It is a fact that, following 7 years of relatively low prices and volatility, ag. markets are now moving higher led by both short and long-term fundamental changes. The short-term considerations are now known: lower production and higher demand have taken world ending stocks to dangerous levels for our three major commodities, wheat, corn and soya. Furthermore, production risks are still ongoing in many key regions: Brazil, Argentina, US, Russia. All correlated to weather concerns.
Prices have started to climb strongly since September 2020. And now, many UK farmers question the potential for prices to remain strong or even move higher. The global picture is currently driving us to indeed be optimistic. With world demand constantly going up by roughly 3 to 4% (which represents 40mt of addition annual demand for corn alone!), supplies need to follow the trend. A lot has been achieved during the past 15 years. For instance, South America has nearly doubled its production, along with Russia and Ukraine. They still have more potential to grow. However the potential for growth in our regions is very limited. In addition global climate change is clearly one major source of concern.
As a consequence and to meet with world demand, new production areas will soon be needed. Africa will certainly take the lead in the next 10 years. They have the land. They have the climate. They just need massive logistic investment for it to occur. The Chinese know this. They are working on it.
Looking at past market history to predict the future, it is also clear that higher prices do not occur for one season alone. In addition they also always bring higher volatility in our markets. Which is good news for informed farmers as it allows them to capture much higher prices, when strategies are well managed.
Catching these opportunities also involves more time, more dedication upon markets. In a UK context of lower subsidies, improving your market skills is a must have. It is very likely that there will be greater pricing opportunities for farmers in the coming months and years. Indeed it takes time for stocks to rebuild as world demand increases constantly, year upon year.