Food giants warn: they are on the precipice of a food crisis.
Indonesia's ban on palm oil exports is being met with massive protests. On May 17, protests broke out in several Provinces and Cities in Indonesia, demanding that the government immediately lift the ban on palm oil exports.
Since the outbreak of the Russian-Ukrainian conflict, the global food system has been seriously threatened, and more and more countries have successively issued relevant export bans. Following The ban on sugar exports in Kazakhstan, Brazil, the world's largest sugar producer, has also received bad news, with a large number of sugarcane processing plants cancelling some sugar export contracts and reducing sugar production by about 1.2 million tonnes in 2022/23, raising concerns about global sugar shortages.
In addition, U.S. food giant Goya Foods warned that the ban policies of various countries, the Conflict between Russia and Ukraine and the rise in energy prices will jointly lead to a food crisis, and some countries are already on the precipice of food shortages. The president of Goya Foods said that in the case of coconut water imported from Thailand, the cumulative increase has been close to 10 times.
The overall rise in energy and food prices may continue to exacerbate global inflationary pressures. Former Fed Chairman Ben Bernanke's latest statement said inflation had become one of the most serious threats to the economy and that the delay in the Fed's action was a "mistake" that led to a U.S. recession that was almost a foregone conclusion.
Indonesia ban 'provokes public outrage'
A ban is causing a tumultuous upheaval.
On May 17, local time, a protest demonstration broke out in Jakarta, the capital of Indonesia, and nearly a thousand Indonesian farmers gathered outside the government office to demand that the Indonesian government immediately lift the ban on palm oil exports.
According to Reuters, protesters involved in the rally demonstrations are planning to travel to the presidential palace next, and similar protests have spread to 22 provinces.
The protesters who participated in the rally, mostly palm farmers, are being slashed by the Indonesian government's April 22 ban on palm oil exports, and their incomes have been drastically reduced, and the palm fruits picked in large quantities cannot be sold.
According to a statement from the Indonesian Palm Oil Farmers Organization (APKASINDO), the price of local palm fruits has fallen by 70% since the export ban was enacted, below the reserve price set by regional authorities. Meanwhile, the group estimates that at least 25 percent of palm oil processing plants have stopped buying palm fruits from independent farmers.
As the world's largest producer of palm oil, Indonesia accounts for nearly 55% of the global supply of palm oil. Affected by the Conflict between Russia and Ukraine, there has been a shortage of rapeseed oil and sunflower oil in the world, and indonesia's ban has made the supply of the global vegetable oil market into an extremely tense state.
Affected by indonesia's palm oil ban, international palm oil prices are soaring. Since April, palm oil futures prices have risen by nearly 24 percent, and this year they have risen by more than 64 percent. In addition, the price of soybean oil futures on the Chicago Mercantile Exchange also hit an all-time high.
However, under the restrictions of the ban, Indonesia's palm oil can only be sold at a domestic price limit, which has triggered strong dissatisfaction from palm oil manufacturers and farmers. Banners from local protesters read: "Malaysian farmers are smiling, Indonesian farmers are miserable".
Malaysia has become one of the winners of this wave of palm oil price increases, and the relevant data shows that in addition to Indonesia, Malaysia is another major producer of palm oil in the world, accounting for about 25% of the global total production.
In fact, the Indonesian government's promulgation of the palm oil ban is also a "helpless move". Since 2021, due to the continuous decline in palm oil production, the local edible oil price in Indonesia has risen sharply by more than 60%, triggering a large number of people to protest.
In order to curb the rise in edible oil prices, the Indonesian government has successively introduced an increase in palm oil export taxes and export bans. Indonesia's chief economic minister, Airlangga Hartarto, said the ban on palm oil exports would remain in place until domestic bulk cooking oil prices fell to IDR 14,000 ($0.9563) per liter.
The constant outbreak of demonstrations and protests has led to a continuous decline in the support of Indonesian President Joko Widodo. According to the latest data released by Indonesian pollster Indikator Politik Indonesia, people's satisfaction with Jokowi fell to 58.1% in May, the lowest level since December 2015.
Sugar and coconut water are also "urgent"
Since the outbreak of the Russian-Ukrainian conflict, the global food system has been seriously threatened, and more and more countries have successively issued relevant export bans.
