Food, feedstuffs and beverages prices set to rise in 2020, report suggests

WORLD – The food, feedstuffs and beverages (FFB) price index in 2020 has been forecast to rise at a rate of 3.9%, boosted by high price growth of beverages.

This is according to The World Commodity Forecasts Food Feedstuffs and Beverages report released by research and analysis firm, Research And Markets.

The FFB price index contracted by 4.3% in 2019, as falling prices of oilseeds and weaker growth in the prices of cocoa, coffee and staple grains weighed on the index.

However, the report highlights that the bilateral trade war between the US and China has disrupted existing trade patterns and caused the prices of some products that are subject to tariffs, including soybeans and soymeal, to diverge in some markets.

A number of other markets, including those for grains, such as rice and maize, are also beginning to tighten slightly, which the research and analysis company said will support price growth in this sub-index in 2020-21.

“Nonetheless, supplies in most markets remain comfortable by historical standards. Downside risks related to a potentially disruptive El Niño event will persist, but an agricultural price shock is not expected,” the report highlights.

By the end of 2020 it is expected producers and consumers will have largely adapted to the shifts in supply chains caused by the US-China trade war.

Research and Markets says in the reports that rising populations and incomes are also expected to continue to support modest growth in demand (and therefore prices) in the medium and long term, pushing up prices to growth of 2.8% in 2021.

Nonetheless, the road ahead will be bumpy. According to the company’s study, agricultural markets have been well supplied for several consecutive seasons, providing ample stocks to draw on.

However, labour shortages created by the coronavirus pandemic are expected to hurt agricultural productivity.

Furthermore, the report suggests that the risk of a disorderly economic slowdown in China (although not the core forecast) and the impact of the increasingly protectionist trade policies espoused by the US president, Donald Trump, will continue to pose risks to the forecast.

In addition, exchange-rate trends may help to keep a lid on global commodity prices; since last April the US dollar has rallied strongly against other major currencies.

The dollar (in which most raw materials are traded) is expected to continue to remain fairly strong against most emerging-market currencies in 2020-21, especially as the sharp depreciation of the Turkish lira and the Argentinian peso sparks concerns about potential contagion in other emerging markets.

Research and Markets says that this will weigh on import demand in many emerging markets and encourage exporters to increase output, further contributing to global supplies.

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