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Agricultural commodities are at the start of a “mini-supercycle” and prices are expected to rise for several years due to demand from China and biofuels, according to some of the world’s leading operators.
Executives at Cargill, Cofco, Viterra and Scoular said this week that the corn, soybean and wheat markets will remain strong for the next two to four years.
Prices have fallen from their multi-year highs in recent weeks as the US dollar has risen and rain is expected in the US Midwest, but future corn prices are double compared to a year ago , at $ 3.29 per bushel, soybeans at $ 14.31 is 65 percent more, and wheat is nearly a third higher, at $ 6.54.
“We’re definitely seeing a mini supercycle,” said David Mattiske, chief executive of Viterra, Glencore’s majority-owned. FT Commodities Global Summit. “We are in a demand-based environment with the issues of growing population, growing wealth and people consuming more. And on top of that, we have an increased demand for vegetable fuel. “
Sustained higher prices will be a fortune for farmers who have felt the financial strain of several years of stagnant crop prices. However, that will mean higher food costs for importers of cereals and oilseeds, especially the poorest countries struggling with the economic effects of the pandemic, as well as rising food prices.
Cereal and soybean markets gained momentum in the second half of last year after governments and companies he hurried to store during the pandemic. China, which had a poor corn crop, produced big purchases, last year it imported a record 11.3 million tonnes, with more than a third of the total coming from the US.
According to Alex Sanfeliu, head of Cargill’s world trade unit, the two major harvests a year for corn and soybeans (one in the United States and the other in Brazil) mean that cereal and oil supercycles they tend to be shorter than other crops, but predicted a bullish market over the next two to four years. “The features of the super cycle are there,” he said.
China’s large imports of corn last year, which were previously aimed at self-sufficiency, surprised traders and analysts and sparked a debate over whether it would be “repopulated” after the crash. pandemic or whether purchases would continue.
Several executives believe the gap will remain, boosting the growing power to continue major corn. Marcelo Martins, head of cereals and oilseeds at Cofco International, the trading arm of the Chinese state-owned conglomerate, said there was an imbalance in supply due to a poor harvest. “[The supply deficit] it’s here to stay, ”he said.
Meanwhile, demand for biofuels, which boosted soybean and soybean oil prices, is “unprecedented,” according to Paul Maas, chief executive of U.S. agricultural trader Scoular. As governments push for a reduction in the use of fossil fuels, many increase the amount of biofuels mixed with gasoline. “The increase in demand is real and we are at the forefront of seeing how all this works,” Maas said.
Despite the excitement, Gary McGuigan, world trade chief of Archer Daniels Midland, added a note of caution. “We’ve seen a price correction over the last few weeks or so,” he said, adding that while demand dynamics were “definitely changing,” it was too early to call for a mini supercycle.
One of the great uncertainties was China. “Of all the areas of the world in high demand, China is the most opaque and the most difficult to predict,” he said.
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