HANOVER, Germany — European analysts predict farmers will have a comfortable ride in the commodity markets in the next decade, despite having to navigate some rough roads with a few unexpected curves.
Perez Dominguez of the Organization for Economic Co-operation and Development told a meeting held during the Agritechnica farm show in Hanover last week that fears of food prices falling because of recession are unfounded because of fundamental strengths in global supply and demand.
“There is increasing pressure on a limited land base, higher demands being placed on every hectare to produce more and the technology that has been improving yields is delivering smaller and smaller gains,” he said.
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Former Chicago grain futures analyst Lars Kechenbuck of KS Agrat in Germany said supply and demand set prices over the long haul, despite futures markets’ sometimes odd reactions to world events that bear little relation to commodity market fundamentals.
“More people and a rising demand for biofuels are creating real need for more (grains and oilseeds),” he said.
Carl Albrecht Bartmer, head of the farm organization that organizes Agritechnica, said markets are rising because of improving standards of living, government biofuel policies and loss of arable land.
“Seven billion people isn’t a magic number,” he said of the recent population milestone.
“We have seen a steady path to a greater world population with improved buying power. As farmers, our consumer market is changing … but now we maybe need some of our trading tools and trade agreements to change as well.”
Dominguez said the OECD expects steady but moderate increases in nearly every agricultural product except wheat.
“The good news for wheat producers is that wheat is already high, so declines from this point aren’t as much of an issue,” he said.
Producers are turning away from wheat in favour of more profitable crops, and analysts feel this might eventually create shortages that will support wheat prices.
