Soaring crop prices, renewing fears of food inflation
A crop rally in the U.S. is threatening to make essential food commodities dramatically more expensive, and the costs could soon spill over onto grocery store shelves.
Wheat, corn and soybeans, the backbone of much of the world’s diet, are all surging to the highest since 2013 after gains last week had some analysts warning that a speculative bubble was forming.
Bad crop weather in key-producing countries is a major culprit. Dryness in the U.S., Canada and France is hurting wheat plants, as well as corn in Brazil. Rain in Argentina is derailing the soy harvest. Add to that the fears of drought coming to the American Farm Belt this summer.
Meanwhile, China is gobbling up the world’s grain supplies, on track to take in its biggest haul of corn imports ever as it expands its massive hog herd. Rumours are swirling that the Asian nation is working on one million tonnes of new corn purchases, according to Arlan Suderman, chief commodities economist at Stonex.
“The agriculture sector looks very appealing right now and the money is chasing it,” Suderman said.
The agricultural rally is stirring food inflation fears, because staple crops heavily influence consumer prices for everything from bread and pizza dough to meat and even soda.
The Bloomberg Agriculture Spot Index — which tracks key farm products — soared the most in almost nine years last week.
Wheat climbed as much as 4.7 per cent to US$7.46 a bushel, the priciest since February 2013. Fresh buyers are starting to step in, with both Egypt and Bangladesh issuing new tenders.
Corn rose by the 25-cent exchange limit to as high as US$6.575 a bushel, the highest since May 20, 2013. Soybeans increased as much as 1.9 per cent to US$15.44 a bushel, the highest since June 5, 2013.
Soybean oil traded at levels not seen in a decade. An expected increase in Canada’s canola acreage won’t be enough to alleviate tight inventories, according to Farmers Business Network.