Food is becoming more expensive all over the world
The Bloomberg Agriculture Spot Index, which covers nine major products, recorded a monthly increase of more than 7%. This is the highest figure since Russia’s invasion of Ukraine, which sparked sharp increase in prices on the markets in early 2022. While the increase is still far from its peak two years ago, it comes at a time when farms from Brazil to Vietnam and Australia are grappling with both floodsWhat long-term droughtswhich is threatening sugar, cereal and coffee crops.
“We witnessed recently coincidence of worse weather conditionswhich caused prices to increase. Supply uncertainty means buyers are willing to pay more, said Michael Whitehead, head of agribusiness analysis at ANZ Group Holdings.
A bad year for agriculture
This marks a change from the beginning of this year when food prices have been largely kept in check by healthy supply and weakening demand in key markets such as China. If the rebound continues, it could translate into prices in supermarketssaid Dennis Voznesenski, deputy director of sustainable and agricultural economics at Commonwealth Bank of Australia.
Agricultural index herring basic products used to feed farm animals, sweetening drinks and baking bread. Smaller crops such as cocoa, essential for chocolate producersalso saw production decline in West Africa in 2024, which pushed up the price of cocoa beans mid-year.
Rising crop prices. The index achieved its biggest monthly gain in two years / Bloomberg
Problem with next year’s harvest
Wheat futures in Chicago rose in September on concerns that bad weather among major exporters could make it even worse deplete global supplieswhich are slowly approaching the nine-year minimum. Australian farmers they face the risk resulting from both drought and frost. No rain in the Black Sea region makes it difficult to prepare, sow and plant new plants for next year’s harvest.
Meanwhile soybean futures saw their biggest monthly increase in two years as top producer Brazil grapples with its worst drought in decades. Lack of sufficient rainfall limited the early sowing rate, which will probably translate into lower yields in some areas, a Maxar analyst summarized the situation in a note dated Friday. Fires also exploded on sugar cane fields in this country, what caused an increase in futures contracts for this sweetener by about 16 percent this month.
Less Arabica and Robusta
Arabica coffee reached its highest price since 2011 as bad weather has a negative impact on trees also during the crucial flowering period. The less demanding, and therefore usually cheaper, variety of Robusta coffee has also suffered from bad weather, so it is now almost as expensive as its more noble variety. Drought in Vietnam’s coffee beltfollowed by heavy rains as harvest time approached, hurt the performance of the country’s main coffee producer.
In other parts of Southeast Asia palm oil stocks declines as trees age, pushing futures prices for this oil to a five-month high and gaining a rare premium over competitive soybean oil.
Arabica coffee reaches its highest level in 13 years. Droughts in Brazil are the latest threat to the limited global supply of coffee / Bloomberg
All this means more problems throughout supply chainfrom farmers struggling with coffee bean theft to consumers paying more for burgers. They only gain hedge fundswhich are betting on further gains by increasing their net bets on a boom in sugar, soybean meal and cocoa.
Weather and politics
Analysts at JPMorgan Chase said in a report last week that drought across much of northern and central Brazil will likely continue to threaten heavy agricultural crops. In addition, traders monitor tensions in the Middle East and the Black Sea and this, as the result of the upcoming US elections will affect trade relations with Chinaaccording to Whitehead. “There is a reasonable degree of volatility that markets are watching closely,” he said. “Keep one eye on the sky and the other on politics.”
