FOOD INDUSTRY: STILL SOLID BUT PRICE VOLATILITY WILL BEAR WATCHING
After their surge in 2007/2008, prices for farm raw materials began to soar again in June 2010, affecting foodstuff prices worldwide with particularly sharp increases in emerging countries. No other asset class registered jumps in prices as spectacular as those recorded by some farm raw materials with grain prices skyrocketing 36% year-on-year through August. Sugar prices also soared, up 50%. Prices for meat (beef, mutton, chicken) and dairy products rose over 15%. The price increase for rice was more modest with that commodity not traded on the futures market and only a small fraction of its production traded internationally.
Since March this year the pressure on grain prices seems to have eased substantially thanks to a 3.5% increase in the harvest production in 2011/212 compared to 2010/2011 (FAO projections). The level has nonetheless remained high with no significant replenishment of stocks materializing thus far.
The pattern for corn has been almost identical: With stocks running particularly low, Chicago market prices skyrocketed, up a stunning 77% year-on-year through August. Soybean stocks, meanwhile, have conformed to expectations, a performance expected to limit any rise in prices for that commodity. Cocoa prices have eased back to the levels prevailing before the Côte d’Ivoire crisis for two reasons: The large volumes of cocoa flowing back into the market, enabled by the resolution of the crisis and the shift of private equity funds away from net buy positions.