Filippo Roda: Agrifood commodities under pressure

Agrifood Commodities Under Pressure: Uncertainty and Unprecedented Price Volatility
Filippo Roda’s presentation during the 2025 Tomato News Conference @ANUGA on 5 October 2025

Click on the image above to watch the recording on Vimeo or read the transcript below.
All the slides are available HERE

Thank you for the invitation, and good afternoon everyone.

Just a brief introduction before I start. At ARETE we analyze agri food commodities, aiming at forecasting their future behaviour, both in terms of market fundamentals, so basically supply and demand, and in terms of prices and the goal is to provide market operators like you instruments data to optimize their buying, selling or purchasing strategies. This is to say that today as an analyst, I will show you most likely food commodities dynamics and trends, drawing insights from data from numbers and from statistics. Well, as you can see from the title of my presentation, over the past five years, most agri food markets have been impacted by a record level of uncertainty and of price volatility, representing a major challenge for all operators across the supply chain.

Indeed, since the second half of 2020, the agri food commodities have experienced numerous and repeated supply and demand imbalances driven by both exogenous and endogenous factors. Many have been mentioned at the beginning of this conference. In the list, you have key factors that have contributed to supply and demand imbalances.

It’s not only pandemic driven factors like the post Covid Chinese demand reprice, but there is first asset that have directly impacted the production. First, the climate shocks with adverse weather events in key commodities, producing and exporting regions that are increasingly frequent and increasingly intense with climate change, but also animal disease. Think, for instance, of the fact of the spread within the Europe of avian flu, of ruminants viruses on eggs and milk production.

Production has been impacted also by input cost crisis. I mentioned energy crisis. And these are huge impact not only on energy intensive agri food commodities on transformations, but also on energy related commodities. Think of those commodities that can be used for the production of energy, for instance, corn and sugar for the production of ethanol or vegetable oil for the production of biodiesel.

There is also a set of factors that impacted the supply by affecting trade. And these factors, have a huge impact, especially on markets with a larger share of trade over production, and for markets where exporting regions are far away from importing regions. Among these factors, you see logistics and transport prices. You see also currency dynamics, with currency dynamics affecting the relative competitiveness of export and import in different regions. And many of these factors have contributed often to diverging price trends across different regions for the same commodity.

And I will provide you some examples later on during the presentation. And you always have to consider that all of these factors have to be considered within a normative framework that is increasingly complex with an increasing number of policies. Think of US tariffs, think of environmental policies, animal welfare policies, ban on export,export restrictions, import restrictions, all factors that are contributing to increased market complexity, market uncertainty, providing, I would say, the perfect field also for some speculation, both on the financial and on physical market.

Most of these factors have impacted the supply of agri food commodities within a context of a quite inelastic demand for agri food products. So basically this resulted in a deficit, and this resulted in a sharp reduction of global agri food commodity stocks. And as you can see from the chart for the next marketing era, stocks of most agri food commodities are still forecasted to be well below pre-crisis level.

This is even true for commodities that in the last 2 or 3 marketing years have experienced a partial stock rebalancing.

You see, for instance, how cocoa butter, holy oil, coffee stocks for the next marketing year are forecasted more than 25% below the 2019/20 levels. And this is important not only because the stocks are a proxy of market abundance, but also because the stocks act as a buffer against price volatility when shocks occur. The fact that stocks are still low means that markets have still a high degree of fragility, a high degree of vulnerability and they are exposed to other new unpredictable shocks.

Now prices overreacted to the market fundamentals dynamics with record high price volatility and with almost all commodities that over the past five years have reached the record high level of prices

In this slide, you have some examples. On the top left you have tropical commodities cocoa, coffee and sugar. On the top right you have vegetable oils, coconut, sunflower, palm, olive oil. On the bottom left you have grains. And on the bottom right you have animal products, mainly eggs and dairy products. Now, if you look at the first row of the table below charts, you see how prices for all these commodities are still well above the pre-crisis level, well above 2019 levels.

This is true, of course, for commodities that are still experiencing inflation and that are still at record high prices. Coffee, coconut oil prices only in the last year have increased by more than 50% and are now trading on levels that are three, four times higher compared to 2019. And the same is for eggs or butter.

But this is true also, and more importantly, for commodities, that in the last three years have experienced some stock rebalancing. Look at grains. Despite, huge drops compared to the peak that have been reached between 22 and 23, prices are still above pre-crisis level, with prices dropped around 10% in the last year, but are still 5-7%, year to 2019, suggesting not only that the market takes time to normalize to rebalance, but also suggesting the possible formation of a structurally higher price floor compared to 2019.

Finally, there are also some markets that, after having experienced some deflation, are now rebalancing. Look, for instance, at sunflower oil, coconut oil, palm oil prices are highlighting exactly what I told before. Market are still fragile, are still vulnerable, and new shocks can immediately impact on prices. Because we do not have stock buffer.

Now, as I mentioned before, trade driven supply shocks have often resulted in diverging price trends across different regions for the same commodities. And here you have some examples. Look at the top two charts. You see, for instance, the widening gap between European and global markets for sugar and rice. As you can see, prices in the European Union have reached there or are still at a record high level compared to international benchmarks.

And this has not been driven only by a disappointing European Union production within a context of increasing sugar and rice production in other key exporting and producing regions but has been driven also by many of the factors that I’ve mentioned before. Think of the impact of the Suez Canal blockade on the European Union rice imports from Asia, both in terms of cost and delivery times. Think of energy crisis, the impact of energy crisis in the European Union beet processing.

