Bloomberg — Droughts, downpours and fires from Asia to the Americas are stoking concerns about crops, pushing up prices of basic foods which could end up resulting in higher bills.
He índice Bloomberg Agriculture Spot -which includes nine main products- is on track to register a monthly rise of around 7%, the largest since the Russian invasion of Ukraine sent markets skyrocketing in early 2022. Although still far from that year’s peak, the rally comes as Agricultural crops from Brazil to Vietnam and Australia struggle with both flooding and an excessively dry climatewhich threatens sugar, cereals and coffee.
See also: The biggest jump in sugar since 2008 is a threat to food prices
“We have recently attended a confluence of worse weather conditions that have driven prices higher” as uncertainty over supply makes buyers willing to pay more, said Michael Whitehead, head of agribusiness insights at ANZ Group Holdings Ltd.
This marks a turnaround from earlier in the year, when food prices were largely kept in check thanks to healthy supply and weakened demand in key markets such as China. If the rebound continues, it could impact prices in supermarket aisles, said Dennis Voznesenski, associate director of agricultural and sustainable economics at Commonwealth Bank of Australia.
The agricultural index tracks commodities used to feed livestock, sweeten beverages and bake bread. Smaller crops like cocoa -essential for chocolate makers- They have also rebounded in 2024 following shortages from West Africa, and weather disruptions drove up vegetable costs in some countries.
Chicago wheat futures rose in September over concerns that bad weather in major exporters could further squeeze global reserves that are already heading toward their lowest level in nine years. Australian fields have been threatened by both drought and frost, and a lack of rain in the Black Sea region is slowing planting for next year’s crop.
Meanwhile, Soybean futures headed for biggest monthly rise in two yearswhile the main producer, Brazil, faces its worst drought in decades. Arid conditions – which have slowed the pace of early planting – are expected to persist in some areas, forecaster Maxar said in a note on Friday. There were also produced fires in the country’s sugar cane fields, which sent sweetener futures up almost 17% this month.
Also read: World agricultural giant concerned about corn in Argentina
He Arabica coffee rose to highest level since 2011since bad weather there also affects the trees during the crucial flowering period. The normally cheaper robusta coffee variety has also been affected by the bad weather, making it almost as expensive now. Drought in Vietnam’s coffee belt, followed by heavy rain as harvest approaches, has hurt production in the top producer.
And elsewhere in Southeast Asia, palm oil supplies are shrinking as trees age, pushing futures to a five-month high and a rare premium to rival soybean oil.
All this means more pain throughout the supply chain, from farmers fighting coffee bean theft to consumers paying more for hamburgers. And hedge funds are betting on new profits, increasing the net bullish bets on sugar, soybean meal and cocoa from September 24, government figures show.
See also: From coffee to soybeans: the worst drought in 40 years endangers Brazil’s crops
Drought across much of northern and central Brazil is likely to continue to threaten crops in this agricultural heavyweight, JPMorgan Chase & Co. analysts said in a report last week. Besides, traders are watching tensions in the Middle East and the Black Sea and how the result of the upcoming US elections affects trade relations with China, according to Whitehead.
“There is a reasonable degree of volatility that the markets are not asleep to,” he said. “Keep one eye on the sky and the other on politics.”
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