Outside Influences on the Grains & Oilseeds Industry in 2021

Stefan Vogel, global strategist for Grains & Oilseeds, takes his quarterly look at what RaboResearch F&A's insights into other sectors mean for the G&O industry.

Pandemic’s Impact on the Global Food System

While online shopping is the poster child on the consumer side, showing rapid enhancements and uptick during the pandemic, the supply chains of the future will require resilience, efficiency and greater transparency, with technology helping to build this.

Impact on G&O: The G&O chain has performed pretty well during the pandemic, but some bottlenecks could be seen. With politicians continuing to interfere, due to both the pandemic and the high price environment, G&O supply chains will have to stay agile and improve their use of technology.

Results of Rabobank’s Consumer Food Survey

What consumer habit changes will stick after the pandemic? Some are quite certain: Accelerated online shopping; food service having a higher share of delivery/ghost kitchens; working from home works. Wil the increase in home cooking and baking also stick, after the pandemic?

Impact on G&O: Retail is king when food service is restricted, and with it not only packaging of basic G&O products like flour has changed, but the malt industry, for example, has also taken a hit. Will beer consumption recover if food delivery stays higher and restaurant dining does not fully return to normal? Will online shopping benefit starch use for packaging?

Fertilizer Prices Moved Off Their Decade Lows

Prices across the global fertilizer complex moved off their 10-year lows in 2H 2020 given improved demand. However, heavy supplies and growing production capacity could weigh on prices in 2021.

Impact on G&O: Improved G&O farming margins might not have to be passed on to the fertilizer sector, but land prices might not follow this trend and may try to benefit from high G&O prices.

Brazilian Sugar Exports up, but Companies Exit

Global sugar prices certainly did not rise as much as G&O prices, but they have come off the very low levels seen in past years. Brazil's sugar exports in 2020 reached a new record, up ~70% year-on-year, but 2021 is expected to fall short of last year’s sugar production and export performance.

Impact on G&O: Several G&O companies are, or have been, active in Brazilian sugar and ethanol production. The top global G&O companies have either already exited their whole sugar business (ADM), restructured and moved their business into a JV with an energy multinational (Bunge), announced the exit of their sugar trade (Cargill) or have announced a sale (Dreyfus). Key strategies for G&O companies remain a focused commodity exposure and setup of the supply chain as well as a continued focus on the downstream

Poultry: Covid Recovery Battles Affordability and Feed Costs

Poultry demand will be characterized by strong, ongoing demand, despite ASF-recovery and alternative protein growth (pork, aquaculture and beef). Rabobank expects a dual market trend in 2021, defined by consumers with high spending power driving up demand for premium products in retail on one side, and by price-focused consumers who’ve been economically affected by the pandemic on the other side.

Impact on G&O: In 2020, poultry has risen to the top position in global meat, exceeding 100m metric tons. Poultry is a major feed consumer and given the high share of feed in the cost of poultry production, the current high G&O price environment will also impact poultry margins and demand growth for poultry and feed.

Detailed Regional Outlooks From Farm to Fork

Australia harvested a very good grain crop, the Rabobank Australia Rural Commodity Price Index for the past 12 months is at, or close to, record highs, the country faces a reduced reliance on China and an increasing focus on sustainability. Listen to the podcast discussing Australia’s agriculture outlook.

Brazil’s strong G&O margins drive acreage and fertilizer use up. Strong meat prices help feed use, as well as record pork exports in 2020 and a 6% increase anticipated for 2021.

China’s pork prices came off their highs due to more supplies from the reserves and also slower demand in the festive season, but the African swine fever recovery pace will remain a major uncertain factor. Dairy prices are closing-in on record highs. Fertilizer use is expected to rise, driven by government aims to increase use by 3% and by high domestic G&O prices.

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