MERCHANDISER
GLOBAL AGRICULTURAL COMMODITY prices are booming. Prices, as The beverages price index will rise by 10% this
indicated by the Economist Intelligence Unit’s (EIU) food, feedstuffs and year but fall by almost as much in 2008.
beverages (FFB) index, are on course to rise by 16% this year, repeating the Uncertainty over Brazil’s coffee crop prospects,
strong performance of 2006. Surging demand for food, feed and fuels are prompting speculative buying and hoarding by
combining with low stock levels to create extremely tight markets. farmers, and a poor cocoa crop (coupled with
Additionally, unfavourable weather conditions, combined with competition political instability in Côte d’Ivoire), has support-
ed prices. But producers are now responding to
Oilseeds & Grains
the attractive prices (now in their fifth year of con-
secutive increase) and by 2008 production of
Set for Further Gains
both markets, together with tea, will overtake con-
sumption. The resulting growing surplus will see
for acreage, imply that it will take some time still before supply manages to prices ease over 2008-09.
catch up with demand. The FFB index will thus rise by a further 2% a year Sugar is the only price index forecast to fall in
in 2008-09, suggesting the commodity wide price boom is far from over. 2007. Having peaked early last year, prices will
Grains and oilseeds will lead the surge, with annual average price tumble by a third from their over-valued highs of
increases of 16% and 29% respectively expected this year. EIU’s latest 2006. This follows a surge in sugar output in key
market assessments point to both markets remaining in deficit until at producing areas, which has resulted in over-sup-
least 2009, implying further upward price pressure. Prices for both mar- ply. However, the decline will be short-lived. Prices
kets are set to rise by 5% in 2008. will bottom out in 2008 and rise by 7% in 2009 as
PRICE FORECAST SUMMARY: US$ INDEX, 1990 = 100%, % CHANGE YEAR-ON-YEAR
Index % Change
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
WCF 111.7 146.5 166.5 164.6 158.5 4.0 31.2 13.6 -1.1 -3.7
FFB 110.2 127.9 148.0 151.6 153.6 -0.5 16.1 15.7 2.5 1.3
Beverages 123.1 133.7 146.6 134.1 124.9 20.4 8.6 9.7 -8.5 -6.9
Grains 106.1 133.4 154.7 163.0 168.9 -4.8 25.7 16.0 5.3 3.7
Oilseeds 113.1 116.5 150.0 157.7 160.3 -9.3 3.0 28.7 5.1 1.6
Sugar 78.8 117.8 78.3 80.7 86.3 37.9 49.5 -33.6 3.1 7.0
Note: WCF (World commodity forecasts) is an index of 24 hard and soft commodities. FFB (Food, feedstuffs and beverages) is a price index
of 15 soft commodities. The beverages sector has a weight of 20.1% in the FFB index, grains 46.4%, oilseeds 28.6% and sugar 4.9%. The
FFB index has a weight of 55.6% in the WCF index.
Source: Economist Intelligence Unit
According to Kona Haque, Senior Commodities Editor, “The ethanol and increased demand for sugar as a biofuel feedstock
biodiesel industries are pushing up demand for crops such as maize, soy- supports the market, while supplies from the EU,
beans and palm oil, but lack of available land and adverse weather con- once a major sugar exporter, decline following the
ditions are preventing output from rising sufficiently.” As a consequence, reduction of subsidies.
stocks will be drawn down further and the inevitable rise in price will have
knock-on effects on substitute crops and end-use sectors such as livestock World Commodity Forecasts: Food, Feedstuffs
and dairy. In 2009 oilseed prices will rise by a further 2% amidst further and Beverages, August 2007. Available from the
supply pressures, as planted area switches to grains in China, to sugar- EIU: T: + 44 (0) 20 7576 8181 or:
cane in Brazil and to maize in the US. Grain prices will also rise in 2009 by
www.store.eiu.com
4% amid continued shortages.
Carbon and Energy in Asia, 2007
October 2-3, 2007
Shangri-La Hotel, Singapore
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22 SEPTEMBER 2007 COMMODITIES NOW
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