Compiled 04/11/2021

Commodity Tracker: 5 charts to watch this week


Topic: August 2021 commodity charts

In August of 2021, tight global supply and market conditions led to high European gas prices, with EU gas stocks at just 58 percent full at the time and many wondering if storage sites will be sufficiently filled to sustain Europe during the winter. In the US Northeast market area, winter gas prices rallied at an all time high following concerns over flat production from Appalachia and lagging regional gas storage inventories. In Iran, Ebrahim Raisi’s inauguration as President came after conflicts between July and early August, with Raisi supporting a return to negotiations with Western European and North American powers regarding nuclear talks and resurrecting Iran’s oil sector. In Russia, 50.2 million megatonnes of wheat were harvested between the start of the 2021-2022 marketing year and August 3, while as of July 29, 1.7 million megatonnes were exported. However, S&P Global Platts Analytics decreased its estimate for Russia’s wheat output for 2021-2022 to 80.2 million megatonnes, citing the decline in the winter crop area. Finally, the Electric Reliability Council of Texas (ERCOT) approved 590.4 megawatts of new generation capacity for commercial operation in July. 

Weather shocks in Brazil ripple across global commodities


Topic: Drought and cold weather impacts Brazil’s farming belt

Brazil’s farming belt braced for the cold weather and dry conditions promised by the La Nina weather phenomenon that was to follow shortly after “the worst drought in nearly a century” experienced by the country. The inhospitable weather conditions simultaneously led to a sharp spike in prices for coffee and sugar in international markets and gave bullish corn traders “further fuel.” Initial estimates of production losses for next year’s crop of coffee vary between 10 to 50 percent, which in turn has pushed up prices. Similarly, corn growers were affected by the drought and frost, with many cutting their Brazil corn production numbers as a result. For the livestock feed industry, a corn shortage has forced the industry to rely on imports, with normal overseas purchases of about 1 million megatonnes expected to increase to 3.5 million to 4 million this year. Orange and sugar output is also expected to be impacted by the frost. Some scientists, such as Lincoln Muniz Alvez at the National Institute for Space Research, have linked the recent drought to the deforestation of the Amazon rainforest, while agricultural experts are concerned that the recurrence of La Nina may extend drought conditions into the new year.

What the soaring cost of breakfast may signal for global food price inflation


Topic: Price surge in raw materials for breakfast staples related to the pandemic

Since the pandemic began, the cost of raw materials used in producing breakfast staples has soared, with many concerned that a commodity boom may push up global food prices for consumers. Culprits of these rising prices for agricultural products include dry weather in key exporting countries, strong demand from China, and government stockpiling of grains following the outbreak of the pandemic. Butter, coffee, milk, sugar, and vegetable oil prices have surged, while futures prices for white corn and rice have increased drastically. As a result of this increase in costs of raw materials, food companies such as Nestle and Unilever announced price increases earlier in the year. Significantly, The Baltic Dry index hit its highest point in more than a decade. For countries such as Egypt and Pakistan, who import a large share of their food, a spike in shipping costs has also added to ingredient prices. 

China hog stocks shed $75bn after swine fever recovery and ‘peak pork’


Topic: China’s recovery and low demand for pork following swine fever

Following massive losses from African swine fever, a resurgence in pork supplies in China has cleared approximately $75 billion of the country’s pork-related equities. The outbreak, which first occurred in August 2018, had just about halved the size of China’s hog herd in 2019, and although supplies have risen and officials have stated that China has fully recovered from the impact of the outbreak, Chinese hog futures dropped more than 50 percent since they first began trading this year. Darin Friedrichs, an analyst at Shanghai-based StoneX, noted that China has “‘entered a period of structurally lowered demand’” after high prices for pork led many Chinese consumers to turn to other proteins.

