Corn, wheat, soybeans and vegetable oils, a small group of commodities that form the backbone of many of the world’s diets. Their prices have risen sharply, sending alarm signals for household food shopping budgets.
This week, the Bloomberg Agriculture Spot Index, which tracks major agricultural products, posted its biggest gain in nearly nine years. With global food prices already at their highest level since mid-2014, this latest price jump is being closely watched as staple crops have a ubiquitous impact on product prices in supermarkets, from bread and pizza dough to meat, and can even affect the price of soda.
Soaring raw material prices have broad implications for households and businesses alike, and threaten a world economy trying to recover from the coronavirus (CCP virus) pandemic, as well as fueling food inflation and causing more pain for families already under financial stress from job loss or income loss. For central banks, price spikes at a time of sluggish growth can present unpopular policy options and may limit their ability to ease policy.
There seems to be a bullish international price force,” said Abdolreza Abbassian, a senior economist at the U.N. Food and Agriculture Organization, in an interview, according to Bloomberg. The signs are that there is little reason to believe that prices will stay at these levels. They are more likely to rise further. Difficulties lie ahead.”
Emerging markets, already under pressure from currency weakness in some cases, are particularly vulnerable because food costs account for a larger share of their spending. For the poorest and often politically unstable countries, the surge in raw materials threatens to further exacerbate global hunger.
“The relentless rise in prices acts as a misery multiplier, plunging millions deeper into hunger and despair,” said Chris Nikoi, the World Food Program’s regional director for West Africa, earlier this month.
The recent crop spike comes after months of price increases driven by growing import demand from China. Corn prices have doubled in the past year, while soybeans are up about 80 percent and wheat is up 30 percent. With Chinese purchases continuing and a string of severe weather conditions threatening crops in Brazil and the U.S., there is little respite in sight. Analysts, including Rabobank, Mintec and HSBC Global Research, believe prices are likely to rise as a result, though conditions will vary from market to market.
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