In addition to palm oil in Indonesia and wheat in India, some countries have even stopped exporting sugar. Recently, Kazakhstan issued a six-month ban on the export of sugar and raw sugar, which will officially take effect on May 23.
According to the data, Pakistan produces about 7.5 million tons of sugar per year, ranking 8th in the world.
In addition, Brazil, the world's largest sugar producer, has also received bad news. According to Reuters, a large number of sugarcane processing plants in Brazil are canceling some sugar export contracts in favor of ethanol production, which has once again raised concerns about global sugar shortages.
Because the Russian-Ukrainian conflict has led to a continuous surge in global crude oil prices, which in turn has boosted the price of ethanol. Brazilian sugar and ethanol companies, on the other hand, have industrial flexibility to produce more or less sugar or ethanol at market prices.
Brazilian sugar analysts expect Brazil to reduce sugar production by about 1.2 million tonnes in 2022/23 against the backdrop of high ethanol prices.
In addition, the news from a recent sugar industry conference held in New York showed that almost all companies involved in the Brazilian sugar trade have their contracts cancelled, with a total contract volume of about 200,000 to 400,000 tons.
It is worth noting that Brazil's sugar supply plays a pivotal role in the world. According to the Brazilian Federation of Agriculture and Animal Husbandry, Brazil is the world's largest producer and exporter of sugarcane, with an annual sugar production of about 33 million tons, ranking first in the world and supplying 50% of the world's sugar.
Some sugar traders say the sharp drop in sugar production in Brazil could lead to a global sugar shortage and even trigger a further rise in international sugar prices.
It should be pointed out that China's annual sugar production is about 10.3 million tons, about one-third of Brazil's output, but China is the world's major sugar importer, with a total of 5.6662 million tons of sugar imported in 2021.
For the supply crisis of food raw materials, Robert Unanue, president and CEO of THE US food giant Goya Foods, said that the ban policies of various countries, the Conflict between Russia and Ukraine and the rise in energy prices will jointly lead to a food crisis, and some countries are already on the precipice of food shortages.
Headquartered in New Jersey, USA, Goya Foods' products are sold in many states in the United States and many Latin American countries, and are under great pressure from rising prices of some raw materials.
Taking coconut water imported from Thailand as an example, Unanue said that the price of a box of coconut juice used to be $1.44, and now it has risen to $15 a box, which is ten times inflation.
Inflation "Haze"
The overall rise in energy and food prices may continue to exacerbate global inflationary pressures.
On May 17, data released by the Ministry of Commerce showed that India's key inflation indicator in April: wholesale price index (WPI) rose 15.08% year-on-year, exceeding market expectations and refreshing the record record of 30 years. Among them, the wholesale price of food rose by nearly 8.35%, and the wholesale price of fuel and electricity rose by 38.66%.
Affected by the continuous explosion of the inflation rate, the market expects that the RBI will raise interest rates further at its monetary policy meeting in June, or by 50 basis points.
At the same time, the Bank of England also threw important warnings to the market. Bank of England Governor Andrew Bailey said on May 16 that there was no way to stop Inflation from hitting 10% this year, and that rising food prices would be like the "end of the world" for British consumers.
Pele further said the Bank of England would raise interest rates sharply to ensure that UK inflation fell back to its target of 2% from its expected peak of more than 10% in the autumn. If necessary, the Bank of England will not shy away from triggering a recession.
The UK Consumer Price Index (CPI) rose to 7% in March, reaching a 30-year high, and the Bank of England's Monetary Policy Committee raised major interest rates by 25 basis points to 1% this month.
At present, the country with the most serious inflation rate in the world is undoubtedly the United States. According to data released by the U.S. Department of Labor, the U.S. CPI index increased by 8.3% year-on-year in April this year, exceeding market expectations and hitting a new high in nearly 40 years. In this regard, US President Biden said that US inflation is "unacceptably high" and solving the inflation problem will be the top priority in the future.
In fact, leaving aside the Russian-Ukrainian conflict, rising food prices and other factors, the Fed's super loose monetary policy is also one of the reasons for inflation in the United States.
At present, more and more voices are beginning to question the Fed, and in the latest CNBC dialogue, former Fed Chairman Bernanke said that inflation has become one of the most serious threats to the economy, and the delay in the Fed's action is a "mistake" that has led to a US recession is almost a foregone conclusion.
Editor-in-charge: Tactical Constant