Rising wheat prices make pasta and bread expensive


Topic: Surging wheat prices and tight supply impact bread and pasta production

A tightening wheat supply across Russia, Canada, and the US and increased wheat prices have meant that end products such as bread and pasta have become costlier for importing countries. The USDA lowered world wheat supply estimates for the 2020-2021 marketing year by 16.8 million megatonnes to 1.066 billion megatonnes. Meanwhile in Russia, wheat output was reduced by 12.5 million megatonnes to 72.5 million megatonnes as a result of a probable smaller winter wheat harvest due to frost between February and March. In Canada, wheat production was lowered by 7.5 million megatonnes to a ten-year low of 24 million megatonnes as a result of drought across the Prairies in July. In the US, wheat production went down 1.3 million megatonnes to 46.2 million megatonnes as a result of similar drought conditions between July and August. Globally, export prices of wheat have increased between 21 percent and 30 percent, generating higher prices for end products for major wheat importers such as Egypt, France, Italy, and Turkey. Egypt proposed to increase subsidized bread prices, which have been fixed for 20 to 30 years. Packaged pasta prices in France are likely to rise an average 10 to 20 percent due to increased durum wheat prices. Italy, who imported nearly 2 million megatonnes of durum wheat from Canada and the US in 2020-2021, may have difficulties meeting its requirement in the 2021-2022 marketing year. Turkey, which sources almost half of its imported durum wheat from Canada, also faces shrinking sources. In the US, a significant increase in bread prices has been seen. As for global durum wheat supplies, according to the USDA, both Canadian and US durum wheat exports plummeted to the lowest since the 1964-1965 marketing year. However, Mexico and the EU gained the chance to increase exports in 2021-2022, with Mexico’s wheat production forecast having gone up 9 percent higher at 1.3 million megatonnes and the EU’s production forecast up by 7 percent to 7.7 million megatonnes. In Russia, a smaller winter wheat crop is partly offset by a larger spring wheat output and significant carryover at the end of 2020-2021, but Russia’s floating export tax on wheat may cost its market share to the EU and Ukraine. Finally, in regard to price outlooks, Australian prices have risen nearly $60 per megatonne; Ukrainian quotes have risen over $70 per megatonne on the year; Russian quotes have risen nearly $90 per megatonne on the year; and Canadian quotes have risen over $40 per megatonne on persistent drought and negative harvest outlook.

It’s been nearly 20 years since inflation has been this high in Canada


Topic: Canada’s inflation rate surges to a new nearly 20-year high

Higher prices for transportation, food, and shelter have led to Canada’s inflation rate rising to a new 18-year high of 4.4 percent in September of 2021. According to Statistics Canada, the transportation index has risen by more than 9 percent, gasoline prices have risen by almost 33 percent, and the prices for new cars have risen by 7.2 percent in the past year. Meanwhile food costs have surged by 3.9 percent and shelter costs have surged by 4.8 percent. Policymakers’ initial downplay of the threat of rising prices as a result of the pandemic and its impact on demand has been contradicted by many economists, who are inclined to think that high inflation may last longer than policymakers initially anticipated.

National Workforce Strategy for Agriculture and Food & Beverage Manufacturing Will Help Address Chronic Labour Issues in Agriculture


Topic: CFA and others develop a National Workforce Strategy for Agriculture and Food and Beverage Manufacturing

The Canadian Federation of Agriculture (CFA) is partnering with Food and Beverage Canada, the Canadian Agricultural Human Resource Council, and the Future Skills Centre to develop a National Workforce Strategy for Agriculture and Food and Beverage Manufacturing in response to chronic labour issues in agriculture. The two-year project “will establish an actionable roadmap to lead the way in addressing workforce and skills shortages in agriculture and the food and beverage manufacturing industry.” The first year will collect information on existing programs and services, identify gaps, and recommend new programs and tools; the second year will develop the project. 

Canada’s food inflation figures are wrong, critics say – mainly because just three grocers supply the data


Topic: Critics claim Canadian food inflation figures are incorrect

After collecting data on the prices of three food sources (evaporated milk, peanut butter, and butter), Melanie Morrison, who runs Saskatoon-based company BetterCart Analysts, has argued that “Statistics Canada’s efforts to track food price inflation data may require a rethink,” raising concerns over the validity of much of Statistics Canada’s data in the wake of Canadians’ tightening food budgets and low fixed incomes. Morrison also states that container sizes are not being accurately reflected in some cases, which means that the amount of food for the price may be shrinking. Morrison claims that her company is able to track real-world food prices “more comprehensively than Statistics Canada to help grocers make what it calls ‘data-driven decisions in real time.’” Statistics Canada relies on data from three chains it “partners” with but the names of which have not been disclosed due to “corporate confidentiality,” according to Heidi Ertl, director of consumer prices at Statistics Canada.

European Corn Risks Being Left in Fields as Gas Crunch Bites


Topic: Gas shortages may risk European corn crops

French corn farmers are being told by gas suppliers to prepare for shortages, to use less fuel, and even to postpone harvest collection if possible, while in Ukraine, increased energy prices have meant a slower harvest to offset expenses. However, if harvested too late, this puts European corn at risk of deteriorating crop quality and reduces farmer incomes. As of October, Ukraine has harvested about a third of its corn, while France has harvested about 32 percent.