The rally across a number of commodity sectors however resulted from a variety of factors, most of which are believed to be transient.
US wheat futures fell to new lows today not seen since 2012. Some had hoped wheat prices would stabilize as Egypt, the world’s largest wheat buyer, entered the market.
Here we go again. While the early part of the US Midwest summer has been fairly benign for crops, farmers’ luck has run out in late August. The central part of the US is experiencing a broad heat wave, putting a number of crops at risk.Source: Int…
Last year’s crippling drought has led to a spike in global corn prices and tightened available supply stocks, as U.S. farmers experienced staggering crop destruction from the sweltering heat.
But this year, Mother Nature seems to be making up for lost time.
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If you thought your grocery tab was high in 2012, brace yourself because this year will be even worse- but that just means there are stocks to buy now that will let you cash in on higher food prices.
Last year’s drought drove up prices of grains such as corn, wheat and soybeans. Soybean prices jumped 40% earlier in 2012 while wheat prices soared about 50%. Prices declined in the fall as crops were harvested, but remained elevated.
Because of the higher prices of animal feed such as corn and soymeal, many ranchers had to slaughter animals earlier than planned. This caused a brief bump up in meat supplies in 2012, but threatens to lead to tight meat supplies and higher prices in 2013.
The Livestock Information Center in Denver forecasts that this year’s U.S. beef production will come in at 24.8 billion pounds – the lowest level since 2005.
In 2014, the Livestock Information Center forecasts only 23.6 billion pounds of beef will be on the market – the lowest level since 1993.
And Larry Pope, the CEO of the world’s largest pork producer, Smithfield Foods Inc. (NYSE: SFD), told the Financial Times in 2012 he thought pork and chicken would soon join beef on the list of increasingly expensive meats.
The U.S. Department of Agriculture forecasts food prices overall will increase 3.5% to 4% in 2013.
However, like most government estimates, those could be on the low end due to these three main factors driving higher prices.
