Soft commodity prices have risen sharply so far this year, peaking in December, with futures contracts for orange juice, cocoa, coffee and sugar surging due to El Niño.
Carlos Mera, head of agricultural commodity market research at Rabobank, points out that there is a strong link between El Niño and rising sugar prices: "You could say that El Niño has a sweet tooth because it eats or takes away most of the world's sugar." ”
The 2022 harvest for Florida citrus growers was the fewest in nearly 90 years, and citrus supplies were in short supply, causing orange juice to become expensive. Photo according to Visual China
The impact of El Niño tends to peak in December, but it usually takes time for this effect to spread globally. Because of this lag effect, and the time it takes for imports and exports to be imported, consumers may not be feeling the direct impact of price increases yet, but the impact will become more apparent over time. "It is likely that the price of sugar will already be passed on to consumers in 2023 and the cost of chocolate will be passed on to consumers in 2024. The retail price of chocolate is sure to rise significantly. Mera explained.
Orange juice futures prices climbed 80% in 2023, reaching an all-time high after hurricanes and disease devastated citrus crops in the U.S. state of Florida in late November, the data showed. This price increase reflects the market's sensitive response to extreme weather events. Dave Ritter LLC, a trader at Ritter Capital Investments, said, "Sometimes, these markets exceed our wildest expectations, and no one predicts that the orange juice price will reach $4 [per pound]." He also warned that orange juice prices would eventually plummet, setting a record and "going down in history."
Côte d'Ivoire, the world's largest cocoa producer, is expected to experience a severe decline in cocoa production this year due to heavy rains that have lasted for many months this year. Photo according to ICphoto
The price of cocoa, a key ingredient in chocolate, has also soared this year, rising by 64% to a 46-year high as supplies in West Africa have been severely affected by heavy rains and fungal diseases. Robusta Coffee reached its highest level in 15 years on Dec. 15, while sugar prices also rose 13% in 2023, although gains have eased since hitting a 12-year high in September.
Forecasters believe 2024 will be a pivotal year. In its annual outlook for 2024, Rabobank mentioned that this year's drought due to El Niño in much of Southeast Asia, India, Australia and parts of Africa has supported the rise in soft commodity prices such as sugar, coffee and cocoa.
The ABN AMRO bank also expects global food inflation to fall sharply after years of soaring food prices. But the bank warned that some crops could be adversely affected by El Niño early next year, while acknowledging that some crops could benefit, such as several crops in the United States, southern Brazil and Argentina.
Red Star News reporter Deng Shuyi
Editor: Zhang Xun, Editor-in-charge: Guan Li
(Download Red Star News, there are prizes for reporting!)