You are here: Home » News » NEWS » Extreme Weather Threatens Global Agricultural Market

Extreme Weather Threatens Global Agricultural Market

Views: 109    

Affected by the recent frequent occurrence of extreme weather, the production of many agricultural products has been impacted, leading to successive increases in futures prices. This wave of pressure is also expected to be transmitted to the consumer side.

   The price of US coffee futures for September delivery on the Intercontinental Exchange climbed more than 7% on the 26th, exceeding US$2 per pound. Coffee futures prices have soared by more than 21% in the past three trading days, reaching a six-and-a-half-year high, and have soared by more than 60% this year.

   Market participants said that Brazil’s coffee crops this year have been affected by drought. Now there is frost in South America in winter. The double shock may reduce Brazil’s coffee production, prompting funds and investors to buy more coffee futures.

  Most of the world's coffee is produced in Brazil, Colombia and Vietnam. Brazil is the largest producer.

   Due to concerns that lack of rain in Brazil will affect production, coffee prices have been rising steadily. Brazil’s largest Arabica coffee producing area has not reported precipitation for two consecutive weeks. According to reports, the soil moisture there is far below the 60% required for the growth of coffee crops. Market participants also said that the damage to coffee trees by frost may be "very large." People are more worried that frost may destroy leaves and branches and affect Brazil's crop prospects in 2022.

   UBS Foreign Exchange and Commodity Strategist Jordon said that Brazil’s harvest was disappointing. Coffee production in Arabica-producing areas fell by about 35% from 2021 to 2022, and logistics interruptions reduced coffee exports from Colombia and Vietnam. In addition, continuous dry conditions have an impact on plant health, and concerns about harvest potential from 2022 to 2023 are also increasing.

   However, the sharp rise in coffee futures prices may have little impact on consumer coffee products. Jordan said that the cost of coffee beans accounted for a very low percentage of the consumption end of drinking coffee. According to calculations, about 4% of the price of a cup of coffee is the cost of coffee beans.

   In addition to coffee, corn and soybean prices are also at decades of highs, because climate conditions have affected the harvest in the Midwestern United States.

DailyFX analyst Yang Yan said: "Since the epidemic, commodity prices have entered a major bull market cycle. Insufficient supply and recovery on the demand side have led to reduced inventories and higher prices. In addition, the monetary and fiscal stimulus policies adopted by various countries and the rise in wages have also led to rapid inflation. An important reason for the climb."

   Jordan said that any unfavorable factors related to the weather will further increase the price of coffee and other commodities. He is bullish on grains, live cattle and soft commodities, including coffee, cocoa, sugar, corn and wheat.

The World Meteorological Organization’s recent report "Extreme Summer: Floods, High Temperatures and Fires" pointed out that some areas of Western Europe experienced two months of rainfall during the two days from July 14th to 15th, and the soil moisture content in these areas was already close. saturation. The Secretary-General of the World Meteorological Organization Petri Talas stated that climate change is the root cause of the torrential rains and floods that have swept through Western Europe this summer. Before climate change mitigation is effective, extreme weather events and natural disasters will increase.

   Although European wheat production is expected to increase this year, part of the harvest may eventually be converted from grinding bread products to feeding farm animals. This will threaten food exports to North Africa, because North Africa is heavily dependent on food imports.

Customer First
Shanxi Guangyuan Fertilizer Co.,Ltd. is a modern comprehensive private enterprise combining scientific research, production and sales.
     QR Code
Copyright © Shanxi Guangyuan Fertilizer Co.,Ltd. All Rights Reserved.