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Food Inflation Eases, But Uncertain Crops Slow Wider Relief
USAgNet - 08/11/2022

While the outlook for global crops is improving from the tumultuous weeks after Russia’s attack on Ukraine, the threats of drought, flooding and blistering heat are keeping supplies tight and prices elevated.

Bloomberg reports that crop futures have retreated to pre-war levels, and the UN’s monthly measure of food prices sank the most since 2008. That’s offering some relief to consumers who have faced rampant food inflation since the start of the pandemic. Still, the war is putting more pressure on farmers from the US to India to replace crop losses and make up for the shortfall in supplies from Ukraine, normally a key shipper to poorer nations in the Middle East and Africa.

How much they can provide is in question. Major producers like the US, Brazil and Argentina have been facing yield issues over the last few years thanks to scorching heat, supporting prices at higher levels. Global production of corn and soybeans in 2021-2022 fell short of initial forecasts by 45 million tons. The US Department of Agriculture on Friday is expected to cut its outlook for this year’s US corn and soybean yields, according to analysts polled by Bloomberg, while wheat likely fared better.

“Unlike recent years every single bushel of production matters and even a small yield loss of 1-2% relative to trend is concerning given current tightness in US and global balance sheets,” said Ben Buckner, grains analyst for Chicago-based AgResource Co.

In Europe, the searing heat could shrink the European Union’s grains harvest by 5% versus last season, according to the European Commission. Corn crops have been particularly battered by the scorching weather, boosting the bloc’s import needs and increasing costs for livestock farmers. Agriculture heavyweight France is suffering its worst drought on record and fields are drying up across other key producers like Germany and Romania.

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