Milk bottles© Rex Features

Unprecedented events are making it increasingly difficult to forecast agricultural commodity prices, a leading analyst has warned.

Market drivers for farm commodities included climate change and energy, said Tassos Haniotis, director of economic analysis at the EU’s directorate general for agriculture.

Farming was an energy intensive sector and agricultural commodity values followed the path of world energy prices, he said.

See also: Weakening euro knocks dairy wholesale prices

But sudden and unexpected shifts in global markets – including the recent drop in world oil prices – were making it harder to forecast agricultural commodity values.

“Are we living in an unprecedented situation? Yes,” Mr Haniotis told reporters in Brussels. It had become a “nightmare” to try to make accurate forecasts, he added.

“If we could forecast the future, we wouldn’t be in the type of jobs we are in. What we try to do is be as honest, open, transparent and sincere as we can be.”

Over the past two years, EU analysts had repeatedly looked at different scenarios based on different assumptions to determine the range within which prices were likely to move, said Mr Haniotis.

“There are products for which the range is much smaller, but for others it is much wider. We have run a series of scenarios that could ‘shock the system’ trying to anticipate what will happen.”

Emerging trade patterns meant there were four major players in the global market for agricultural commodities: the USA, the European Union, Brazil and China, said Mr Haniotis.

Although annual GDP growth rate remained highest in China, an ongoing slowdown in Chinese growth was becoming more influential than it had been in the past.

Tasos Haniotis

Tasos Haniotis © Tim Scrivener

EU analysts ran a scenario three years ago examining the likely impact of the Chinese slowdown in growth on agricultural markets.

More recently, in December 2014, EU analysts also ran a scenario looking at the impact of climate change in different parts of the world, Mr Haniotis said.

“We try to see what is happening. But what is new – what is completely new – is the type of macro linkages that agriculture has right now.”

People tended to forget that agriculture was the most energy intensive sector, said Mr Haniotis.

When considering the prospects for their own businesses, farmers were right to look at the direction of agricultural markets.

But it was also important to look at other markets too, including the energy market.

Taking dairy as an example, Mr Haniotis said: “If you only look at the milk price, and forget what is happening to feed costs or energy prices at the same time, then you miss the whole picture.”

He added: “It is extremely difficult. And what makes it more difficult is when you have all factors moving in the same direction – the so called perfect storm scenario.”