Grain prices are expected to rebound next year, as speculators close their books and market fundamentals return, says Dan Basse, president of Chicago analysts AgResource.
Addressing the Global Grain 2008 conference in Geneva on Wednesday (19 November), he insisted that the market collapse of 2008 was a one-off. “After next March we will see the bull market in agriculture return,” he predicted.
The downturn this year was as much to do with the activities of speculators as the bumper harvest, he said. Since the financial crisis, there had been a rush for cash, with hedge funds and other investors getting out of commodities.
But this process was coming to an end. “Once these guys have done with liquidating their positions, we should see stability return to the market,” said Mr Basse.
Then the market fundamentals would kick in. World grain stocks were still “disappointingly low”, having grown just 11m tonnes since the bumper harvest of 2008.
Farmers were also putting less seed in the ground, in response to the anxiety they felt after this year’s cost:price squeeze.
Demand from emerging economies like China, India and south-east Asia – where there was still positive, albeit slower economic growth – would also pick up again.
The turnaround in market prices would happen early next year, once traders stopped worrying about the bumper 2008 harvest and turned their minds to the tighter market in 2009, he suggested.