Prices for bulk contracts of coffee, milk, sugar, wheat, oats and orange juice have jumped 28 per cent on average from 2019 levels, according to trading on US futures markets, where companies lock in supplies or hedge their exposure to commodities costs. For meat-eaters, adding pork to that list pushes the average price rise to 32 per cent.
“The cost of raw ingredients accounts for only part of the overall price paid for products at the supermarket or in restaurants, but substantial cost rises were likely to be passed on to consumers, said analysts.”
The FT article noted: “‘Food inflation is real in many places. It’s not going away soon,’ said Abdolreza Abbassian, senior economist at the UN Food and Agriculture Organization. In April, the FAO’s real food price index — which tracks a wide range of products — hit its highest level in a decade.”
Bruce-Lockhart and Terazono explained that, “Strong demand from China, stockpiling of grains by governments since the outbreak of Covid-19 and dry weather in key exporting countries have all contributed to rising prices of agricultural products.
And Reuters writers Tom Polansek, Ana Mano, and Agustin Geist reported this week that, “Beef prices are surging worldwide, taking meat off the menu in steak-loving Buenos Aires and spoiling summer barbecues in the United States as Chinese imports rise and the cost of feeding cattle soars.
“Globally, the surge is contributing to the highest food prices since 2014, according to the United Nations food agency, hitting poorer consumers particularly hard as they struggle to recover from economic shutdowns triggered by the COVID-19 pandemic.”
The Reuters article noted that, “U.S. beef exports to China hit a monthly record in March of 14,552 tonnes, according to the U.S. Department of Agriculture, well above total shipments in all of 2019. A growing middle class in China is making room for beef in a diet that has long been pork-based.”
Global grain stockpiles could grow even slimmer next season, exacerbating a supply crunch across crop markets already pushing up food prices.
“The International Grains Council cut its inventory estimate for the 2021-22 season to 595 million tons, the lowest in seven years, according to a report published Thursday. Rising animal-feed demand and a drought-stricken Brazilian corn crop are outweighing bumper harvests elsewhere, shrinking the world’s grain supply cushion for a fifth straight season.”
Meanwhile, Bloomberg News reported this week that, “U.S. Trade Representative Katherine Tai and China’s Vice Premier Liu He had a ‘candid’ first conversation as the two sides try to resolve some of their differences on trade.
“The trade chiefs spoke Thursday morning in Beijing, China’s Ministry of Commerce said in a statement, and ‘conducted candid, pragmatic and constructive exchanges in an attitude of equality and mutual respect.’
“In a separate statement, the USTR said ‘Ambassador Tai discussed the guiding principles of the Biden-Harris administration’s worker-centered trade policy and her ongoing review of the U.S.-China trade relationship, while also raising issues of concern.'”
Keith Good is the social media manager for the farmdoc project at the University of Illinois. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily FarmPolicy.com News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.
In an update from the Federal Reserve Bank of Kansas City earlier this month ("Larger Livestock Loans Boost Farm Lending"), Nathan Kauffman and Ty Kreitman stated that, "Demand for livestock loans grew in the third quarter, boosting agricultural lending activity at…
Bloomberg writers Kim Chipman and Elizabeth Elkin reported late last week that, "Skyrocketing fertilizer prices could lead U.S. corn profits to drop by about a quarter next year, potentially motivating farmers to shift millions of acres into less cost-intensive soybeans."
On Wednesday, the Federal Reserve Board released its October 2021 Beige Book update, a summary of commentary on current economic conditions by Federal Reserve District. The report included several observations pertaining to the U.S. agricultural economy.