A crop rally in the U.S. is making essential food commodities dramatically more expensive, and the costs could soon spill over onto grocery store shelves," reportKim Chipman and Megan Durisin of Bloomberg. "Wheat, corn and soybeans, the backbone of much of the world’s diet, are all surging to highs not seen since 2013 after gains last week had some analysts warning that a speculative bubble was forming."
Bad weather is the biggest reason: rain in Argentina is hurting the soy harvest, and dryness is hurting wheat and corn crops in Canada, France and the U.S. And many scientists predict drought in the American Farm Belt this summer. "Meanwhile, China is gobbling up the world’s grain supplies and is set to import the most corn ever as it expands its massive hog herd," Chipman and Durisin report. "Rumors are swirling that the Asian nation is working on 1 million metric tons of new corn purchases."
Since staple crops are a big factor in consumer food prices, the rally has prompted fears of food price inflation. "Pricey crops are also helping to drive even broader gains across the commodities complex, with metals such as palladium and copper rallying on a comeback in industrial operations around the world," Chipman and Durisin report. "Still, soybean, wheat and corn futures in Chicago are all trading in overbought territory with their 14-day relative strength indexes above 70, indicating that prices may have risen too far, too fast. Values declined in China, signaling a possible calming of shortage fears as summer crop plantings progress and hefty purchases of foreign supplies continue to arrive at ports."
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