Weather conditions driving up agricultural commodity prices
Adverse weather in many of the world's leading agricultural commodity producing regions is leading to markets pricing in production risks, Rabobank says.
Adverse weather in many of the world's leading agricultural commodity producing regions is leading to markets pricing in production risks, Rabobank says.
The bank's monthly July agri commodities report said the tight supply of many products required favourable weather conditions in order for stocks to be replenished and demand met – but instead unfavourable weather had led to increased market volatility.
Hot and dry conditions in the United States are threatening corn, wheat, soybean and cotton crops, while the Brazilian sugar crop has also been revised lower to to climatic conditions, the report said.
Too much rain across Europe had also raised concerns about grain quality, it said.
“Inventory levels in many agricultural commodities are at historical lows, which will likely cause price reactions to further deterioration in the weather to be significant and highly volatile.
“Early indications of bad weather will likely be reflected quickly in the prices of commodities.”
To illustrate the point, the report said the recent frost scare in Brazil was likely to have very little impact on production, but prices on the New York Arabica market increased 10% on the news.
“Given the fundamentals, market sensitivity to adverse weather news is expected to remain acute until stock levels can be rebuilt.”
Colin Wiliscroft
Mon, 25 Jul 2011
Mon, 25 Jul 2011
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Weather conditions driving up agricultural commodity prices
16021