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Food inflation: Tight grain, oilseed supplies to keep prices elevated

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SINGAPORE: Drought or too much rain, the war in Ukraine and high energy costs look set to curb global farm production again next year, tightening supplies, even as high prices encourage farmers to boost planting.

Production of staples such as rice and wheat is unlikely to replenish depleted inventories, at least in the first half of 2023, while crops producing edible oils are suffering from adverse weather in Latin America and Southeast Asia.

“The world needs record crops to satisfy demand. In 2023, we absolutely need to do better than this year,” said Ole Houe, director of advisory services at agriculture brokerage IKON Commodities in Sydney.

“At this stage, it looks highly unlikely, if we look at the global production prospects for cereals and oilseeds.”

Wheat, corn and palm oil futures have from dropped from the record or multi-year highs but prices in the retail market remain elevated and tight supplies are forecast to support prices in 2023.

Why it matters

With food prices climbing to record peaks this year, millions of people are suffering across the world, especially in poorer nations in Africa and Asia already facing hunger and malnutrition.

Food import costs are already on course to hit a nearly $2 trillion record in 2022, forcing poor countries to cut consumption.

Benchmark Chicago wheat futures jumped to an all-time high of $13.64 a bushel in March after Russia’s invasion of key grain exporter Ukraine reduced supplies in a market already hit by adverse weather and post-pandemic restrictions.

Corn and soybeans climbed to their highest in a decade, while Malaysia’s benchmark crude palm oil prices climbed to a record high in March.

Wheat prices have since dropped to pre-war levels and palm oil has lost around 40% of its value, amid fears of a global recession, China’s COVID-19 restrictions and an extension of the Black Sea corridor deal for Ukrainian grain exports.

What does it mean for 2023?

While flooding in Australia, the world’s second-largest wheat exporter, in recent weeks has caused extensive damage to the crop which was ready for harvest, a severe drought is expected to shrink Argentina’s wheat crop by almost 40%.

This will reduce global wheat availability in the first half of 2023.

A lack of rainfall in the US Plains, where the winter crop ratings are running at the lowest since 2012, could dent supplies for the second half of the year.

For rice, prices are expected to remain high as long as export duties imposed earlier this year by India, the world’s biggest supplier, remain in place, traders said.

“Rice availability in most exporting countries is pretty thin except India, but it has export duties in place to reduce sales,” said one Singapore-based trader at an international trading company.

“If we get a production shock in any of the top exporting or importing counties, it can really swing the market upside.”

The outlook for corn and soybeans in South America looks bright for its harvest in early 2023, although recent dryness in parts of Brazil, the world’s top bean exporter, has raised worries.

US domestic supplies of key crops including corn, soybeans and wheat are expected to remain snug into 2023, according to the US Department of Agriculture.

The agency is forecasting US corn supplies to fall to a decade low before the 2023 harvest, while soybean stocks were seen at a seven-year low and wheat ending stocks are forecast at the lowest in 15 years.

Palm oil, the world’s most consumed edible oil, is taking a hit from tropical storms across Southeast Asia where high costs have resulted in lower use of fertilizer.

Still, higher prices of grains and cereals have encouraged farmers to plant more crops in some countries including India, China and Brazil.

“Planting is higher in several countries but the output is expected to remain subdued due to adverse weather and other factors,” said Ole. “Production is unlikely to be enough to replenish supplies which have been drawn down.”

Explore the Reuters round-up of news stories that dominated the year, and the outlook for 2023. 

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Business

Petrol, diesel prices likely to go down from April 1

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  • Petrol rate likely to reduce by Rs4-5 per litre.
  • Rs15-20 per litre reduction expected in diesel price.
  • Sources hint at possibility of prices remaining unchanged.

Following a reduction in international crude oil prices, the rates of petroleum products in Pakistan are expected to decline from April 1, Geo News reported Wednesday.

According to estimates of oil marketing companies (OMCs), the price of diesel is likely to decline by Rs15-20 per litre while the price of petrol is expected to go down by Rs4-5 per litre.

However, well-placed sources in the industry said that there is a possibility that the Finance Division keeps the price unchanged.

