Global crop prices hit their biggest increase since 2022, and inflationary pressure is likely to heat up

The Zhitong Finance App learned that due to the escalation of tension in the Black Sea region and extreme weather, global agricultural product prices recorded their biggest quarterly increase since the Russian-Ukrainian conflict broke out in early 2022, which may pose new resistance to central banks' inflation targets.

The Bloomberg Agricultural Spot Index, which tracks 10 key crops, from soybeans to coffee, jumped 13% in the three months ending September, the biggest increase since March 2022.

Fighting between Russia and Ukraine has intensified in recent months, blocking crop exports from the Black Sea, an important global supplier of grains and oilseeds, and tightening supply, prompting Asian and African buyers who rely on imports to find alternative sources. Extreme weather has further heightened concerns, disrupting wheat and corn production in major producing regions from the US to Europe.

Global grain prices are also supported by China's continued procurement of US soybeans and optimism about bilateral trade ahead of the key summit between the leaders of the two countries at the end of last month. After the meeting, the two sides announced that as part of a broader agreement, China will lower tariffs on US crops such as wheat and corn, but keep additional tariffs on US soybeans.

Supply disruptions are intertwined with changes in trade flows, causing global buyers to remain on high alert. The market is concerned about the prospects of Russian-Ukrainian peace talks and whether China will make further purchases. However, if optimism is to be transformed into a continued strengthening of the grain market, China's demand will continue to pick up.

On the weather side, the growing El Niño phenomenon — which is likely to be one of the strongest ever recorded — continues to threaten agricultural production in various regions and dampen yield expectations for crops such as palm oil and cocoa. India has just finished its weakest monsoon season in ten years. Harvests are threatened, and food prices are at risk of rising.

U.S. supply prospects are plentiful after the USDA released its latest report on Wednesday, which has curbed bullish sentiment to a certain extent. Chicago grain prices plummeted on Wednesday, then recovered some of their losses.

In the past quarter, Chicago corn and wheat prices both increased 15%, and soybeans increased 13%.