04 July 2015 | Online since 2003

Agflation to hit animal protein and dairy industries



19 September 2012 14:30:10|News

Agflation to hit animal protein and dairy industries


Compared to 2008 agflation is sustained and kinder to developing economies but the threat of government intervention looms

Skyrocketing agricultural commodity prices are causing the world to re-enter a period of "agflation", with food prices forecast to reach record highs in 2013 and to continue to rise well into Q3 2013.

Unlike the staple grain shortage of 2008, this year's scarcity will affect feed intensive crops with serious repercussions for the animal protein and dairy industries.

“The impact on the poorest consumers should be reduced this time around, as purchasers are able to switch consumption from animal protein back towards staple grains like rice and wheat" said Luke Chandler, Global Head of Agri Commodity Markets Research at Rabobank.

"These commodities are currently 30% cheaper than their 2008 peaks. Nonetheless, price rises are likely to stall the long-term trend towards higher protein diets in Asia, the Middle East and North Africa. In developed economies – especially the US and Europe – where meat and corn price elasticity is low, the knock-on effect of high grain prices will be felt for some time to come.”

Due to the long production cycles of the animal protein and dairy industries, the affects of grains shortages will be more sustained as herds (especially cattle) take longer to rebuild, maintaining upward pressure on food prices. However, food makes up a smaller proportion of budget spend in such countries, so the current period of agflation should not lead to the unrest witnessed in response to the shortage in 2008.

Rabobank estimates that the Food and Agricultural Organisation (FAO) Food Price Index will rise by 15% by the end of June 2013. In order for demand rationing to take place, in turn encouraging a supply response, prices will need to stay high. As such Rabobank expects prices – particularly for grains and oilseeds – to remain at elevated levels for at least the next 12 months.

Government intervention

Whilst the impact of higher food prices should be reduced by favorable macroeconomic fundamentals (low growth, lower oil prices, weak consumer confidence and a depreciated US dollar); interventionist government policies could exacerbate the issue. Stockpiling and export bans are a distinct possibility in 2012/13 as governments seek to protect domestic consumers from increasing food prices.

Increased government intervention will likely encourage further increases in world commodity and food prices.

Rabobank expects that localised efforts to increase stockpiles will prove counterproductive at the global level, with those countries least able to pay higher prices likely to see greater moves in domestic food price inflation.

This is a vicious circle, with governments committing to domestic stockpiling and other interventionist measures earlier than usual—recognising the risk of being left out as exportable stocks decline further.

On top of that, there are warnings that global food stocks have not been replenished since 2008, leaving the market without any buffer to adverse growing conditions. Efforts by governments to rebuild stocks are likely to add to food prices and take supplies off the market at a time when they are most needed.

Download




Comments


No comments posted yet. Be the first to post a comment

To post comment without approval login or register

Display name

Please enter your name

Email (optional)
Comment

Please enter your comment

Post Comment

Your comment submitted successfully.Please wait for admin approval.

Some error on your process.Please try one more time.



Jobs


Start Date: 3 July 2015
G212: Breeding Advisor (Trainee Considered) - South West Wales

An exciting opportunity has arisen for a Dairy Breeding Advisor for an established territory within South West Wales. Our cli...


Start Date: 3 July 2015
A430: Assessor - International

De Lacy Executive seek highly motivated individuals with practical experience in the arable or fresh produce sectors to join ...


Start Date: 3 July 2015
C174: Monogastric Nutritionist

De Lacy Executive is currently recruiting for a Nutritionist to enhance my clients team of expertise within their monogastric...


Start Date: 18 June 2015
Massey Ferguson big baler driver for harvest work: Job in Yorkshire

Contractor looking for an experienced tractor driver to operate Massey Ferguson big square baler and other farm duties.


Start Date: 24 June 2015
Job for Experienced tractor person to work on a cereal and potato farm during harvest >>Scotland<<

Busy arable farm working within Perthshire looking for a harvest worker to help with cereal and potato harvesting d...





Top stories you may have missed
5 June 2015 | Cattle

A strong pound and increased red meat imports coupled with a plentiful dome...


5 June 2015 | Arable

Depression is affecting Wales' farming industry and there is a need to use ...


5 June 2015 | Arable

With just one week to go before the final judging and announcement of the w...


5 June 2015 | Finance

A rural law expert has highlighted the importance of good succession planni...


5 June 2015 | Farmshops

A south Yorkshire dairy farming family is pulling out all the stops to prom...


4 June 2015 | Finance

Predicting what is going to happen to wheat prices is a challenge, but in s...


4 June 2015 | Agri Safety

A Lancashire based livestock theft prevention scheme is aiming to go nation...


4 June 2015 | News

A female farmer has been recognised by the farming and conservation industr...


4 June 2015 | Finance

The new Conservative government appears to be preparing to implement cuts f...


4 June 2015 | Arable

The Rural Payments Agency (RPA) will have mobile support units at the follo...