Deteriorating weather conditions could entail food inflation! Experts warn of this twist so that the authorities can cushion a blow and save crops.
Currently, leading agricultural producers are struggling to cope with scanty supplies and rising prices of essential agricultural products. The reason is a series of natural disasters, particularly the onset of droughts, frosts, and heavy rains. Analysts caution that negative climate changes and geopolitical turmoil are the catalysts for rising prices of agricultural plants.
In turn, financial markets are sensitive to deteriorating weather conditions. As a result, the Bloomberg Spot Index for key crops has rallied from a year ago. This has exacerbated concerns about poor harvests of most crops, in particular, wheat and coffee. Besides, analysts predict a significant inflation of many food products.
The Bloomberg index, which includes nine agricultural commodities, has jumped over the year and is likely to close this week with its highest one-week gain. Its further growth will push prices for bread and beverages to elevated levels.
At present, cereals, comprising a few agricultural species, are trading at their record highs at the Chicago Mercantile Exchange. The current market prices are the highest since July last year. The reason is drought and scarce harvests expected in major exporting countries, from Australia to Russia.
Another popular product, Arabica coffee, which is also a component of the Bloomberg index, is on track to the strongest one-week growth in four weeks. As for orange juice, its price is breaking all records due to the drop in citrus yields in Brazil. Asian rice is also affected by a similar situation. Its price has soared to a 15-year high.