a challenging yet fruitful year it would turn out to be in the global agricultural markets.
From record production of corn and soybeans to a supply bounce-back in the dairy markets, production has been excellent, with the FAO food index declining since March and crude oil falling off a cliff. The year has not been without its challenges, too. The ban by Russia on food imports from the US, Europe and others, to the outbreak of the Ebola virus, 2014 has presented many hurdles to the global agricultural markets.
In the grains market, corn production in the US, the world’s largest producer, reached record levels for a second consecutive year due to great weather conditions and improved yields. Excellent production was seen for other grains as well, causing global grain price falls. Durum wheat was the exception to this as a fall in the supply and quality of the crop in North America caused sharp price rises.
Vegetable oil prices fell over the past 12 months, as the soybean and rapeseed crops reached record levels. Excellent global production of other oilseeds also encouraged price falls across the vegetable oils market. It’s not all good news though, as olive oil prices have risen following lower production in some major producing countries due to dry conditions.
The global dairy market has recorded some of the largest price falls in 2014. Milk supply rose 3% after higher output from all 3 major producing regions: the EU, US and New Zealand. Supply also rose in these markets following the food import ban by Russia. This was good news for the dairy industry after the disastrous year in 2013 when drought plagued main dairy exporter New Zealand.
Arabica coffee prices rose following a drought in Brazil and the spread of a fungus in Central America that caused the output to drop considerably. Subsequently, demand for Robusta coffee increased. Cocoa bean prices rose throughout the year as demand continued to outpace supply. The situation worsened with the outbreak of Ebola, as efforts to contain the virus resulted in disruptions of bean shipments. Global sugar prices continued to fall due to excellent supplies.
In the non-food markets, the price of crude oil has dropped since August, and prices are currently at their lowest in 5 years. Output is expected to be up 2% on last year driven by higher OPEC production. The decision to maintain current production levels despite lower demand has caused prices to drop further. Demand has fallen due to the global economy remaining sluggish.
The continued lack of a sustained global economic recovery has limited price rises for most industrial commodities. The falling crude oil prices have resulted in slightly lower plastic prices. In the industrial metals market, an increase in home and car sales in the US, EU and China led to aluminium, zinc and nickel prices all rising. Steel prices fell following good supplies.
Overall, 2014 has been a favorable year for fundamentals with production rising in most major agricultural markets.
From all us here at Mintec, we wish you are very happy and prosperous 2015.