Duxton’s Agri Bits and Pieces – Special Report
Posted on: February 17th, 2017

S&P GSCI Agriculture Inflation-Adjusted Index

As shown in the graph below, the S&P GSCI Agriculture Inflation-Adjusted Index is currently at its lowest level since the inception of the index. Since its peak in September 1974, the index has declined 5.3% p.a.

Source: Bloomberg
Inflation Adjusted Price of Wheat

As shown in the graph below, the inflation adjusted price of wheat per tonne is currently the lowest it has been on record. As the market proverb goes “the best cure for low prices is low prices” and as such, the USDA reports that this year’s USA wheat planting will be the lowest since 1882. Driven by these dynamics, the World Bank is predicting an increase in wheat prices over the next 10 years.

Source: USDA, World Bank
Forecast
Source: World Bank
Inflation Adjusted Milk Prices

Whilst there has been volatility around farm gate milk prices lately, international dairy prices have recovered significantly in recent months, increasing by over 20% as global supply and demand return to balance. The IFCN expects world milk prices to increase by 46% over the long-term. Using current exchange rates, this would equate to a milk price of AUD$7.61/kgms or 56.7 c/L. This is comparable to the prices achieved in the period between 2007 and 2014.

Source: Dairy Australia, IFCN, Bloomberg
Forecast
Source: World Bank
Inflation Adjusted Cotton Prices

Cotton has been in a bear market since 2011. Whilst cotton prices reached their all-time lows in 2002, the current inflation-adjusted price is only $0.12/kg higher. This current price is approximately 52% below the 2011 high and 67% below the 1973 high. The World Bank estimates cotton prices to rise 29% over the next 10 years.

Source: World Bank
Forecast
Source: World Bank
Inflation Adjusted Soybean Prices

Soybean inflation adjusted prices bottomed out in 1999. Since then, prices have rebounded approximately 48%. However they still remain 23% below their 1960 price and 33% below their 2012 price. The World Bank estimated the price of soybeans will increase 14.9% over the next 10 years.

Source: World Bank
Forecast
Source: World Bank
 

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