Drought, heavy rains and wildfires from Asia to the Americas are raising crop concerns, raising prices of staple foods and could ultimately raise food costs, Bloomberg reports. UNN.
Details
The Bloomberg Agriculture Spot Index, which includes nine major commodities, is on track to gain nearly 7% for the month, the highest since Russia invaded Ukraine. While still a long way from that year’s peak, the increase comes as farms from Brazil to Vietnam to Australia battle both flooding and extreme dry weather that threatens sugar, grains and coffee, the newspaper said.
Michael Whitehead, head of agribusiness insight at ANZ Group Holdings Ltd, said: “We’ve seen a combination of worse weather recently which has pushed up prices” as supply uncertainty suggests buyers are willing to pay more.
This is said to be a reversal from earlier this year, when food prices were largely supported by healthy supply and weak demand in key markets such as China. If the situation persists, it could affect supermarket prices, said Dennis Woznesenski, deputy director of sustainability and agricultural economics at the Commonwealth Bank of Australia.
Small commodities such as cocoa, which are needed by chocolate makers, will also become more expensive in 2024 after a famine in West Africa and changing weather conditions have caused vegetable prices to rise sharply in some countries, it said.
Chicago wheat futures rose in September on concerns that bad weather in exporting countries could further reduce global supplies. Australian fields are facing both drought and frost, the paper says, while a lack of rain in the Black Sea region is delaying planting for next year’s crop.
Meanwhile, soybean futures are said to be on track for their biggest monthly gain in two years as top producer Brazil battles its worst drought in a decade. Forecaster Makhar said that drought conditions, which have held back early planting, are expected to continue in some areas. There have also been fires in the country’s sugarcane fields, and sweetener futures are up nearly 17% this month.
Arabica coffee has risen to its highest level since 2011 as poor weather there affects trees during the crucial flowering period. The usually cheaper Robusta coffee variety has also suffered from bad weather, making it almost as expensive. Drought in Vietnam’s coffee belt, followed by heavy rains as the harvest approaches, is slowing production for a major producer.
Elsewhere in Southeast Asia, palm oil supplies are shrinking as trees age, pushing futures to five-month highs and a rare premium over rival soybean oil.
“All this means more problems in the supply chain – from farmers struggling with coffee bean theft to consumers spending more on burgers. Hedge funds have been betting on growth since Sept. 24, raising net bets on sugar, soybean meal and cocoa, according to government data.
JPMorgan Chase & Co. Drought, mainly in northern and central Brazil, will continue to threaten the crops of agricultural heavyweights, analysts said. in last week’s report. Moreover, traders are focusing on tensions in the Middle East and the Black Sea, as well as how the outcome of the upcoming US election will affect trade relations with China, according to Whitehead.