Palm Oil Futures Soar to a Two-Year High Amid Rising Food Inflation
Palm Oil Prices Skyrocket Due to Tightening Supplies
On Monday, palm oil futures reached a two-year high due to increasing concerns about dwindling supplies. As a primary edible oil for over three billion people, particularly in Asia, the rising prices are causing alarm. There are growing fears that global food inflation could be persistent.
Record Highs for Palm Oil Futures
According to Bloomberg, palm oil futures hit their highest level since July 2022 on Monday morning. The vegetable oil has seen an increase of over 15% this month and is set for its third straight month of gains due to production issues in the main growing regions.
Decrease in Palm Oil Production
The Indonesian Palm Oil Association's latest data reveals that palm oil production is predicted to fall to 51 million tons in Indonesia this year, a decrease from 54.8 million in 2023.
Factors Contributing to Rising Palm Oil Prices
Bloomberg highlighted that the tropical oil has been gaining strength due to reduced output in Indonesia and Malaysia, which together account for over 80% of the global supply. Older trees and weather disruptions are affecting production at a time when demand is increasing. These higher prices could escalate food costs in major buyers like India and China.
Rise in Vegetable Oil Prices Amid Global Food Inflation
The rise in vegetable oil prices coincides with the latest data from the Food and Agriculture Organization of the United Nations' Food Price Index. This index, which monitors the international prices of a basket of globally traded food, averaged 124.4 in September, a 3% increase from August and 2.1% higher than the same month the previous year.
Global Food Crisis Warnings
Sara Menker, founder and CEO of Gro Intelligence, warned in a Bloomberg interview about a year ago that the current global food crisis is 'much worse than 2008'. In late 2020, Albert Edwards of SocGen began cautioning about the Federal Reserve inflating bubbles during the Covid pandemic and how this could trigger a rise in food prices and the usual ongoing risks, such as socio-economic instabilities.
Food Inflation Predicted to Persist
Food inflation is expected to be very persistent and could continue until the end of the decade, if not longer.
Advice to Readers
A piece of advice for readers is to consider investing in farmland.
Bottom Line
The surge in palm oil futures to a two-year high amid tightening supplies is a cause for concern, especially considering the potential for persistent global food inflation. This situation underscores the importance of strategic investments and careful planning in response to these economic shifts. What are your thoughts on this development? Feel free to share this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