But there are also several policies that have impacted these markets. Think, for instance, about, the Indian rice export ban in 2022/2023 or import taxes in the European Union when you have to import sugar. And another interesting example is what’s going on in the olive oil market where we have diverging price transfer within European Union, you see Italian prices, the yellow line ever recorded premium over European Union prices. And again, this is not only because an increasing, a rebounding Spanish production in the past marketing year within a context of a stable or a declining Italian production. But this is also because a more than expected the level of rigidity of the demand for Italian product, because of consumer preferences, but also because of labelling rules. You see, policies, what we call, in general, a perfect storm.

Well, before, going on, I just want to provide you some, case studies, some examples of what I mentioned here. You see, for instance, some of the key production drops that most markets have experienced over the last five marketing years.

You see, for instance, 40% drop in European Union olive oil production in 21/22.

You see, for instance, a more than 50% drops in durum wheat production in Canada in 21/22, with Canada being the leading global durum wheat, producer and exporter. But you see also how Brazilian arabica coffee production, and cocoa production in Ivory Coast dropped more than 27 and 25%, respectively, in 2021 and 2023, with Brazil, for instance, accounting for more than 30% of global green coffee export. And if we consider only arabica variety, this chat got even at even larger.

And what you see is that, basically after such a shock, production takes time to recover and often remains well below pre-event levels for several years. If you see the dashed lines, you see the average prices. And again, the main drivers have been, supply related, supply shocks, but also policies.

This is, for instance, the case for milk production in the European Union. The bottom right graph with European Union milk production that is lowered down also by an environmental policy with the lower herd size that is not always offset by increasing yields. Here you have some of the factors that instead are resulting in volatile and in spillover effects on commodity arising from input costs.

I mentioned an energy crisis. Look at the first chart. The, orange line is the natural gas price in the European Union. Of course, the price is well below the peaks that have been reached during the energy crisis. But prices are still above, well above prices, of the pre-crisis level.

In the European Union, the natural gas price between 2018 and 2020 was around 10 to 15 euro megawatt hours. Today, natural gas is pricing, let’s say, between 30 to 35 euro megawatt hours because of a structural change in European Union supply and demand. We have a more expensive supply because we cannot rely anymore on cheap imports from Russia. We have to import from the US liquefied natural gas that is more expensive because of transportation cost and because of regasification.

And you also see the lower competitiveness of the European Union compared to other producing regions. You see, for instance, the premium of natural gas in the European Union over the price of natural gas in the US. You see the yellow line over the red line. Of course, energy crisis also have an effect on fertilizers. You see how fertilizers costs are still 50% above pre-crisis level.

And in this slide I want also to mention the bottom right graph. Despite we are entering in a phase of interest rate cutting by the European Central Bank and by the Federal Reserve, you see how interest rates are still relatively high. Inflation do not leave room for a huge interest rate cut, meaning that the cost of capital is still relatively high, capping production of foremost commodities.

Here you have instead some of the factors that have an impact or are still having an impact on trade. I have mentioned currency dynamics. See, for instance, the Eurodollar exchange rate, the yellow line. In the last, over the past five years, the exchange rate have dropped close to the parity or below parity at least twice one in between 22 and 23 and one at the end of 24.

And basically a strong, a weak, euro can be considered as a bullish factor for European Union prices, both because you have a lower purchasing power on the import side, but also because your export is more competitive on the export size. You see how now since 2025, the dollar started weakening. Now we have a quite weak US dollar compared to the euro that can be considered as a bearish factor for the prices in the European Union, but it is a bullish factor in the US and for global commodities that are traded in US dollar. You see diverging price trends, diverging effect depending on regions.

In this line, I have also included a graph on container just to provide you an idea of what’s going on in logistic, in transport. And you see how, again, this part we are on price levels well below crisis but that are a still many criticality on the transport side, the Suez Canal blockage, but also as a low down in the drafting the Panama Canal, in Europe, a congestion in European ports, a low water level in most waterways, and so on and so forth.

So all factors that have resulted in stocks drops in important areas. If you are an importer, if you cannot import products, then you have to reduce your stocks. And this is of course a bullish factor, especially for prices in your region. You see, for instance, the drop of coffee stocks in the US and the European Union, -70% since 2020.

So to conclude, the agri food market, after repeated shocks of recent year, still needs time to normalize, let’s say, to rebuild the stocks. It will take time. Multiple marketing year to restore stocks. And as long as market fundamentals have not reached the, let’s say, safe level, markets will remain exposed to volatility with a huge degree of fragility and vulnerability.

Market rebalancing will mainly depend on the recovery of supply. We have seen how demand is quite inelastic. However, following two, three, four years of inflation, some demand disruptions can contribute in the medium short term, to rebalance markets. But I would conclude that for the next marketing era, for most commodities that are still not conditioned for a full normalization, and I cannot exclude the possible formation of a structurally higher price floor.

So before concluding, just a few charts to provide you a connection between my presentation and processing tomatoes. I have not spoken about tomatoes, Martin will do it later as a super-expert, but here you see how most of the factors that I’ve mentioned, most of the dynamics that I’ve mentioned, have affected or are still also affecting the tomato markets with production drops that have been driven not only by planting choices but also by weather event.

You mentioned several times, the weather market, during the introduction of this conference to see for instance, the drop of -17% we have in European Union in 22/23 because of drought compared to 21/22. But you have also mentioned like the, downwards division of Chinese production for the next marketing year, also because, of heavy rain and floods, in critical producing areas.

And still, if you look at prices, you see how prices have reacted with direct volatility over the past five years with record prices that have been reached across all the regions, in between 2022 and 2024, but also with diverging trends. For instance, while U.S. and Chinese prices are decreasing after the record production of last of the past marketing year, you see how Italian prices are still at a record high level.

That concludes my presentation. I hope that I have given you some useful insights. So thank you for the attention. And I pass the floor, to Antonio or to Martin. Thank you again.