A closer look at agricultural commodities, stocks so far this year
The Brexit and pandemic of COVID-19 in 2020 had serious repercussions all over the world, especially in the European market. The food or agriculture sector is facing a teething problem due to the same. Even the market experts are finding it difficult to assess the situation because the transportation of goods and services have been marred. And agricultural goods are essential commodities.
Keeping the date of expiry on the bay has become a headache for the countries exporting agricultural commodities. It’s like myriad work at hands with little time in hands. It has led to the loss of millions of pounds, and it may extend in the absence of any policy further.
However, the entire food and agriculture business cannot be attributed alone to pandemic and Brexit. There are several reasons that require serious attention. The period for the Agri commodity is volatile, and that can put further pressure on retail prices. It can push the rates up.
Food and agriculture organisation
Last December, the food prices crossed the six-year high barrier of the retail price globally as per the assessment of the Food and Agriculture Organization of the United Nations.
Interestingly, it has been surging ever since then. The FAO Food Price index of January 2021 hiked by 4.3 per cent. Its eight consecutive months of price rise or inflation in the retail essential commodity market.
Key inflationary drivers in pandemic
The stockpiling of food commodities, weather conditions, lack of transportation, several bans following the protection, lockdowns and strong demand from China all led to food inflation. These drivers continue to hover but in a lesser effect. Thus, things are getting back on track, slowly, though. However, with the resurgence of COVID-19 cases, one can never know.
Last year, in 2020, the pandemic affected a loss of 2.1 per cent in demand for coffee. It happened due to out-of-home-channel as per Rabobank. However, it was estimated to grow by 2.2 per cent. Now, there’s a forecast that it may grow 10.2 million bags in 2021. Also, there’s a prediction of it further increasing to 2.2 million surplus bags by 2022. Thus, the prices may rise only marginally.
The price of Russian sunflower oil has doubled compared to the last year and continues to rise. And following the 9 per cent drop in the current yield (dry weather), the hike remains certain for the commodity. Similarly, the production of Italian Virgin oil is low, and the prices are up by 67 per cent year-on-year basis.
Moreover, daily hikes businesses are recording for crushers reluctant to sell oil in anticipation of a rise in prices.
Since October, the price of sugar has been rising on London ICE. The price was £260/tonne, which rose to £322/tonne in February. It got fuelled by scarce supply further. Thus, the speculation sent the price burgeoning during the month. Moreover, Brazil’s aspiration to create ethanol following the rising oil prices is also adding to the hike of sugar rates globally.
However, huge supplies from countries like India may not let the prices hike suddenly or in big amount.
Palm oil prices
As per Rabobank, the global demand may raise the price of Palm oil in the fiscal year 2020/21 by almost 3 per cent. The increase of consumption in India (5.2 per cent) and Indonesia (5 per cent) has raised hopes for investors. Brokers like Brokereo are providing chances for trading. Currently, palm oil makes for a decent investment.
However, the production may not rise in a similar proportion. Thus, demand and supply would vary. So, market players can earn good. In 2021, Rabobank is speculating an increase of 5.7 per cent you.
Oilseeds and grains
Following the supply of grains and oilseeds becoming tighter the world over, speculation and traders’ sentiments have increased the prices. However, the UK unit may see a rebound after hitting a forty-year low production in 2020.
Feed costs are increasing substantially. The soybean meal hiked to 31 per cent, while wheat prices rose to 35 per cent in December.
Cocoa does not seem to have a good future in the tensed times of pandemic. The struggle may stretch a bit more. Notably, the prices may fall around 6 per cent during quarter 4 of 2020 to quarter 4 of 2021. However, during this phase, the production is likely to surge by 2.5 per cent y-o-y in 2021/22. Thus, there would be a surplus of 170,000 tonnes.
The agribusiness is a sustaining one. It is essential for the food supply. Wheat, corn, soybean and other products have global demands only surging. And it makes for a successful business. Millions of jobs are related to it, and people find money making ideas through it.
Interestingly, the volatility in the essential commodities is unpredictably volatile, and that’s fun while investing. However, choosing the right broker and pieces of advice are pivotal factors.
Mission produce Inc.
The company indulges in fruit farming. Thus, it is the world’s leading and advanced Avocado network. It sells the products globally. It produces, sells and distributes the fruit. However, recently it announced to enter the mango business, which pushed its stock prices in anticipation of profits. Interestingly, mangoes are consumed on a large level worldwide. So, the company wants to benefit from the idea. The market cap of Mission Produce is USD 1.43 billion.
It is a leading food and agribusiness company supplying chief agricultural commodities like corn, sugar ethanol and wheat. Moreover, the company is also in the production of oilseeds and grains. It also sells fertilisers. Due to its hands in multiple, the expansion is bigger than one can assume. During the pandemic situation, Bunge Ltd reported net income attributable to USD 551 million in quarter 4 against the loss of USD 51 million in the same quarter of 2019.
Thus, it indicated a raise in sells by almost 25 per cent. It’s consumers’ growth in Brazil remained unprecedented during the COVID-19 times.
Deere & Co.
The company sells tools and equipment used for agriculture purposes, commercial, forestry, consumer markets and commercial. For the financial year Q1 2021, the company registered a revenue of a 137% increase. It is a hike of 19.4% on a year-on-year basis.
The market cap of Deere & Co. is 112.05 billion. The production in the segment led to an increase in profits.
CF Industries Holdings Inc
The company indulges in selling and manufacturing phosphate and nitrogen fertilisers products, including urea, nitrate, ammonia etc. The CF industries registered an increase of 58.2 per cent on a year-on-year basis. It happened due to the rising net sales in Q4 2020. The prospect for the year 2021 looks bright too.
Tyson Foods Inc.
The market cap of the company is 21.6 billion. It indulges in prepared food. Some of its brands include State Fair, Sara Lee and Hillshire Farm. The company is ideating on expanding the business.
Conclusion: The global market in the agriculture and food industry looks largely hopeful. The essential commodities have recovered quite well, and companies are manufacturing and producing them are performing greatly considering the menace of COVID-19 hovering around. Thus, the year 2021 for agriculture commodities and stocks is good.