Tuesday, March 18, 2014

Cost of breakfast rising due to drought, disease and rising demand

The Financial Times reports that drought, disease and rising demand have led to prices of eight key breakfast commodities rising on average almost 25% this year, fuelling consumer fears of food inflation.

Coffee has soared more than 70% because of unseasonably dry weather in Brazil, while US pigs have been hit by a virus epidemic, leading to a more than 40% rally in Chicago pork prices.

The Wall Street Journal says that in the U.S., much of the rise in the food cost comes from higher meat and dairy prices, due in part to tight cattle supplies after years of drought in states such as Texas and California and rising milk demand from fast-growing Asian countries. But prices also are higher for fruits, vegetables, sugar and beverages, according to government data. In futures markets, coffee prices have soared so far this year more than 70%, hogs are up 42% on disease concerns and cocoa has climbed 12% on rising demand, particularly from emerging markets.

Drought in Brazil, the world's largest producer of coffee, sugar and oranges, has increased coffee prices, while dry weather in Southeast Asia has boosted prices for cooking oils such as palm oil.