Olam Expects Low Grain Prices Into 2017
Global grain gluts and weakening demand out of China are leading Olam International, one of the largest commodity traders in the world, to forecast that grain prices will stay low into 2017.
Although beneficial to customers such as Kellogg and Nestle, agribusinesses are facing serious headwinds as wheat prices are at their lowest in ten years and corn prices are at their lowest since 2008.
"Prices will stay low for the next six months," Olam’s chief executive officer, Sunny Verghese, said in an interview in Singapore last week, reports Bloomberg. "We have very burdensome balance-sheets across the entire grain complex.”
Olam goes on to state that the chances of a La Nina weather pattern appearing, which could cause Australia to be wetter, parts of the U.S. colder, and Brazil drier, and ultimately raise grain prices, are not likely to
emerge either this year or in 2017.
Verghese foresees a record corn crop this year, however despite consecutive bumper crops, he says that the current low prices will not be long term, as they are a cyclical phenomenon.