BAKU, Azerbaijan, May 10. The unfolding conflict between Russia and Ukraine remains the main driving force and risk factor for global agricultural market, aggravating critically limited stocks, Trend reports via weekly research from JP Morgan, multinational investment bank.
According to the report, the steady increase in energy prices, for natural gas in particular, continues to support the increase in the costs of food production and transportation.
“Since natural gas is the main cost of fertilizer production, we have been seeing structurally high fertilizer prices for a long time in the face of increased energy prices. In our opinion, increased production costs will continue to lead to higher prices for agricultural products in an attempt to stimulate supply-side responses,” JP Morgan said.
The bank also maintains the opinion that corn will remain the most vulnerable to the agricultural market due to the conflict with Russia in Ukraine, as well as the risks of shortage in the long term due to problems with the upcoming spring sowing in Ukraine.
At the same time, wheat prices are likely to be at the greatest risk of price increases from current levels, as consumers have limited forecast coverage and buy hand-to-hand, and production prospects are deteriorating, the report added.
Meanwhile, vegetable oil is also exposed to severe risk especially after Indonesia announced that it bans the exports of edible oil. The existing loss of Ukrainian sunflower oil exports on the global market also adds to this, the bank noted.
“We stay long the agri complex via an index. Our price forecasts in 2022 and 2023 sit well above current futures curves, and consumers are well placed to take advantage of the backwardation across markets particularly considering structurally higher fertilizer and energy costs for the foreseeable future,” JP Morgan concluded.
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