World grain prices are expected to rebound next year as the market stabilises, an analyst said.
The market collapse of 2008 was an isolated case and the bull market in agriculture will return after March 2009, according to AgResource president Dan Basse, who addressed the Global Grain 2008 conference in Geneva on Wednesday (November 19, 2008).
Basse said the turnaround in market prices would happen early next year, once traders stopped worrying about the bumper 2008 harvest and turned their attention to the tighter market in 2009.
Basse said the downturn of grain markets this year had much to do with the activities of speculators as the bumper harvest. The financial crisis had led to a rush for cash, with hedge funds and other investors ditching commodities.
However, Basse said the process will come to an end, and the market will stabilise once speculators and investors are done with liquidating their positions, after which market fundamentals would enter the picture.
World grain stocks are seen as low, having grown just 11 million tonnes since the bumper harvest of 2008. Farmers were also planting less crop due to the pressure of cost price squeeze.
Demand from emerging economies such as China, India, and Southeast Asia are also expected to regain momentum.