FoodDrinkEurope’s Post

Last week we published our latest outlook on global dairy markets. Do you want to know more about dairy price or milk production dynamics in the EU, US, New Zealand, Latin America and China? Read the latest Rabobank Global Dairy Quarterly.

📉 Food price inflation may be cooling, but the underlying numbers tell a more complicated story for agriculture. Despite a drop in energy costs—down 6.3%, with gas prices even falling by over 15%—the prices for unprocessed agricultural commodities have barely budged. For farmers and producers, this essentially flat growth in raw product prices translates to squeezed margins and tough decisions. As input costs remain unpredictable and returns stay stagnant, producers are still feeling the strain. At Root Ag Advisory, we're here to help navigate these challenges and explore ways to sustain growth, even in difficult economic times. Learn more at https://lnkd.in/g7BkQa-d #AgricultureChallenges #FarmEconomics #RootAgAdvisory #MarketRealities #AgInflation

We have just published our latest agri monthly report. In summary, we expect better prices ahead, but margins to remain under pressure. Overall commodity prices should tilt higher off the back of higher dairy and slightly better meat prices. Improving market conditions have prompted us to revise our farmgate milk price forecast for this season from $8.70 per kilo of milk solids to $9.00. Meanwhile beef prices should edge higher over the coming year as US production continues to contract. Lamb prices are expected to be marginally better in the year ahead. That reflects lower kill rates in New Zealand and Australia as well as stronger demand and lower domestic production in Europe.  Assuming conducive growing conditions, we expect orchard gate returns for apple and kiwifruit to rise off higher production yields. Prices though should ease slightly over the coming year as production gains outweigh demand.  Subdued demand out of China implies flat log prices over the next year. A pickup in Chinese building activity will be a catalyst for rising prices thereafter. Westpac New Zealand Tim Henshaw Andrew Hill Jo Faber Westpac NZ Economics Team

📉 Food price inflation may be cooling, but the underlying numbers tell a more complicated story for agriculture. Despite a drop in energy costs—down 6.3%, with gas prices even falling by over 15%—the prices for unprocessed agricultural commodities have barely budged. For farmers and producers, this essentially flat growth in raw product prices translates to squeezed margins and tough decisions. As input costs remain unpredictable and returns stay stagnant, producers are still feeling the strain. At Root Ag Advisory, we're here to help navigate these challenges and explore ways to sustain growth, even in difficult economic times. Learn more at https://lnkd.in/gPc3ctVJ #AgricultureChallenges #FarmEconomics #RootAgAdvisory #MarketRealities #AgInflation

Global food prices remain on a moderating path. The FAO’s Global Food Price Index, which tracks monthly changes in the international prices of a set of globally traded agricultural commodities, averaged 120.8 points in July, marginally below its revised figure for June. The slowing grain prices primarily underpinned this. The index is now 3.1% lower year-on-year and 25% below its peak in March 2022 after Russia invaded Ukraine. 

Thoughts on MSP from Consumer prospective: "Perhaps you've heard, experienced, or observed the abrupt doubling of onion prices within a week. 🚧🚧🚧 However, have you ever witnessed a similar surge in the prices of essential staples like wheat, rice, or sugar? Most likely not.💯💯 The key disparity lies in the Minimum Support Price (MSP). The Minimum Support Price not only shields producers but also ensures price stabilization for consumers. Despite governmental arguments advocating for agricultural prices based on a free market, the reality is that true free and fair markets are scarce globally. Those in power often dictate their own conditions. While the government regulates prices in sectors like cement, basic medicine, and fuel, it advocates for food prices to adhere to a non-existent free market. Consequently, MSP not only benefits producers but is even more advantageous for consumers, safeguarding them from sudden price spikes."

This divergence is particularly important due to the interconnectedness of natural resources. It suggests that the current trajectory in agricultural commodities may serve as a leading indicator for the broader commodity market, in our view. This upward trend carries profound implications for food prices, disproportionately affecting consumers at the lower end of the economic spectrum.

🚨 High Impact News! 🚨 The Producer Price Index ex Food & energy released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Those volatile products such as food and energy are excluded in order to capture an accurate calculation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

The results of the latest global dairy trade (GDT) auction were out yesterday, and these saw prices rise another 1.9%, driven by a solid gain of 3.2% in whole milk powder. Prices are now up 20.9% this year, and at the highest level since July 2022. Fonterra has increased its milk price forecast for the 2024/25 season from a midpoint of $9.00 to $9.50, which would be the highest of all time and above the previous record of $9.30 we saw in the 2021/22 season. The co-operative has noted the improved outlook had largely been driven by strong demand out of China (where domestic production is below expectations) as well as Africa, the Middle East and Southeast Asia. A weaker NZ dollar (and a stronger greenback) has helped too, with the currency having fallen to below US$0.59. That’s down about 7.5% over the past eight weeks, and it helps our prospects a lot, given dairy commodities are benchmarked and priced to US dollars. There’s still lots of bad news stories out there, but this is absolutely a positive one, especially for all of those regional communities that depend on a strong farming sector.