Kuala Lumpur: A spectacular rally in crop prices from wheat to palm oil has increased concerns that food costs are going to get a lot higher.
Those fears only got worse on Thursday after Russian forces attacked targets across Ukraine. Both countries are key suppliers of grains and edible oils, according to Bloomberg. The crisis has driven wheat to the highest level since 2012, while drought in South America has dimmed the outlook for soya bean supplies. Palm oil, which is used in thousands of products from cookies to shampoo, is on a record-breaking run as a labour shortage crimps output in major producer Malaysia.
This could feed through to higher prices at grocery stores as everything from pasta to chocolate becomes more expensive to produce, further squeezing household budgets already strained by rising inflation. A measure of global food costs calculated by the United Nations rose near a record in January.
The Russia-Ukraine crisis “represents a major concern for vegetable oil, wheat and corn”, said Oscar Tjakra, a senior analyst at Rabobank in Singapore. “We started 2022 from a position of low stocks in many agricultural commodities.”
Russian forces hit cities in Ukraine after President Vladimir Putin ordered an operation aimed at demilitarizing the country.
This sparked a rally across commodities on Thursday, driving Brent crude oil above USD100 a barrel for the first time since 2014 and sending Chicago wheat futures almost 6 per cent higher.
Ukraine and Russia account for about a quarter of the global trade in wheat, a fifth of corn sales, and 80 per cent of worldwide sunflower oil exports.
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