Harare - The weakness in the world’s agricultural commodity prices that began earlier in the year continued into the third quarter, the World Bank's latest Commodity Markets Outlook report revealed.
According to the report, the World Bank’s Agriculture Price Index declined nearly 1% from the second quarter into the third quarter, with most markets well supplied.
"Food commodities dropped one percent, reflecting softer prices for maize, rice, and other food items, although oils and meals prices gained 1% on the back of strengthening soybean prices."
Raw materials prices however slipped marginally.
As a result, the Agriculture Price Index is expected to ease slightly in 2017 before edging up over 1% in 2018 due to the current season’s reduced grain production.
"Grain prices are expected to remain broadly steady in 2017 and advance 2% in 2018. Oils and meals are expected to follow a similar path to grains."
The report noted that over the medium term, agricultural commodity prices are expected to increase only a cumulative 3% through 2020, a very small gain compared to the post-2011 decline.
Based on US Department of Agriculture’s October assessment- the sixth update for the current season - combined global supplies (beginning stocks plus production) of wheat, maize, and rice are projected to reach 2 896 million metric tons (mmt) this season, 8 mmt lower than in 2016-17.
The World Bank however said key risks to the forecast stem mainly from the supply side: energy and fertilizer prices, weather patterns, as well as trade policies and production subsidies aimed at supporting prices received by farmers. Grains and oilseeds are most likely to be impacted.
"Energy, a key input to most agricultural commodities, notably grains and oilseeds, affects the costs of production directly through fuel use and indirectly through chemical and fertilizer use.
"Should energy prices rise more than projected, upward pressure on grains and oilseeds can be expected. Conversely, lower energy prices could depress agricultural prices. Such risks, however, will impact 2019 prices since most of the decisions for the current crop season have been made."
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