In its last fortnight bulletin, the federal government raised the price of petrol to Rs272 per litre.

The Finance Division attributed the price hike to the depreciation of the Pakistani rupee against the US dollar and an increase in the prices registered by Platts Singapore.

The price of MS (petrol) was increased by Rs5 per litre and the price of hi-speed diesel was increased by Rs13 per litre.

The increase in the price of kerosene oil was kept at Rs2.56 by reducing the government’s dues on it. Similarly, the price of light diesel oil was kept constant by adjusting the government dues as well.

The new prices came into effect on March 16 and will remain in place till March 31.

The Finance Division will announce the news rates on March 31 which will remain in place for the next 15 days. 

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Banks to observe extended working hours

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At the request of the Federal Board of Revenue, the State Bank of Pakistan (SBP) on Wednesday directed all branches of banks to observe extended banking hours in order to facilitate the taxpayers in payment of government duties/taxes.

The central bank, in a statement issued in this regard, said that the direction is for all branches of banks including the National Bank of Pakistan (NBP) and field offices of SBP Banking Services Corporation (SBP-BSC).

“[…] all branches of banks including National Bank of Pakistan (NBP) and field offices of SBP Banking Services Corporation (SBP-BSC) shall observe extended banking hours until 04:00 P.M. and 06:00 P.M. on 30th and 31st March 2023 respectively for collection of government taxes through ADC’s Over-the-Counter (OTC) facility,” the statement read.

It mentioned that National Institutional Facilitation Technologies (NIFT) shall arrange a special clearing at 6pm on March 31 (Friday) for the same-day clearing of payment instruments deposited at NBP’s authorised branches for customs collections.

“For this purpose, all banks shall arrange to keep their clearing-related branches open till such time that is necessary to facilitate the special clearing by NIFT on March 31, 2023 (Friday),” it read.

It should be noted that during Ramadan, banks observe reduced hours. Currently, the timings are:

Public dealing timings:

  • Monday to Thursday — 9am to 2pm (without break)
  • Friday — 8:30am to 1pm (without break)

Office timings:

  • Monday to Thursday — 9am to 3:30pm (with prayer break from 2pm to 2:30pm)
  • Friday — 8:30am to 1pm (without break)

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PM Shehbaz takes notice of gas loadshedding during sehr, iftar

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  • PM Shehbaz says he has already taken notice of the matter.
  • Premier summons a meeting to discuss issue of gas loadshedding.
  • “We will leave no stone unturned to address this issue,” PM says.

ISLAMABAD: Prime Minister Shehbaz Sharif on Wednesday assured the members of the National Assembly that his government would address the issue of gas loadshedding during sehr and iftar as inflation-weary people have been registering complaints.

The prime minister, responding to a point of order raised by MNA Syed Agha Rafiullah, told the house that he had already taken notice of the matter.

PM Shehbaz shared that he had already summoned a meeting to be held later in the day, to discuss the issue of gas loadshedding.

“We will leave no stone unturned to address this issue,” the prime minister assured the house.

Earlier, a parliamentarian from Karachi’s Malir area drew the house’s attention to the problem of gas loadshedding being faced by the people, particularly those of Karachi, during sehr and iftar.

He said though the prime minister had already taken notice of the situation, the Sui Southern Gas Company (SSGC) needed to be directed to resolve the issue and provide uninterrupted supply during sehr and iftar.

Last week, the SSGC said gas would be supplied to domestic consumers during the holy month of Ramadan, but for limited hours — a move that irked consumers who complained of not getting enough of this essential fuel during mealtimes.

The utility had said that the gas pressure would be low from 8am to 2:30pm as it was facing a shortfall of 250 million mmbtu.

According to the SSGC helpline, for iftar, gas will be supplied to consumers in Karachi from 2:30pm to 7pm, while for sehr it will be available from 2:30am to 5am.

The gas utility added that consumers would face complete suspension or low pressure during the rest of the hours. 

However, the people have been complaining that gas remained suspended during sehr and iftar which forced them to purchase meals from hotels and restaurants which burdened their pockets.

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