Manufacturing News

Agflation to drive food prices up 15 percent

Wheat--a staple grainSkyrocketing agricultural commodity prices are causing the world to re-enter a period of “agflation” with food prices forecast to reach record highs in 2013 and continue to rise well into the third quarter of 2013, says a new report, Agflation, from Rabobank’s Food & Agribusiness Research and Advisory group.

“The impact on the poorest consumers should be reduced this time around, as purchasers are able to switch consumption from animal protein back towards staple grains like rice and wheat,” says Luke Chandler, global head of agri commodity markets research at Rabobank. “These commodities are currently 30 percent cheaper than their 2008 peaks. Nonetheless, price rises are likely to stall the long-term trend towards higher-protein diets in Asia, the Middle East and North Africa. In developed economies—especially the US and Europe—where meat and corn price elasticity is low, the ‘knock-on effect’ of high grain prices will be felt for some time to come.”

Due to the long production cycles of the animal protein and dairy industries, the effects of grains shortages will be more sustained because herds (especially cattle) take longer to rebuild, maintaining upward pressure on food prices. However, food makes up a smaller proportion of budget expenditures in such countries, so the current period of agflation should not lead to the unrest witnessed in response to the 2008 shortages.

The report estimates the Food and Agricultural Organization (FAO) Food Price Index will rise by 15 percent by the end of June 2013. For demand rationing to take place, thus encouraging a supply response, prices will need to stay high. As such, Rabobank expects prices—particularly for grains and oilseeds—to remain at elevated levels for at least the next 12 months.

While the impact of higher food prices should be reduced by favorable macroeconomic fundamentals (e.g., low growth, lower oil prices, weak consumer confidence and a depreciated US dollar), interventionist government policies could exacerbate the issue. Stockpiling and export bans are a distinct possibility in 2012/13, as governments seek to protect domestic consumers from increasing food prices. Increased government intervention will likely encourage further increases in world commodity and food prices, according to the study.

Rabobank expects localized efforts to increase stockpiles will prove counterproductive at the global level, with those countries least able to pay higher prices likely to see greater moves in domestic food price inflation. This is a vicious circle, with governments committing to domestic stockpiling and other interventionist measures earlier than usual—recognizing the risk of being left out as exportable stocks decline further.

In addition, the study warns that global food stocks have not been replenished since 2008, leaving the market without a buffer to adverse growing conditions. Efforts by governments to rebuild stocks are likely to add to food prices and take supplies off the market at a time when they are most needed.

For more information on the Rabobank Group report, Agflation, visit the Rabobank’s website.

Did you enjoy this article? Click here to subscribe to Food Engineering Magazine.

You must login or register in order to post a comment.



Image Galleries

Food Engineering's Food Automation & Manufacturing Conference and Expo 2015

Images from Food Engineering's Food Automation & Manufacturing Conference and Expo in Clearwater Beach, Florida, April 12-15, 2015. The event brought food and beverage processors and suppliers together to gain valuable information on the latest trends and technologies in manufacturing, automation, sustainability and food safety.


Burns & McDonnell project manager RJ Hope and senior project engineer Justin Hamilton discuss the distinctions between Food Safety and Food Defense as well as the implications for food manufacturers of the Food Safety Modernization Act.
More Podcasts

Food Engineering

Food Engineering May 2015 Cover

2015 May

The May 2015 issue of Food Engineering explores effective tools for hitting manufacturing targets. Also, read how processors are looking for faster ways to detect harmful pathogens in food and beverages without sacrificing accuracy or reliability.

Table Of Contents Subscribe

Plant Facility/Site Issues

What issue about your current plant facility/site keeps you up the most at night?
View Results Poll Archive


Food Authentication Using Bioorganic Molecules

This text provides critical tools and data needed to augment routine food analysis and enhance food safety by aiding in the detection of counterfeit, and potentially deleterious, foods.

More Products

Clear Seas Research

Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications,Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.


FE recent tweets

facebook_40.pngtwitter_40px.pngyoutube_40px.png linkedin_40px.pngGoogle +

Food Master

Food Engineering Food Master 2015Food Master 2015 is now available!

Where the buying process begins in the food and beverage manufacturing market. 

Visit to learn more.