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Cost of breakfast foods hits 10-year high

The cost of groceries that make up a typical breakfast soars to its highest point in 10 years under the tensions of bad weather and supply chain crises, another of the long list of upward pressures on global inflation. Offers.

The Financial Times breakfast index, based on futures prices for coffee, milk, sugar, wheat, oat and orange juice, has risen 63% since 2019 and has accelerated since this summer.

Food companies are raising consumer prices to protect their profit margins. Nestle When Procter & Gamble Over the past few weeks, it warns that cost pressures will continue to worsen before they improve. Analysts warn that prices will continue to rise as production, processing and transportation costs increase.

Carlos Mela, Head of Agricultural Market Research at Rabobank, said:

Commodity data and research firm Gro-Intelligence analyst Wilosnat said food prices fell sharply from 2016 to 2020 due to bad weather and a good harvest, but since then various problems have occurred at the same time. Stated.

The food production problem clashed with higher demand as the rebound from the pandemic proved to be stronger than most people expected. The switch from “just-in-time” sourcing to “just-in-time” purchasing also boosted additional demand for wheat, coffee and sugar. “Global demand is higher than everyone thought,” said Osnart.

Food prices tend to settle at the end of the year as the Northern Hemisphere is the post-harvest season and the Southern Hemisphere begins its growing season, but breakfast products have risen 26 and continue to rise this year.Percentage since Midpoint..

Weather patterns are contributing.The forecaster predict Another period of drought and frost is lined up for the second consecutive year of the La Niña meteorological event.The cost of fertilizers made from natural gas by many manufacturers has skyrocketed as well Stop Their plants are becoming more tense due to soaring gas prices.

During the year of extreme weather, producers in many major food production areas faced a decline in production. Wheat futures prices have risen 20% since the beginning of the year as Russia, North America and Argentina were both affected by the drought and European producers were hit by rain. The last time wheat prices soared to current levels was the aftermath of the 2012 drought in the United States.

Meanwhile, the price of oats has doubled this year after nearly half of the crops have been wiped out by a severe drought in Canada. As the world’s largest producer and exporter of oats, according to Gro, Canada’s oat production is driving world trade, with its crops shrinking 44% this year.

Drought In Brazil, large sugar and coffee producers and exporters are hitting both commodities. Sugar has increased by 26% since the beginning of the year and coffee has increased by 56%.Farmers in the largest coffee-producing areas also suffered unseasonal damage frost Many trees were damaged in July, raising concerns about the next season’s harvest.

Coffee was also one of the products most affected by the container turmoil, Mela said.Transportation continues to be a problem affecting the supply chain, with container charges almost 280 percent higher Since last year, according to the transportation group Drewry.

Many of the hedging agreements signed by large roasters are expected to end at the end of the year. Earlier this month, customers’ coffee prices will rise next year, said François Xavier Roger, chief financial officer of Nestlé, the world’s coffee roaster.

Strong demand has led to higher prices for milk and orange juice, the first pandemic, and continues to be supported by an increasing number of consumers eating breakfast at home. Increasing demand for biofuels is also pushing up the prices of vegetable oils such as canola, soybean oil and palm oil.

Higher prices usually reduce demand while encouraging increased production. However, this time it warns analysts that adjustments can be slow. “At this point, there are no signs of that. There is certainly confusion,” said Amy Reynolds, an analyst at the International Grains Council.

A million tonnes column chart showing a plunge in Canadian oat production

Demand for “just in case” continues, and poor crops in developing countries have led to higher grain bids. “Despite the price level, there are no signs of a disruption in demand. How high should the price be?” Reynolds asked.

Rising costs for farmers will make it difficult for them to take advantage of higher prices to increase supply.

“All produce will be affected by the lack of fertilizer prices in the short term,” said Kona Haque, head of research and trading firm ED & F Man. This year’s severe drought means that many farmers may not have had the harvest to benefit from higher prices. This will hurt the amount of seeds, fertilizers and pesticides they can buy next season, she added.

If you’re lucky, with exceptional weather conditions and a good harvest next year, it’s not enough to restock and lower prices to previous levels, analysts said.

“It will take more than a year to get out of the current supply shortage,” said Gro Osnato.

A line chart of US futures prices, Rebase (2019 = 100, 14-day rolling average), shows that oat and coffee prices are leading the breakfast ingredients rally.

Cost of breakfast foods hits 10-year high Source link Cost of breakfast foods hits 10-year high

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