Agricultural prices showed the largest quarterly jump since 2022 amid escalating tensions in the Black Sea region and extreme weather, threatening new inflationary problems for central banks. The Bloomberg Agriculture Spot Index, which tracks 10 key crops from soybeans to coffee, rose by 13% over the three months to September – the highest since March 2022. Over the year, the index has gained more than 20%.
The escalation in the Black Sea region has disrupted grain and oilseed flows from a key global supplier. Russia is trying to redirect supplies through alternative ports, but only about 1/10 of the volumes are going through them. Weather disruptions have affected wheat and corn production from the U.S. to Europe. The strengthening El Niño threatens crops, including palm oil and cocoa. India has completed its weakest monsoon season in a decade. Rising prices risk exacerbating inflation during a period of high energy prices, which add costs for farmers. Investors see the possibility of up to four Federal Reserve rate hikes in the next 12 months.
Global grain prices supported U.S. soybean purchases by China and optimism about trade ahead of the leaders' summit. After the meeting, the parties announced that Beijing would lower tariffs on wheat and corn but maintain duties on soybeans. “U.S. soybeans continue to compete with Brazilian ones on price, stimulating demand from countries not linked to China,” said Matt Darragh from Kpler. “A stronger export campaign may require soybean prices to rise to ration demand.”
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