The World Bank and agricultural commodity price forecasts
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Posted by MoneyController on 05.11.2024
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At least three factors weigh on the agricultural commodity market when it comes to forecasts for 2025: 1) climate, including climate change, 2) the (broadly defined) energy market and 3) geopolitical dynamics. This is said by the World Bank, which predicts an increase in vulnerability and an overall market decline of 4% for 2025, forecasting instead a stabilisation for 2026. But let us see in a little more detail what some of the effects of these factors might be.
It is not even necessary to explain the reasons why climate and climate change have a decisive influence on agricultural commodities. It can be added, however, that according to many experts, climate change tends to increase the magnitude of certain weather phenomena (remaining in Europe, this is shown by events such as the floods in Emilia-Romagna, Italy, or the recent catastrophe in Valencia, Spain). Although the World Bank predicts a generalised fall in prices, it points out that heat waves could instead act as a bullish factor for prices.
The energy market will affect agricultural commodities, especially in relation to biofuels, the demand for which could push up prices. Similarly, higher energy costs could also translate into higher commodity prices. A particularly low oil price (as a competitor to biofuels), on the other hand, could act in a bearish direction, the World Bank also explains.
From the point of view of international relations or, if you like, geopolitics, there are many factors that could influence commodity prices (that geopolitics also influences prices was reminded, for example, by the dynamics of wheat and sunflower oil prices after Russia invaded Ukraine). According to the World Bank in a bullish direction, for example, the redefinition of some food supply chains could act, as well as the increase of some fertilisers.
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