Predicting the unpredictable
Welcome to this new and expanded issue of the IEG Vu annual Global Outlook which you can download below.
Every year in December, our expert IEG Vu analysts cast their eyes back on the preceding 12 months and try to make some informed and accurate predictions for the next 12 months.
The only true certainty about agro-industrial products and commodities is that nothing is ever certain. Politics and the weather (or climate) are the two biggest factors. Politics usually has an immediate effect, while the climate’s effects are slower to take effect but probably, in the long run, more long-lasting.
Taking the weather first, climate change is changing everything. The oceans are warming up, which is altering the behaviour pattern of fish, so the tuna market has seen some wild fluctuations. On land, there have been droughts and heatwaves in many countries and these are seriously disrupting planting, harvesting and production patterns.
The problem is often not simple heat, dryness or floods, but a toxic chain of all three. Plants get baked by a heatwave, and then washed away from downpours. Nor is it always heatwaves – the very late frost that struck northern Europe this year hammered the red fruit crops as well as the apple trees in Poland, Germany, Austria and Italy, and seriously damaged the vineyards in France.
Politics usually manifests itself in the form of tariffs, quotas and other import restrictions. At present, the Russian embargo on all manner of fresh fruit and vegetable imports from Europe (and elsewhere) is making life tough for farmers, and governments have had to step in to buy surplus produce and convert it to processed form, usually for institutional feeding programmes. Spain has been particularly active in this.
Probably the biggest political issue at the moment is that of the UK’s departure from the European Union. Brexit means that the continent’s second-largest (or third-largest, depending on whose figures you accept) economy will be uncoupled from the EU in all forms of trade, and the UK will have to establish its own trade agreements with the rest of the world – and the EU itself, of course. The fact that there are very few experienced trade negotiators in the UK, as this matter has always been handed by an EU team on behalf of the bloc, is not making this process easy. Still undecided is what the EU and the UK will do about all other bureaucracy that hitherto has come under the EU umbrella – standards, hygiene norms and technical co-operation are just three.
Back to predictions. In the previous Global Outlook report
, our IEG Vu analysts made just three forecasts, all relating to fruit juices. This year, the team are casting their net wider, and making informed analytical forecasts on a wider variety of commodities. This time next year we, and you, will know whether we were right.