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04.11.202121:23 Форекс анализи и прегледи: Cost of food commodities rises again, holding new records

The UN Index, which tracks essential foods from wheat to vegetable oils, rose as much as 3% in October, indicating a new ten-year high. At the same time, the threat of further increase for end consumers, who are already facing the challenges of a new COVID-19 outbreak, remains at its highest.

Global food prices rose again last month, threatening the economy with new records, and increasing the momentum of consumer price increases.

Poor weather conditions this farm year have hit crops around the world. Besides, transportation costs skyrocketed and labor shortages affected the food supply chain from farms to supermarkets. The energy crisis also had a negative impact on producers, forcing greenhouses to incur additional costs and causing an additional risk of increased fertilizer bills for farmers. Global hunger levels reached multi-year highs back during previous Covid-19 outbreaks and are at risk of rising again, updating its readings.

Abdolreza Abbassian, senior economist at the UN Food and Agriculture Organization said that the problem with materials and fertilizers and their impact on next year's crop was worrisome. He noted that by that time the market had accounted for most of the supply and demand issues. Abdolreza Abbassian added that the market had not considered next year's production prospects.

It means that market players are already aware of current prices. However, producers and investors are concerned about a combination of future factors, therefore futures may be volatile. It could heighten bank and investor fears about inflation

Exchange Rates 04.11.2021 analysis

Some regions are likely to continue to face food security concerns. On Thursday, the UN raised its global wheat trade forecast to a record high as purchases in Middle Eastern countries from Iran to Afghanistan are rising. Drought has reduced crops, increasing reliance on imported grain. Besides, it occurs amid rising prices.

Abbassian said that it was the worst time for those countries as world prices were so high. However, he noted that people would not survive if 2022 turned to be a poor year for significant crops

The rise in prices harkens back to the tough years of 2008 and 2011, which contributed to the global food crisis. While it takes time for commodity costs to be reflected in supermarket prices, officials in regions like North Africa and Turkey are already struggling to protect shoppers from the blow.

According to the FAO, high farmers' costs could also stop cultivation of crops in the Northern Hemisphere, which are now planted. For example, the cost of nitrogen fertilizer hits producers hard, affecting the cost of production. Russia is going to introduce a six-month quota for these products.

However, there are signs that prices for some foodstuffs are stabilizing.

According to Abbassyan, last month, meat and sugar prices went down. Programs to offer consumers artificial meat are gaining support, although demand is falling.

The specialist believes there are enough global grain and oilseed stocks to meet demand, and prices for rice, one of the world's most important foods, remain low.

Abdolreza Abbassian said that people had better understanding what products they needed. He noted that uncertainty was probably decreasing.

Actually, that sounds rather uncertain. First, it is due to the fact that regulators do not have answers that will satisfy consumers and reassure producers. Food futures will rise in the coming days. Besides, this trend will likely continue until spring.

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