Rabobank Report Projects on World Food Prices
By Amanda Brodhagen, Farms.com
Rising food prices and commodity prices for livestock feed have been common speculations with the severe drought in the U.S. Rabobank released a new report predicting that all of these speculations will most likely be true. The report entitled “Re-entering Agflation,” says that Rabo’s AgriFinance division expects world food prices to reach record highs in 2013 and that these prices will put pressure on the livestock industry. While, the North American media has been paying a lot of attention to the drought in the U.S. there have also been water scarcities in South America and Russia which also drive up agricultural commodity prices.
The prediction is bad news for livestock farmers who will feel the pinch of higher feed costs and industries such as cattle will be largely impacted, especially if culling and liquidation becomes common place, which will surely impact the long production cycles and make it difficult to replenish. Meat products will be more affected by the squeeze compared to beverages and value-added industries as the input costs of grains and oilseeds only represent a small fraction of their overall production costs.
The report also notes that increased agriculture protectionism measures may become common place with governments attempting to protect domestic consumers from rising food prices. Governments may try to stockpile or set export bands at the end of 2012 or the beginning of 2013. The report also cautions that these types of government measures may be counterproductive and in fact might even escalate the commodity and food prices.