Outlook 2020: Supply Slide Saves Grounded Demand

Agricultural commodities were heavily impacted by trade wars, African swine fever, and erratic weather in 2019. According to the RaboResearch report "Outlook 2020: Supply Slide Saves Grounded Demand," many of these factors will remain key for agri commodity prices in 2020.

Video: Outlook 2020

Rabobank’s 12-month outlook for price (compared to forward curve)

Report summary

In 2019, agri commodity markets were impacted by several unprecedented incidents and uncommonly severe conditions. China's hog herd declined significantly, as a result of African swine fever (ASF). This drastically weakened demand for feed and, combined with the US-China trade war, resulted in a significant slowdown in the global soybean trade.

Meanwhile, record US corn- and soybean-planting delays drove corn prices from three-year lows to six-year highs within a few weeks. Then, improved weather, strong export competition, and lackluster global demand saw prices collapse again. These circumstances will continue to challenge markets and impact global supplies and prices in 2020.

As macro, political, and climate risks continue to make their mark on agri commodity markets in 2020, producers, processors, traders, and retailers need to prepare.

Feed demand and ASF

ASF culled about 55% of China’s hog herd, creating a global pork and animal protein deficit and slowing global feed consumption growth. In 2020, China’s feed consumption is expected to rebound slightly, amid a concerted move toward large industrial farms, commercial feed rations, slowing herd losses, and growth in other animal proteins. The increase in less feed-intensive pork replacements (like poultry and aquaculture), however, will restrain feed use.

Meanwhile, global feed growth outside of China will remain steady in 2020. Importantly, a replenished wheat and barley crop in Europe, along with more competitive corn prices, will result in large-scale switching in feed distribution.

FX and geopolitical influence

A ‘phase one’ US-China trade deal appears to be in play, though a comprehensive deal looks unlikely. Under these auspices, China will buy increasing quantities of US agricultural products in the hope that the US will delay introducing new tariffs and possibly lower existing ones. In this context, emerging markets may see some short-term respite.

However, Rabobank foresees a significant risk of a mild US recession in 2H 2020, in which case emerging markets are unlikely to perform well. We remain sceptical that a US-China trade truce will prove to be sustainable. When trade tensions resurface, risk aversion will increase, leading to depreciation across emerging-market currencies.

In Brazil, we see decent GDP growth and a forecast for an appreciating Brazilian real.

On the Asian side, a deceleration of the Chinese economy may result in a further depreciation of the renminbi, which would lead to the depreciation of Southeast Asian currencies.


Funds have seen another year of extreme activity in 2019, with non-commercials reaching record net shorts. In G&O, funds were shortest toward the first half of May. Incessant heavy rainfall across the Midwest prevented plantings and precipitated the most impressive short covering rally ever. Something similar happened with white sugar, as non-commercials reached a record net short position, ignoring the fundamentals in the major exporters. However, trackable commodity trade advisor returns have been rather good. In the context of a possible recession – or at least a slowdown in global growth – funds may feel more inclined toward uncorrelated strategies than to directional strategies.


Unusual weather events across the globe resulted in significant price volatility in 2019. The US experienced the wettest spring planting season on record, resulting in harvest delays and challenges in planting crops. European crops were impacted by short, intense heatwaves. Good rainfall in western Europe allowed for plantings of winter crops, yet parts of southern and eastern Europe still lack rainfall. The Indian Ocean Dipole Index (IOD) reached record levels around September/October, causing the wettest September in India in 100 years and exacerbating the drought in Australia and Indonesia. The IOD will likely remain the primary climate driver for Australia and Indonesia until the end of Q1 2020. We see a small rainfall deficit developing in Brazil. However, there is time for recovery.

Overall, at the time of writing, there is no indication of a major weather event for 2020.

Energy commodities and shipping

Oil markets have come under pressure in 2H 2019, due to demand concerns about the health of the global economy. We foresee potentially tighter oil markets in 2020. OPEC is in discussions to make potentially deeper cuts next year, which the organization will formalize in its December meeting. The oil industries in Iran and Venezuela remain under crippling US sanctions, which we see continuing for the near future. We see firm oil demand growth in 2020 under most economic scenarios. The IMO 2020 shipping fuel change will likely lead to increased crude oil demand from global refiners, on top of growth from developing nations. We expect global crude inventories to reach multi-year lows in 2020, as demand outpaces supply growth.

  • Stefan Vogel

    Global Strategist – Grains & Oilseeds; Head of Agri Commodity Markets
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  • Carlos Mera

    Senior Commodities Analyst
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  • Michael Magdovitz

    Commodities Analyst
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  • Andrew Rawlings

    Associate Commodities Analyst
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