‘Agflation’ to hit in 2013

A new phenomenon is set to affect the world in 2013: agflation. Rabobank’s Agri Commodity Markets Research says skyrocketing agricultural commodity prices will cause food prices to reach record highs in 2013 and will continue to rise into Q3 2013.

According to Rabobank, 2012’s scarcity will affect feed-intensive crops, with serious repercussions for the animal and dairy industries.

“The impact on the poorest consumers should be reduced this time around, as purchasers are able to switch consumption from animal protein back towards staple grains like rice and wheat,” said Luke Chandler from Rabobank.

“These commodities are currently 30% cheaper than their 2008 peaks. Nonetheless, price rises are likely to stall the long-term trend towards higher protein diets in Asia, the Middle East and North Africa. In developed economies - especially the US and Europe - where meat and corn price elasticity is low, the knock-on effect of high grain prices will be felt for some time to come.”

Grain shortages will be more sustained as herds - in particular, cattle - take longer to rebuild, which will maintain upward pressure on food prices. However, Rabobank says, since food constitutes a smaller proportion of budget spend in developed countries, higher prices should not lead to the unrest caused by the 2008 shortage.

Rabobank estimates that the Food and Agricultural Organisation (FAO) Food Price Index will rise by 15% by the end of June 2013. Prices for grains and oilseeds, in particular, are expected to remain elevated for at least the next 12 months.

Read more about Rabobank’s predictions here.