RaboResearch In The News

July 2022

Cutting Fertilizer a 'Blunt Instrument'

Farm Inputs Analyst Sam Taylor discussed Sri Lanka’s fertilizer policy, noting that it wasn’t the spark that toppled the government, but part of a series of disastrous decisions. The lack of government funds, due to the country cutting taxes right before the pandemic hit, may have helped drive the “dubious policy on synthetic agrochemicals and fertilizer” that then caused a massive decline in yields, explained Taylor. He also noted the cultural aspect of forcing farmers to reduce fertilizer use to achieve emission goals. “Sudden shocks to the system can have a very visceral response both in the production and supply of food products,” Taylor said. “It’s very much seen by growers as a targeted attack on them as a person and on their culture and how they’ve done things. It’s very often seen as a targeted attack on their livelihood.” Taylor concluded saying, “The world is in a fragile place, and it’s not in a position to allow needy people to be hungry. We need the Russia-Ukraine crisis to resolve itself before we feel very comfortable with confidence in pricing and a lot of soft commodities and fertilizers.”

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U.S. Potato Forecast Framed by War, Drought, Pandemic

Fruits, Vegetables, & Tree Nuts Analyst Almuhanad Melhim discussed issues in the potato industry considering the pandemic, supply chain disruptions, and the war in Ukraine. According to Melhim, these challenges really began in 2019 when there was a short supply of potatoes. “The following year, we planted less acreage because of COVID. So, that led to a smaller area which meant less supply. Then, last year, we had a very dry and hot season in the North Pacific region, and that led to one of the weakest yields in the last 10-15 years, which also led to a smaller crop. You add in the equation short supply, strong demand, that equates strong prices,” explained Melhim. On top of this, the war in Ukraine will impact crop planting decisions this spring. “The impact was indirect. Ukraine and Russia, there is not much going on with the potato being imported from them or exported to them. However, through the impact on grain markets and energy markets, the potato sector here in the U.S. was like any other agricultural sector affected to a large degree,” continued Melhim. 

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Latest Almond Forecast Improves Outlook Sightly 

Senior Animal Protein Analyst Christine McCracken answered a Q&A about the Rabobank Poultry Quarterly for National Provisioner. When asked about the record high boneless breast prices in June, McCracken said, “June chicken sales, as reported by IRI, were already seeing the impact of higher prices. Total sales dollars for the month were $1.2 billion (+18.3% YOY), with total volumes down only 0.8% YOY. Consumer demand for chicken is historically far less sensitive to price changes than other proteins and sales of chicken remained relatively strong throughout the month.” McCracken also provided insights on broiler exports, inflation squeezing U.S. consumers, how rising fuel and input costs impact U.S. poultry production and distribution, U.S. labor shortages, the avian flu, and market trends that will impact small- to mid-sized U.S. poultry operations. 

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Rabobank Analyst Sees Return to Fundamentals

Global Grains & Oilseeds Sector Strategist, Stephen Nicholson, spoke with World Grain about the war between Russia and Ukraine and how it will impact the grain market moving forward. According to Nicholson, if the Russia-Ukraine landmark deal signed July 22 holds up, then price movement on the grain market will be based more on fundamentals, meaning the basic concept of supply and demand and less on fear-based psychological factors. “If you think about it, the market went sharply upward at the start of the war and then has come back down close to where it was before the war,” Nicholson explained. “That gives some indication that about 75% of that was all about psychology and maybe 25% of it was based on fundamentals.” Nicholson added: “I hope we can come back to the fundamentals and set the war and negotiations, and all the confusion around that, aside for now. I’m not saying we can put it to bed, but perhaps now the markets will have to come back and focus on the fundamentals.”

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