A medium term outlook for selected agricultural commodities

Analysing the development of food and agricultural raw material markets during the past twenty years, two phases could be distinguished. Following a long period with production surpluses, comprehensive stocks and stable prices, in the seventies the situation changed dramatically. During 1973 and 1974 food prices have nearly quadrupled on average (with substantial differences between individual commodities) and those of agricultural raw materials more than doubled (see Figure 1). The upsurge of food prices reflected above all poor crops in some importing regions for grains - crop failure in the USSR played an important role - as well as decreases of grain and oilseed production due to bad weather conditions in major exporting countries (in particular in the United States). On the international markets for sugar and beef production and supply shortages were mainly a consequence of producer responses on disappointing prices in the years before. For agricultural raw materials, the upswing in economic activity in industrial countries during 1973/74 - with a largely parallel course of the business cycle in individual countries - strongly stimulated demand and pushed up quotations since simultaneously supply development has proved as less dynamic. Finally, pessimistic expectations with regard to future supplies of agricultural commodities and fears of commodity cartels following the OPEC-price cartel were temporarely important market determining factors.