Agriculture/Bulk Agriculture Commodities
Both clear skies and stormy weather are in the forecast for the agricultural sector. That’s the mixed- bag conclusion from a September 2022 panel discussion at the Ag Outlook Forum in Kansas City, Missouri. The panel of experts—including Kip Tom, former ambassador to the U.N. Food & Agriculture Organization, and Daniel Whitley, administrator for USDA’s Foreign Agricultural Service—stated that U.S. farmers right now are in a good economic position. Both incomes and land values are far higher now than they were before the pandemic, they noted. The group pointed to ongoing macro-economic challenges and impact from the war in Ukraine as factors that are wreaking havoc on supply chains and putting increasing expectations on U.S. farmers to increase production of crops such as wheat. They expect supply chain challenges—a backlog of agricultural equipment and parts, manufacturing disruptions stemming from China’s continued zero-COVID policies, and the potentially fragile energy situation in Europe as a result of the Russia- Ukraine conflict. Agricultural labor is another potential disturbance. A glut of unfilled jobs in the dairy industry is particularly worrisome, the panel noted. AG OUTLOOK: MI XED
FOOD COMMODITY PRICES DROPPING—BUT STILL INFLATED The latest Food Price Index, released in September 2022 by the UN Food and Agriculture Organization (FAO), shows that the prices of five key commodities—cereals, vegetable oil, dairy, meat, and sugar— have fallen for a fifth consecutive month. The good news is tempered by the fact that prices are still nearly 8% higher than they were one year ago. The Index, which tracks the monthly international prices of these breadbasket staples, averaged 138 points in August, down nearly 2% from July, though 7.9% above the value one year before. Here’s a breakdown: • Cereal: A landmark agreement in July 2022 that unblocked Ukraine grain exports amid the ongoing war has helped to lower cereal prices. Production expectations are still tight, however: FAO’s global cereal production forecast projects a decline of nearly 40 million metric tons, or 1.4% from the previous year. • Cheese: Although dairy prices saw a 2% drop, they remained 23.5% higher than in August 2021. The price of cheese increased for the 10th consecutive month. • Meat: The price of meat declined by 1.5% but remained just over 8% higher than the value last August. Meat prices declined due to weak domestic demand in some top exporting countries, the report notes. • Sugar: Sugar prices hit their lowest level since July 2021, largely due to high export caps in India and lower ethanol prices in Brazil. • Vegetable oil: Prices decreased by 3.3%, which is slightly below the August 2021 level. FAO attributes this to increased availability of palm oil from Indonesia and the resumption of sunflower oil shipments from Ukraine.
14 Inbound Logistics • October 2022
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