Buyer's Brief – A Year Of Two Halves

By Steve Wynne-Jones
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Buyer's Brief – A Year Of Two Halves

The past year has seen no shortage of fluctuations in commodity prices. But what can last year's data tell us about the year to come? Nick Peksa investigates. This article first appeared in ESM Issue 1 2020.

Those sports fans amongst us are all familiar with the phrase “a game of two-halves’. Whilst heavily associated with football in the 1980’s and 1990’s it also seems rather applicable to 2019’s raw material markets.

The first few months of 2019 were played at a relatively easy pace, with commodity prices lacking the energy to run, while the forecast for many food related markets was favourable and prices were decreasing.

However, the second half of the year saw the US-China trade war intensify, as the global dynamics of many markets shifted and consequently affected the global economy. China, as their commodity surpluses declined, started to search for alternative supply from other nations.

Unfortunately, China had to fight a battle on a second front with African Swine Flu (ASF) ravaging the country’s pig industry – as the world’s largest producer and consumer of pork, this had a considerable effect on global supplies and prices.


Depressed Global Economy

The global growth forecast for 2019 recently decreased to just above 3%, its lowest level since the aftermath of the economic crash of 2008/09.

This has primarily been driven by the various trade barriers that have been erected by the US against China, and now the EU; measures that have resulted in global trade experiencing zero growth in 2019. Unsurprisingly, the main casualties have been the US and Chinese economies, with both expected to shrink further in 2020.

This, in turn, has had a knock-on effect on most world economies, however, 2020 is looking better overall with growth expected to pick up by 0.4%.

Vegetable Oil

In February of last year, we discussed the lacklustre performance of vegetable oils. With ample supplies suppressing prices in Europe, it appeared we had statistically reached a point where prices should regress back to the mean. At the back-end of 2019, prices struck back with vengeance.


We knew about the potential problems with European rapeseed, however, palm oil surged to a 16-month high, on the back of strong demand from China and India, with supply being limited by a seasonal productional decline.

A number of factors contributed to the shortfall; a lagged effect of reduced fertiliser application, a decline in the biological yield cycle of the palm trees, issues with ongoing labour shortages, and a lack of replanting and replenishing oil palm groves.

Of course, there are exceptions. Olive oil prices have been steadily dropping all year. Stocks in the EU are estimated to currently stand at 859,000 tonnes, with Spain holding 88% of this. This is expected to increase once the 2019/20 harvest is complete.

In order to relieve pressure on the EU olive oil market, the European Commission recently adopted new measures to provide aid to EU producers for the storage of olive oil. The storage of olive oil privately will enable producers to alleviate the glut of olive oil currently on the market, which in turn will hopefully stabilise the market price.



The last few months of 2019 were also an extremely turbulent time for the tuna industry. Market prices have reached a decade low and the US industry has been embroiled in scandal as Bumble Bee Foods, the largest seafood company in the States, filed for bankruptcy.

The price for frozen skipjack tuna has reduced to a 10-year low, with some indications that deals are being made at USD $875 per tonne and below. Skipjack tuna in Bangkok, a key processing hub, remains oversupplied.

Local fish traders are attempting to stimulate price increases by holding back on offers to the canning industry, however, with no substantial volumes being purchased, prices will continue to remain depressed.


The first half of 2019 saw superb pastures in Europe, however, the situation declined in July and August, as slightly warmer than normal temperatures were experienced in regions of France, northern and central Germany and north-western Poland.


This warmer weather also resulted in below-average rainfall and thus a decline in grass quality, thereby affecting milk yields.  Fresh milk prices are forecast to increase on the back of robust dairy product demand from Asia and the anticipated decrease in milk production (1%) in 2019/20.

We have already seen skimmed milk powder prices surge on the back of strong demand from Asia, the fact that EU intervention stocks are empty did not help. On a positive note, increased demand in SMP should stimulate manufacturing, and as a result the EU butter market in Europe should decrease further.


After steady declines of around 10% a year over the last three years, coffee might have finally reached the bottom of the market. Coffee, as per normal, experienced a pre-Christmas rally.

However, it appears there might be some tightening of supplies on the back of drier than normal weather conditions in Brazil and Vietnam. While stocks are still plentiful, with increasing demand from Asia, we should expect price increases across 2020.


For sugar manufacturers, the first half of 2019 was dire, as a glut in supplies drove prices ever downwards, in turn placing increased pressure on rationalisation of the industry. The second half of the year saw a fightback in the market on the back of news of reduced supply (primarily from India and Thailand).

Expectations of reduced crops may see sugar stocks decline to their lowest values in four years, and we have already seen sugar prices start their rally.

Ending Thoughts

The last few years have seen raw material prices suffer from over-competition, as we know when competition is high, price wars ensue and there is no overall winner. Farmers suffer, manufacturers suffer, and it can bring on a sense of complacency for the consumer, as they expect food prices to remain unsustainably low.

With many raw material prices ascending in the second half of 2019, this should allow the players in the food industry the chance to retrench and prepare for the next ‘match’.

For more information, contact [email protected].

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine

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