Higher commodity prices here to stay

Commodity prices over the next decade are set to remain at a higher level than the past, according to an OECD-FAO report produced ahead of this week’s G20 summit of agriculture ministers in Paris.

In real terms, prices over the next decade are predicted to average up to 20% higher for maize and 15% higher for rice, compared to the previous decade, while wheat prices should remain at the same level. This is likely to have a knock-on effect on higher meat prices.

But the report is “cautiously optimistic” that commodity prices will fall from their 2010/11 peaks as markets respond to higher prices, although risks of further “upside price volatility” remain high until stocks can be rebuilt, it says.

Unpredictable weather will continue to be the main driver of volatility and while high levels of speculative activity in futures markets may amplify short-term price movements, the report says there is no conclusive evidence of longer-term systemic effects on volatility.