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Improved supplies resulting from favorable harvests have boosted global stocks of most agricultural commodities.
This, along with weaker demand for internationally traded food commodities, has allowed prices to fall back to their December 2007 levels—with the largest declines among agricultural products whose prices had increased the most.
In particular, lower crude oil prices coupled with pressure in many European countries to reconsider biodiesel mandates, has reduced the attractiveness of using edible oils for biodiesel production and contributed to a substantial decline in their prices.
Overall, concerns about the adequacy of global food supplies have subsided, and many of the export bans and high export taxes that were put in place during the food price spike of 2008 have either been eliminated or substantially reduced.
Most of the price swings in agricultural raw materials reflect changes in rubber prices, which track the price of crude oil.
Increased production and wider use of genetically modified cotton in China and India meant that the price of cotton did not increase during the boom, and in the past months the price has declined due to weak import demand from China, the world’s largest cotton user (and textile manufacturer).
Prices of beverages declined 30 percent between their peak in June and December 2008, as both coffee and cocoa supplies appear to be ample.
Looking forward, agricultural markets are likely to remain well supplied, and stocks are beginning to return to normal levels, although weather-related production problems (especially in South America) could always intervene.
Easier market conditions are likely to prevail for several years.
As a result, agricultural prices are anticipated to average 21 percent lower in 2009 than in 2008, and prices in 2010 are expected to remain broadly stable.
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