Food inflation fears are easing as cooking oil and grain prices fall


Concerns about rising global food costs are easing as prices for everything from cooking oils to wheat and corn fall to their lowest levels in months on increasing physical supplies and investors scale back their bullish bets on futures markets.

Alpine oil, the world’s most consumed cooking oil, has fallen more than 40 percent from a record close in April to its weakest level in a year, while wheat has slumped over 35 percent from an all-time closing high in March and corn is down about 30pc from its peak this year.

The Russian invasion of Ukraine in February has stifled shipments of grain and sunflower oil from the Black Sea, exacerbating existing shortages caused by extreme weather conditions and supply chain chaos. This fueled fears of a global food crisis that would hit consumers in poorer countries particularly hard. Prices are now back to pre-invasion levels.

Investors have reduced optimistic net positions in US markets as interest rates rise and the risk of a recession increases. Their bullish net bets on soybean oil have shrunk to their lowest in 23 months, wheat is at its lowest in four months and corn is at its lowest in eight months.

Palm oil fell as much as 11 percent to 3,735 ringgit ($844) in Kuala Lumpur on Wednesday, leading soft commodities’ losses before paring the plunge to 2.8 percent by the close. Wheat rose 2 percent after falling more than 13% in the past three days, while soybean oil, soybeans and corn notably posted sharp declines on Tuesday.

Losses in palm oil come as top producer Indonesia ramps up exports after a ban, inventories in Malaysia rise and production enters the seasonal peak cycle. Indonesia is encouraging exports to shed bloated local stocks and the Palm Oil Committee says stocks could return to normal by the end of August.

The collapse in fossil fuel costs will also reduce demand for plant-based energy such as biodiesel. “Big losses in crude oil, a slump in soybean oil and escalating palm oil export and manufacturing supply are hanging heavily over the market,” said Sathia Varqa, owner of Palm Oil Analytics in Singapore.

Still, the fall in prices could boost demand from top importers China and India, helped by lower tariffs. “The good news is that the crude palm oil reference price for Indonesia and Malaysia for August delivery will be lower, which will lead to a reduction in export taxes,” he said.

The huge US corn and soybean harvests still have some way to go before they are secured and the weather over the coming two months will be crucial. Data from the US Department of Agriculture Tuesday after the close showed that health ratings for corn and soybean fell more than analysts had expected.

The United Nations is expected to release its latest global food cost index on Friday, and it may show a third month of declines from the record set in March following the Russian invasion. Food inflation fears are easing as cooking oil and grain prices fall

Fry Electronics Team

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