Corn and wheat prices drop

There has been a reduction in the cost of wheat, corn and other commodities that contribute to most of the world’s food supply. According to recent data, wheat prices have declined to approximately 40 per cent and corn prices have slipped about 25 per cent since the spring. The recent decrease is an encouragement for consumers dealing with high grocery bills and investors hoping to see lessened strain inflation on the wider economy. “It should help, it’s just a question of how long that it is sustainable,” said Tom Martin, senior portfolio manager with Globalt Investments, an investment advisory company. “As we slow down, and the economy seems generally to be slower, you get less inflationary pressures,” he added.

Over the past months, increasing food and energy prices have fuelled the hottest inflation in four decades. There has also been a constant demand combined with constricted supplies that started the inflation on its upward path. Now prices are falling as supply and demand start to balance out amid the global economic slowdown. Ukraine and Russia have reached a deal on grain exports, helping to further ease global supply shortages. But Russia’s invasion of Ukraine, in February, worsened things by hampering production and exports of wheat and other crops, along with oil and natural gas.

The United States Department of Agriculture forecasts higher wheat production this year and the potential for a record soybean harvest. Falling commodity prices could also help major food producers who have been dealing with higher costs to make things like cereal and other packaged foods. Both Conagra and Mondelez, food companies based in Chicago, have seen profit margins fall over the last several months.

Conagra’s CEO Sean Connolly said, a media report, that another cycle of extreme inflation would likely push down margins but slowing inflation or deflation could lift profits to the higher end of the company’s target. “These are volatile times,” he told investors in a conference call, following the company’s most recent financial results. “So, we can’t tell you exactly where we will land,” he added.

Investors are closely watching falling commodity prices as they try and control the cost of living going forward and whether the Federal Reserve will ease up on its interest rate hikes.

 Ukraine exports roughly 10 per cent of the world’s wheat and corn.