![]() This content is not intended to and does not change or expand on the execution-only service. The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. UN Food and Agriculture World Food Price Index | Source: Bloomberg This level and maybe even higher due to climate change is not an unreasonable long-term expectation and thus we have a positive view on the agriculture sector long-term. Changing the starting period to early 2003 the annualised price increase goes up to 4% annualised. The UN Food and Agriculture World Food Price Index is only up 2% annualised since 1990 suggesting food prices have risen less than the overall price level. However, climate change and more erratic weather patterns are putting upward pressure on prices as production is getting more impacted. ![]() One of our team’s ideas that formed during the pandemic was the idea that food prices had for decades been a close to zero contributor to inflation. However, the merger is seen as highly anticompetitive and the Argentinian government is already objecting to the deal. The merger will create an approximately $100bn revenue agribusiness worth around $34bn. The improving long-term outlook for food-related commodities has also increased merger and acquisition activity with Viterra (controlled by Glencore) announcing a merger with Bunge (an American soybean exporter involved in food processing, grain trading and fertilizer). Improved outlook for agriculture and increased M&A iShares Agribusiness UCITS ETF vs MSCI World in June 2023 | Source: Bloomberg The strong performance across agribusiness stocks were also seen in yesterday's US equity market session with positive gains across companies with agribusiness storage, transportation, machinery, seeds, and fertilizer. Higher grain prices have lifted the agribusiness sector in the equity market with the iShares Agribusiness UCITS ETF up 8.1% in June while the global equity market is up 5.1%. Droughts across the Northern Hemisphere have negatively impacted expectations grains production and to make things worse it is happening while commodity markets are on high alert over the return of El Niño which has the potential to aggravate the situation even more. Climate change is the key upside risk to food prices that could cause food prices to rise faster than what we have observed since the early 1990s.Įxtreme weather conditions drive grains higherĪs highlighted in our recent commodity notes Commodity weekly: Best month in over a year and COT: Speculators wrongfooted by grains surge June has been good for commodities overall, but especially for the grains sector.The long-term outlook for food prices have improved and thus also the outlook for agribusinesses driving more mergers and acquisitions.The grains sector is the best performing in June among all commodities and it has lifted agribusiness stocks up 8.1% in June compared to just 5.1% for global equities.
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