Business

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

Published

1 year ago

Farwa

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.

Business

The cost of a liter of petroleum increased by much to Rs 8.14.

Published

45 mins ago

Farwa

Prices for gasoline and high-speed diesel were raised by the government on Monday by Rs4.53 and Rs8.14, respectively, for the upcoming two weeks.

In relation to this, the ministry of finance released a notice.

Diesel now costs Rs 290.38 per litre, while petrol is now priced at Rs 293.94 per liter following the most recent increase.

Additionally, light diesel cost Rs6.54 more per litre, to Rs174.34. A 6.69% increase in price to Rs193.8 per liter was made for kerosene oil.

The impact of the developing Middle East situation and the expanding global market are the main factors contributing to the transformation.

Before the most recent spike, the price of gasoline and HSD had risen by almost $4 and $4.50 per barrel, respectively, on the global market during the previous two weeks.

Business

Finance Minister Aurangzeb claims that Pakistan and the IMF are talking about a new multibillion-dollar initiative.

Published

2 hours ago

Farwa

The South Asian country is drawing to a close a $3 billion loan program with the International Monetary Fund that lasted nine months and was intended to address a balance-of-payments crisis that had put it in danger of defaulting last summer.

Pakistan has started negotiations for a new multi-year IMF loan program for “billions” of dollars, Finance Minister Muhammad Aurangzeb said in a Washington interview, with the final $1.1 billion tranche of that arrangement likely to be approved later this month.

Aurangzeb, a former banker who started his job last month, stated, “The market confidence, the market sentiment is in much, much better shape this fiscal year.”

“We really started talking with the Fund this week to get into a larger and longer program for that reason,” he continued.

A representative for the IMF informed AFP that the organization is “currently focused on the completion of the current Stand-by Agreement program,” which is a nine-month program that is expected to be finished soon.

The spokesperson went on, “The Fund staff is prepared to start initial talks on a successor program as the new government has expressed interest in a new program.”

“Third-year curriculum”
Aurangzeb’s journey to Washington will also include attendance at the IMF and World Bank’s spring meetings, which begin in earnest on Tuesday and have two distinct goals: supporting the world’s most indebted countries and aiding governments in the fight against climate change.

The IMF’s revised World Economic Outlook will be released to coincide with the start of the meetings, which bring together academics, representatives from the private sector, civil society, finance and development ministries, and central bankers to debate the state of the global economy.

Allegations of election tampering plagued Pakistan’s February 2019 elections, resulting in the imprisonment and disqualification of opposition leader Imran Khan and the persecution of his Pakistan Tehreek-e-Insaf (PTI) party.

The unstable alliance that surfaced, headed by Shehbaz Sharif, is currently charged with bringing about an economic recovery through the imposition of several controversial austerity measures.

Aurangzeb stated, “I do believe that we will be requesting for a three year program.” “Because in my opinion, that is what we need to help carry out the structural reform agenda.”

He went on, “I do think we’ll start getting into the contours of that discussion by the time we get to the second or third week of May.”

Keeping the US-China rivalry in check
Pakistan is in a difficult situation as the two nations have started an expensive trade war because of its strong economic ties to both China and the United States.

When asked how the Sharif government intends to handle its commercial relationships with the two largest economies in the world, Aurangzeb responded, “From our perspective it has to be a and-and discussion.”

“The United States is our biggest trading partner, and it has consistently provided us with support and assistance with our investments,” he stated. Therefore, that relationship will always be extremely important to Pakistan.

He was alluding to the nearly 1,860-mile-long China-Pakistan Economic Corridor, which was built to offer China access to the Arabian Sea, when he added, “On the other side, a lot of investment, especially in infrastructure, came through CPEC.”

According to Aurangzeb, Pakistan has a “very good opportunity” to participate in the trade war on par with nations like Vietnam, whose exports to the US have increased significantly as a result of tariffs placed on some Chinese items.

He stated, “We already have a few examples of that working.” “However, we must truly scale it up.”

reform initiative

Pakistan is currently engaged in a privatization campaign to sell off its underperforming state-owned businesses (SOEs) as part of the structural reform package agreed upon by the previous government.

The nation’s flag carrier, Pakistan International Airlines, is the first SOE on the list.

In regards to potential bidder interest, Aurangzeb stated, “we will find out in the next month or so.”

He said, “Our goal is to proceed with that privatization and see it through to completion by the end of June.”

Other businesses may soon follow if the government’s privatization of the PIA proceeds smoothly.

He declared, “We’re building a whole pipeline,” and added, “We want to really accelerate that over the next couple of years.”

Business

Owners of oil tankers stop the provision of fuel in favor of their demands.

Published

2 hours ago

Farwa

The Association declared on Monday that, in response to what it deemed to be a “unfair” measurement by the relevant authorities, the gasoline delivery will stay suspended as of Tuesday.

According to the Oil Tankers Owners’ Association, they attempted to resolve their complaints with Deputy Commissioner Islamabad and Pakistan State Oil (PSO), but to no effect.

The Oil Tankers Owners Association has yelled slogans in support of their demand while parking their containers in the PSO depot.

The owners of oil tankers declared that they would not end their strike until their demands were met, accusing the administration of being to blame for the fuel crisis.

The association requested that the authorities abide by their requests, which included filling under a metered system. It further stated that the deal reached on February 20 had been broken by the authorities.