July 2, 2008
 

Yield improvements to cause retreat in grain prices over the long term

Long-term agricultural prices should start to fall back from historically high levels, as yield improvements are likely to be greater-than-expected, Merritt Cluff, senior economist for the U.N.'s Food and Agriculture Organization, said Tuesday (July 1, 2008).

Speaking at the World Agri Invest Congress in London, Cluff said he did not expect agricultural prices to return to the low levels averaged over the previous decade, in nominal or real terms.

The yield response would be larger than expected, he said. However, rising fertilizer prices will dampen the supply response, he said.

Som Seif, chief executive of Canadian based Claymore Investments, Inc., told the conference he remained "very bullish" about agriculture commodities but, at the same time, agreed the key is improving yields through better inputs and technology.

"I-pods are not changing the world, agra technology is," said Seif.

Meanwhile, Emmanuel Jayet, analyst for Paris-based BNP Paribas SA (BNPQY), on the sidelines of the conference said he agreed that longer-term grain prices will come down from current high levels but will still hold above previous low values.

He said luck with the weather has to improve. Recent floods in the US Midwest pushed CBOT corn futures last week to a record high of over US$8 a bushel.