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Increased costs for staples resembling vegetable oils, wheat, cheese and sugar have pushed meals commodity prices to their highest stage in 18 months, signalling extra ache forward for grocery buyers and central banks.
The UN Meals and Agriculture Group’s meals worth index rose to 127.4 in October — the best stage since April 2023. The determine, revealed on Friday, was up 5.5 per cent from October final 12 months.
Costs for meals commodities have risen steadily for the reason that begin of the 12 months.
Though meals prices stay effectively under ranges reached in March 2022, shoppers are already having to pay extra for groceries as will increase are handed on from meals producers to buyers.
Meals worth pressures throughout the G7 main superior economies ticked up for the primary time in two years in September, complicating rate-setters’ makes an attempt to chop charges to help progress and jobs.
Tomasz Wieladek, chief European economist at T Rowe Value, stated the actions in commodity prices would stoke “food price inflation, which is a significant challenge for central banks”.
All the G7 central banks, bar Japan, have minimize charges this 12 months on the again of indicators that the worst bout of inflation in a technology is lastly underneath management.
However Wieladek famous that the impression of the rise in meals costs on households’ perceptions of inflation could be exacerbated by wholesale prices being priced in {dollars}, a foreign money that has strengthened following Donald Trump’s decisive win on this week’s US presidential election.
FAO economist Monika Tothova stated that the figures steered “a tighter market situation” for a lot of commodities.
“While not reaching the levels of previous peaks, any shock — be it weather-related, a change in trade policy, or other factors — could exacerbate the situation in already tight markets,” Tothova stated. “This could have significant implications for price levels and availability, affecting food import bills and food security.”
The UN recorded will increase amongst most meals classes, together with a 7.3 per cent month-on-month enhance for vegetable oils, a 2.6 per cent rise for sugar, and a 1.9 per cent enhance for dairy merchandise. Lots of the rises have been associated to climate occasions, which diminished output.
Shopper worth inflation has fallen sharply throughout most nations since reaching multi-decade highs in 2022, however greater meals costs are complicating progress in the direction of central banks’ 2 per cent targets.
Within the US, annual meals inflation in September rose to 2.3 per cent from 2.1 per cent within the earlier month, the biggest enhance since August 2022.
Separate knowledge by the Convention Board confirmed that US shopper inflation expectations for the 12 months forward rose to five.3 per cent in October from 5.2 per cent final month, an uptick attributed to “continued upward pressures on food and services prices”.
Within the UK, inflation of meals and non-alcoholic drinks rose to 1.9 per cent from 1.3 per cent in September, marking the primary enhance since March 2023.
Flash estimates for October present that throughout the eurozone, costs of meals, alcohol and tobacco rose at an annual fee of two.9 per cent final month, up from 2.4 per cent in September. Unprocessed meals inflation was as much as 3 per cent in October, from 1.6 per cent in September and 1.1 per cent within the earlier month.
