Food inflation fears ease as cooking oils and grains plunge


Concerns about rising global food costs are easing as prices for everything from cooking oils to wheat and corn plummet to their lowest levels in months on surging 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 45 percent from its record close in April to its weakest in a year, while wheat is down over 35 percent from an all-time high in March and corn is down about 30 percent its high for the 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 poorer countries particularly hard. Prices are now back to pre-invasion levels.

Investors have reduced their 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 fallen 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 tumbled through the exchange limit in Kuala Lumpur on Wednesday, down 10 percent to 3,757 ringgit per tonne by lunchtime, leading losses in soft commodities. Soybean oil, corn and wheat extended sharp declines recorded in Chicago on Tuesday.

The slump in palm oil comes as top producer Indonesia ramps up exports after easing a ban, inventories are rising in Malaysia and production enters its seasonal peak cycle. 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 corn and soybean harvests in the US still have some way to go before they are secured and the weather over the next two months will be crucial. Data from the US Department of Agriculture Tuesday after the close showed that health ratings for corn and soybeans deteriorated more than analysts had expected. Food inflation fears ease as cooking oils and grains plunge

Fry Electronics Team

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