Droughts, rains, and fires from Asia to the Americas are heightening harvest fears, pushing up prices of staple foods, which could eventually lead to higher food costs, Bloomberg reports, UNN writes.
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The Bloomberg Agriculture Spot Index, which includes nine major commodities, is on track to rise about 7% for the month, its highest since Russia's invasion of Ukraine. Although it is still far from the peak of that year, the rise comes as farms from Brazil to Vietnam to Australia struggle with both flooding and excessively dry weather that threatens sugar, grains and coffee, the publication points out.
"We've recently seen a confluence of worse weather conditions that have led to higher prices," as uncertainty over supply means buyers are willing to pay more, said Michael Whitehead, head of agribusiness analysis at ANZ Group Holdings Ltd.
This, as indicated, marks a reversal from earlier this year, when food prices were largely held in check by healthy supply and weakening demand in key markets such as China. If the situation continues, it could affect supermarket prices, said Dennis Woznesenski, deputy director of sustainable and agricultural economics at Commonwealth Bank of Australia.
It is noted that smaller crops such as cocoa, which are essential for chocolate producers, also rose in price in 2024 following shortages in West Africa, and weather changes led to a sharp rise in vegetable prices in some countries.
Wheat futures in Chicago rose in September amid fears that bad weather in exporting countries could further reduce global stocks, which are already approaching a nine-year low. Australian fields are facing threats of both drought and frost, and the lack of rain in the Black Sea region is holding back crops for next year's harvest, the publication points out.
Meanwhile, soybean futures are on track for their biggest one-month gain in two years, as top producer Brazil battles its worst drought in a decade. The dry conditions that have been holding back early planting are expected to persist in some areas, according to forecaster Maxar. Fires have also broken out in the country's sugar cane fields, sending sweetener futures up nearly 17% this month.
Arabica coffee has risen to its highest level since 2011 as bad weather there affects the trees during the crucial flowering period. The usually cheaper Robusta coffee variety has also been hit by the bad weather, making it almost as expensive. A drought in Vietnam's coffee belt, followed by heavy rains as harvest approached, has hurt production in the main producer.
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And elsewhere in Southeast Asia, palm oil supplies are shrinking as trees age, pushing futures to a five-month high and a rare premium over rival soybean oil.
"All of this means more problems throughout the supply chain, from farmers fighting theft of coffee beans to consumers shelling out more money for burgers. And hedge funds are betting on further increases, raising net bets on sugar, soybean meal and cocoa as of September 24, government data show," the publication points out.
Drought in much of northern and central Brazil is reportedly likely to continue to threaten the agricultural heavyweight's harvest, JPMorgan Chase & Co. analysts said in a report last week. Plus, traders are keeping an eye on tensions in the Middle East and Black Sea, as well as how the results of the upcoming U.S. election will affect trade relations with China, Whitehead said.