Prices of agricultural commodities will remain volatile in 2010 due to supply constraints, volatile shipping costs and a constant demand pull from new demand sources like biofuels, according to North American Export Grain Association President and CEO Gary Martin.

 

Volatility in the grain industry has increased in the past three years and it is likely to stay, he said.

 

Rising demand from developing countries, most notably China, helped drive grain and soy prices to record highs last year. Prices subsided in 2009 amid the global economic slump but have since started to recover.

 

Rising grain demand from biofuel producers could also cause higher volatility in prices as supplies struggle to meet demand.

 

Martin said his outlook for the agricultural sector as a whole was "positive but not too bullish" as a growing global population will continue fuel demand for food, but logistical inefficiencies and international trade barriers could restrict trade.

 

Some restrictions in the world market have affected trade, and the outlook would be more bullish if there is an expanded facilitation of trade through official policies and actions, which include tariff and non-tariff trade barriers, said Martin.