Agricultural products are at the beginning of a “mini-supercycle” with prices projected to be boosted for several years by demand from China and for biofuels, according to some of the world’s leading traders.
Executives at Cargill, Cofco, Viterra and Scoular said this week that the wheat, soybean and grain markets will remain strong for the next two to four years.
Prices have fallen behind their multi-year highs over the past few weeks as the U.S. dollar has risen and rain is forecast for the U.S. midwest, but future grain prices have doubled compared to a year ago. make at $ 3.29 a bushel, soybeans at $ 14.31 are 65 percent higher, and grain is almost a third higher at $ 6.54.
“We certainly saw a mini supercycle,” said David Mattiske, executive director of Viterra, the majority owned by Glencore. FT Commodities Global Summit. “We are in a demand-driven environment with issues of growing population, growing wealth, and people consuming more.” And in addition to that we are growing the demand for vegetable fuel ”.
Sustained higher prices will be an advantage for farmers who have felt the financial stress of several years of stagnation in crop prices. However, it meant higher food costs for grain and oilseed importers, especially the poorest countries struggling with the economic effects of the pandemic and also rising food prices.
Cereals and soybean markets saw a big boost in the second half of last year after governments and businesses he rushed to the supply during the pandemic. China, which has had a poor grain harvest, has done so big buy, importing a record 11.3 million tons last year, with more than a third of the total coming from the United States.
According to Alex Sanfeliu, head of Cargill’s global trade unit, the two major annual harvests for wheat and soybeans – one in the United States and the other in Brazil – mean that surpluses in cereals and oilseeds tend. to be shorter than other crops, but predicted a bull market for the next two to four years. “The features of the super cycle are here,” he said.
Last year’s large grain imports from China, which had their first goal of self-sufficiency, took traders and analysts by surprise and sparked a debate over whether this was “replenishing” after the pandemic shock. or whether purchases will continue.
Many leaders believe the gap will persist, pushing the growing power to continue to import grain. Marcelo Martins, head of cereals and oilseeds at Cofco International, the trading arm of the Chinese state-owned conglomerate, said there was an imbalance on the supply side due to a poor harvest. “[The supply deficit] it’s here to stay, ”he said.
Meanwhile, demand for biofuels, which has pushed up soybean and soybean oil prices, is “unprecedented,” according to Paul Maas, chief executive of U.S. agricultural trade Scoular. While governments are pushing for a reduction in the use of fossil fuels, many are increasing the amount of biofuels blended into gasoline. “The growth in demand is real and we are in the first place to see how everything goes,” Maas said.
Despite the enthusiasm, Gary McGuigan, head of world trade at Archer Daniels Midland, added a note of caution. “We’ve seen a slight correction in recent weeks,” he said, adding that while demand dynamics were “definitely changing,” it was too early to call it a mini supercycle.
One of the great uncertainties was in China. “Of all the major driven questions in the world, China is the most opaque and the most difficult to predict,” he said.