Des Moines, Iowa: Food Inflation Is Real And Growing

Dec 9

Dec 04, 2020

While it should come as no surprise to any of us involved in the commodity trade, but global food inflation is back. According to the Food and Agricultural Organization, FAO, of the United Nations, during the month of November, its Food Price Index marked its largest month over month increase since 2012; it rose to the overall highest level since December of 2014. The index itself came in at 105, which was 4 points higher than October and was 6.4 points higher than the same month last year. For the month, the Cereal Price Index was up 2.7 points, Dairy was up .9 and the Meat Index up .9, the Sugar Index up 2.8 points, but the real gain was recorded in the Vegetable Oil Index, which gained a whopping 15.4 points. Rising palm oil values were the main driver in this rise, but soy, rapeseed, sunflower, and other veg. oils all contributed. I guess it only stands to reason that oil has lost the least of all grain/soy markets this week.

Needless to say, none of this has gone overlooked in China, and yesterday, the government drafted a new law concerning the oversight of grain reserves. Previously, the central government only tracked the central state stockpiles, but obviously, that will now be expanded to oversee local and regional inventories as well. The rationale for the change in policy given was “new situations and questions have arisen regarding grains reserves security administration, posing severe challenges to China’s grain stockpile security.” I guess this is saying; you local authorities have not been doing a good job, so it must be your fault that we have food price and availability concerns. It is tough to find good help these days.

We do have a little more corn business to report as we wrap up the week. The USDA reports that Mexico has purchased another 182k MT. There have been rumors circulating for the past few days that China has been purchasing more corn, but nothing has been confirmed. Regardless, it does not appear to be providing much support for now as we are staring at a lower close on the combination chart for the first time in the past five weeks.

The same cannot be said for the trade in the equity world. The S&P 500, the Dow Industrials, and Nasdaq are all on track to finish with record-high weekly closes, so optimism reigns supreme over there. The same cannot be said for the dollar though, as if we closed right now, it would be at the lowest point since April of 2018.