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Food prices: bun fights | Financial Times

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A “clean plate” campaign and social media censorship of exuberant eating videos this year reflect China’s growing fear of food shortages. Disruptions from the pandemic have been compounded by the country’s worst floods in decades. While global harvests remain plentiful, fear of a breakdown in supply chains has put an end to a decade of falling food prices.

China is taking advantage of the glut. Imports of corn and wheat have soared in 2020, helping to lift prices. Further increases to the country’s strategic food supplies are expected.

Around the world, weather patterns remain the biggest risk to global harvests. A severe La Niña weather event contributed to poor harvests and a rise in food prices in 2012.

Annual production of cereals has steadily risen since that year, outstripping demand. Even with recent downward revisions, expected grains stocks of 900m tonnes this season are at all-time highs, says the Food and Agriculture Organization. Prices reflect those trends. Bloomberg’s grains subindex, which tracks futures, remains 60 per cent below its 2012 high, even after rallying more than a tenth since lows in August.

Plenty for the world has left financiers going hungry. Commodity trade desks at European banks BNP Paribas and ABN Amro closed in August. Profits from these activities have fallen with commodity prices. Fewer funds oiling the wheels of global food trade may add to inflation. Speculators have sharply reversed out of bets against the grains market. Speculative net long contracts on wheat, corn and soyabeans are now the highest since 2018. 

Rising food prices in developed countries will hinder economic recoveries. The poor will feel the pangs from trade disruption harder. Lesotho, Congo and Angola all rely on imports for at least 60 per cent of cereals. The latter two’s reliance on ore and oil exports compounds their risk.

Chinese stockpiling will fluctuate with global commodity prices while supplies are ample. But changing weather patterns and ongoing trade disruption have put a floor under agricultural commodity prices for now.

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