Agricultural commodity prices will stabilize slightly above current levels, according to the World Bank. The organization makes that prediction in the Commodity Markets Outlook published yesterday (Tuesday 20 April). But there is not only good news for arable farming, because production costs have also risen sharply.
Prices of agricultural goods have risen substantially this year. This increase will continue for a while, according to the World Bank. The average grain price for 2021 is forecast to be 14% higher than in 2020. According to the World Bank, the causes of this are problems with the harvest in South America and high demand from China. Global food supplies are generally sufficient and at historically high levels.
Good harvest predicted
Grain production is heading for a record year according to the World Bank. Wheat is in good shape in Canada, the EU and Ukraine. Droughts in Russia, Turkey and the US have too little impact to adjust that assumption downwards. At 776 million tons, the predicted harvest is 1,7% larger than last season. Wheat consumption is increasing faster than production by 4,4%. It is therefore assumed that the closing stock of wheat will decrease by 2% at the end of this season.
Not only is the grain price rising, the costs of arable farming will also increase significantly this year, according to the World Bank. Energy costs are increasing by 36% compared to 2020. The energy price is often closely related to the prices for crop protection products and fertilizers. The World Bank does not make a prediction for the costs of crop protection, but according to the organization, fertilizer will become 27% more expensive compared to 2020. A greater increase in oil and fertilizer prices than anticipated in this report could well lead to higher food prices. warns the World Bank.
Corona continues to dominate the market
The World Bank is cautious and says in the report that much depends on the control of the coronavirus and the economic support measures of governments in the developed economies. "Although there is sufficient food in stock worldwide, corona has a major impact on local labor and food markets," said Ayhan Kose of the World Bank in a written explanation of the report. “Incomes have fallen and supply chains have been disrupted by the pandemic. In areas where there were already food security problems, this has been exacerbated by corona.”