Food Inflation Accelerates

Using multiple measures, food inflation has continued to rise sharply. The war in Ukraine has threatened wheat, corn, and vegetable oil production, dramatically increasing the input costs to grow those crops. Fuel, fertilizer, equipment costs, and availability have assured supply problems will continue for many months, if not years. Weather problems, including drought in Ukraine and the mega-drought in our Western U.S., have compounded the threats. There is talk of dire consequences, possibly even famine, in dozens of countries, such as what happened during the financial crises.

Flowering Futures

America’s farmers have suddenly responded to the shortage of sunflower oil exports from Ukraine with plans to double their acres planted in sunflowers. Shampoos, bird feed, baking, and frying potato chips are a few popular uses. Other edible oils have also increased, such as rapeseed, soybean, corn, and palm oil. So far, Kansas and North Dakota have had the most blooms from the beautiful yellow flowers. However, a belt leading from our Canadian border to Texas could grow as farmers switch from other crops hoping to profit.

Soybean oil for May delivery traded at 75.10 cents per pound Friday afternoon, while May beans were $16.72 per bushel. May corn was at $7.68, and May wheat at $10.40, unchanged from last Friday.

Egg Prices Fly as Bird Flu Surges

Chicken is Ukraine’s primary protein commodity. Due to energy cuts, supply chain disruptions, and labor shortages, production has plummeted. Egg prices have gotten scrambled not only by the war but with a potentially more significant issue—avian flu. Farms in half of U.S. states have reported the disease in the past couple of months. Avian flu has killed roughly 23 million birds, with millions more being culled to prevent further infection. The result is greater demand and rising prices for eggs, fish, pork, and beef. CPI and USDA data indicate shell egg prices have risen as much as 52% since early February, when the first case of bird flu was discovered in Indiana. June hogs closed at $114.75 per pound while June cattle brought $134.00.

Interest Rates to Rise more Rapidly

To help reduce inflation, Fed Reserve Lael Brainard announced an accelerated rate of interest rate hikes and a faster drop in the Fed’s asset portfolio. Treasury Bond futures and stock index futures took a sharp tumble midweek on her announcement. June treasury bond futures traded at 143.00 midday Friday, while the June S&P traded at 4499, about 50 points down on the week. June gold traded at $1,948 per ounce, while silver for May delivery brought $24.85.

Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.