No sunny side up for breakfast budgets

YOUR breakfast platter looks set to become more expensive. Drought, disease and rising demand have led to prices of seven key breakfast commodities rising on average almost 25% this year, fuelling consumer fears of food inflation.

“Everything we have for breakfast is up,” said the UN Food and Agriculture Organisation’s Abdolreza Abbassian of increases in the prices of coffee, orange juice, wheat, sugar, milk, butter and pork.

Coffee has soared more than 70% owing to unseasonably dry weather in Brazil, and US pigs have been hit by a virus epidemic, leading to a more than 40% rally in prices.

Wheat prices have been hit by political uncertainty. After edging higher after the extreme US winter, they have been pushed further by the crisis in Ukraine, a key grain producer.

Dairy prices have been bolstered by high demand in emerging markets such as China and Russia, where rising incomes have driven the consumption of milk, butter and milk powder for infants.

Compared with the lacklustre performance of industrial commodities such as oil and copper since January, the strength in food commodities has attracted hedge funds and other investors, fuelling price hikes.

Speculators have started to pile into agricultural commodities, pushing net “long” or bullish positions to the highest level in four-and-a-half years.

There are further risks for breakfast commodities in the next few months amid fears that the El Niño weather phenomenon will create more extreme conditions.

El Niño is the warming of Pacific Ocean surface temperatures that occurs naturally every few years. It can trigger droughts in some parts and heavy rains in others.

Toast could cost even more if drought in India, Southeast Asia and Australia drives up wheat prices.

Hot-chocolate drinkers may face higher prices as El Niño tends to mean hotter, drier weather in West Africa. — © The Financial Times, London