December 28, 2010

Food prices may hit record highs in 2011

Agricultural prices including corn will extend rallies next year driven by higher demand from rising markets, such as China, and higher energy costs, said the Rabobank Group.

There was "rampant demand" for agricultural commodities from China, and rising corn prices may drive gains in other grains, according to a report released last week from analysts at the bank. Surging crude-oil costs, low global food stockpiles and a weakening dollar may also bolster prices, the report said.

Rabobank's predictions add to forecasts that food costs may surge next year, potentially raising inflation and paving the way for a reprisal of the bull market in 2008, when prices surged to records. Increased Chinese purchasing of global crops is "reshaping" some farm commodity markets, the report said.

According to the report, "corn will drive the grains complex" next year, with China importing as much as eight million tonnes. We look for higher energy prices in 2011 to be a catalyst for higher agricultural prices.