Global Food Costs Jump Back Near Decade-High on Harvest Woes
(Bloomberg) -- Global food prices climbed back to near the highest in a decade on smaller crop prospects, reviving concerns about inflationary pressures.
After easing in the previous two months, a United Nations gauge of food costs rose 3.1% in August to near a peak set in May. The advance was driven by reduced grain production expectations, frosts that hurt sugar-cane crops in top grower Brazil and tightening oilseed supplies, the UN’s Food and Agriculture Organization said Thursday.
World food prices have rallied about 33% in the past year, increasing inflation risks for central banks as well as consumers, particularly those in poorer nations that are dependent on imports. Food supply chains have also been affected by a shortage of workers amid the coronavirus pandemic and higher shipping costs.
The chances of any relief in prices in the coming months will probably be limited, according to Abdolreza Abbassian, a senior economist at the Rome-based FAO.
“The general tendency still is for firm prices to continue,” Abbassian said by phone. “High prices are usually the best solution for high prices in that farmers, producers respond. But of late, there’s a new factor with less control than the past, and that is the weather situation.”
The FAO on Thursday cut its estimate for world grain stockpiles, partly because of a worsening wheat-crop outlook amid prolonged drought in North America and unfavorable weather in other major growers such as Russia. In Canada, inventories will be the smallest in more than four decades.
The FAO’s index of grains costs climbed 3.4% last month, while a measure of vegetable oils jumped 6.7% and sugar prices spiked almost 10%, the most in more than a year. Weather conditions remain key and the market will be closely watching a monthly U.S. government report next week for the latest clues on how supplies are being affected.
“We will need very good weather” going into next season, Abbassian said. “If anything on the supply side fails to meet expectations, we could stay in this high-price situation for much longer.”
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