farming field tractor sunset

Food price volatility could return next year, with trade wars, disease and extreme weather posing a threat to agri-commodities, Rabobank has warned.

Global food prices are currently “relatively stable”, but geopolitical tensions, the threat of the El Niño weather system and the rise in diseases affecting livestock could bring “greater uncertainty” in 2019, the food and agribusiness bank warned as it published its annual Outlook report today.

“The agri-commodity price environment may be relatively stable currently, but it’s difficult to remember a time there were so many threats to food commodity prices on so many fronts, from trade wars to currency movements to weather threats and livestock disease,” said report co-author Stefan Vogel, head of agri commodity markets at Rabobank.

The “melting pot” of risks facing food and drink supply chains include the unresolved US-China trade war, Rabobank said, which has the potential to “alter global trade flows” in the year ahead and beyond.

Soyabeans will be most affected by the hostilities between Trump’s administration and Beijing, with China currently importing 60% of the world’s soyabean trade. US farmers will face an oversupply of soyabeans and will “likely see stocks more than double to record levels by the end of 2018/19”, the bank forecast, while Brazil will see “crop prices supported”.

“This will make soyabean farmers the principal beneficiary of the trade war, while putting heightened feed cost burdens on the livestock sector,” Rabobank warned.

At the same time, Rabobank expects the spread of African swine fever to continue to have a global impact on pork production, and potentially demand. Meanwhile, avian influenza is also threatening to hit demand, which would lead to “significant volatility in trade streams”, it warned.

“With the severity of disease outbreaks showing no signs of being curbed, especially in pork and poultry, biosecurity will become a higher business priority for livestock producers in the year ahead,” said Justin Sherrard, global strategist for animal protein at the bank. “Major outbreaks are affecting global trade flows and consumer preferences, and as a result we expect to see a shift to beef and seafood consumption in some markets.”

Rabobank also expects El Niño to drive “further uncertainty” across commodities markets. Experts warn there is now an 80% chance of the weather phenomenon hitting the northern hemisphere by the end of winter, with yields of palm oil, sugar and robusta coffee all likely to take a hit.