Inflation felt in food prices

Food prices are feeling inflationary pressures. This has the potential to hinder consumer spending power as consumers are trying to handle the fall out from the COVID-19 pandemic. A Bloomberg opinion piece on Monday highlighted a few different factors in play:

  1. First of all supply levels are tightening. This can be partly attributed to China absorbing cargoes to meet their trade-deal obligations.
  2. Secondly, adverse weather like droughts and storms have reduced both corn and sugar prospects.
  3. Thirdly, the anticipated arrival for the coming La Nina weather pattern may make this situation worse.

Some key dates ahead

The USDA will release its key monthly estimates on Friday 09 for global supply and demands. If we see a further deterioration of supply stock in Soybeans that should further boost Soybean futures. US September soybean stockpiles fell 42% y/y in September which is the biggest drop in 12 years.

Before that release, we will also have the United Nations release their world food price index. It will show how rising prices have now impacted the cost of food after costs dipped much lower in May to a four year low. This short term dip is in the past now due to the factors listed above. It is possible that by the end of the year the index could be topping January’s high which would make for the highest levels since 2014.

Apart from Soybeans, which hit a two-year high in September, here are some key markets to watch.

  • Sugar has posted its fifth month gain.

  • Corn hit an 11% gain in 3Q.

Friday and the USDA release will be key, so commodity trades keep that in your diary. A break and hold of the trend line below will see more upside in Soybean futures.