Global Food Inflation Gets Reprieve as Wheat and Oilseeds Tumble
Comment of the Day

June 21 2022

Commentary by Eoin Treacy

Global Food Inflation Gets Reprieve as Wheat and Oilseeds Tumble

This article from Bloomberg may be of interest to subscribers. Here is a section:

Agricultural commodities fell, offering some reprieve to rampant food inflation, as traders weigh incoming data on harvests and looming recessions in some major economies.

Wheat harvests are kicking off across the Northern Hemisphere, with analysts continuing to increase production estimates for some key growers like Russia after favorable weather. The US will give an update on its winter-wheat harvest progress later on Tuesday.

The prospect of recessions is also weighing on commodity prices, according to analyst Agritel. Subdued economies can mean lower fuel use or spur shoppers to cut back on higher-priced foods like meat. Chicago soybean oil is headed for its longest retreat since 2019, Paris rapeseed erased its year-to-date gain and Malaysian palm oil recently entered a bear market as rival producer Indonesia ramps up exports.

Eoin Treacy's view

The oldest adage from the commodity market is the cure for high prices is high prices. I was in two different supermarkets yesterday and failed to find pasta for sale. Meanwhile the supply of instant noodles does not appear to have been impacted, probably because they are higher margin products. The leap in wheat prices and price sensitivity of consumers means demand destruction may already be setting in.

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