War, Weather Push Crop Prices to Biggest Monthly Gain Since 2012

Crop prices are set to cap their biggest monthly jump in more than a decade as wars and extreme weather disrupt supplies, raising concerns about food inflation.

The Bloomberg Agriculture Spot Index, which tracks 10 major products, is up more than 13% in August as of Friday, heading for the steepest gain since July 2012. Wheat has been one of the biggest drivers, with prices recently reaching a three-year high as Black Sea port attacks slash shipments from a major growing region. Sugar and cocoa are also up about 20% as a strengthening El Niño fuels weather worries.

While it can take time for pricier crops to feed through to supermarket shelves, the gains come on top of rising energy and transport bills driven by the war in Iran. That’s fueling worries about the cost of everyday pantry staples from bread to meat and dairy.

For wheat, grain exports from Ukraine and Russia have slowed as both sides strike each other’s ships and ports. Russia is also preparing to escalate attacks after concluding that negotiations for a peace deal have reached a dead end, Bloomberg reported last week.

Together, the two nations account for more than a quarter of the world’s wheat exports, as well as large amounts of barley, corn and sunflower oil. That’s leaving few obvious options to fill the gap, Lachstock Consulting said in a Monday note. Unsold grain is piling up, and Ukraine’s agriculture ministry expects farmers to plant less winter-wheat for the 2027 season.

“Argentine quality is questionable, Canada has limits, Australia has export capacity constraints and US wheat is increasingly the expensive residual supplier,” Lachstock said. “Unless Black Sea exports begin flowing again, the market increasingly looks to be dealing with a multi-season supply issue rather than a short-term logistics problem.”

Poor weather has been another headache, with US and European corn harvests both hit by summer heat wave. A powerful El Niño is also set to pose risks to crops into next year. That has boosted commodities like cocoa, with concerns over how the weather phenomenon will impact crop development in the top growing region of West Africa.

New York sugar futures are up about 20% in August, the most since 2015, as major producer India faces tight stockpiles just as demand climbs for the festival season. The government recently took the rare step of allowing some duty-free imports in an effort to curb prices.

Renewed tensions in the Middle East are also reviving worries about fuel and fertilizer flows, vital inputs for the world’s farmers. The US struck Iranian rocket launchers over the weekend, its first military action against the country in weeks.

IC UAC according to bloomberg