Major agricultural traders expect ‘super-mini-cycle’

Agricultural commodities are at the start of a “very small cycle” where prices are expected to rise for several years due to demand from China and for biofuels, according to some of the world’s top traders.

Executives from Cargill, Cofco, Viterra and Scoular said this week that the corn, soybean and wheat markets will remain strong for the next two to four years.

Prices have retreated from multi-year highs over the past few weeks as the US dollar rallied and rain forecast in the US Midwest, but corn futures have doubled from a year ago at $3.29 a bushel, and soybeans at $14.31 are 65 each higher by a percentage Wheat is about a third higher at $6.54.

“We’re definitely seeing a very small cycle,” said David Mateske, CEO of Viterra, which is majority owned by Glencore. FT Commodities Global Summit. “We are in a demand-driven environment with the themes of population growth, increasing wealth, and increasing consumption of people. To that we have a growing demand for fuel from the factory.”

Continued price hikes will be a boon to farmers who have felt the financial strain of several years of stagnant crop prices. However, it will mean that high food costs For importers of cereals and oilseeds, especially poor countries suffering from the economic effects of the epidemic as well as high food prices.

Grain and soybean markets saw a big boost in the second half of last year after governments and companies rushed to storage during the pandemic. China, which had a poor corn crop, made big purchases Imported 11.3 million tons last year, more than a third of the total comes from the United States.

According to Alex Sanfeliu, head of Cargill’s global trading unit, the two large annual corn and soybean crops – one in the US and one in Brazil – mean the cycling in grains and oilseeds tends to be shorter than other crops, but he predicted a bull market during The next two to four years. “The properties of the supercycle are there,” he said.

China’s large corn imports last year, previously intended for self-sufficiency, surprised traders and analysts and sparked debate over whether this was a “restocking” after the shock of the epidemic or whether the buying would continue.

Many executives believe the gap will continue, prompting the bullish force to continue importing corn. There is an imbalance on the supply side due to poor harvests, said Marcelo Martins, head of grain and oilseeds division at COFCO International, the trading arm of the Chinese government conglomerate. “[The supply deficit] He said.

Meanwhile, demand for biofuels, which has driven up soybean and soy oil prices, is “unprecedented,” according to Paul Maas, CEO of US agricultural trader Scholar. As governments push to reduce the use of fossil fuels, many are increasing the amount of biofuels mixed with gasoline. “The increased demand is real and we are up front to see how it all works,” Maas said.

Despite the enthusiasm, Gary McGuigan, head of global commerce at Archer Daniels Midland, added a cautionary note. “We have seen a significant price correction over the past weeks or so,” he said, adding that while demand dynamics were “definitely changing,” it was too early to call a mini-cycle.

China was one of the biggest uncertainties. “Of all the large demand-driven regions of the world, China is the most uncertain and the most difficult to predict,” he said.

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