Friday, July 1, 2022

Supply Lines: Taming food inflation

Has food inflation peaked? With the latest slump in palm oil, wheat, corn and other agricultural commodities, it may seem like it has. Here'

Has food inflation peaked? With the latest slump in palm oil, wheat, corn and other agricultural commodities, it may seem like it has. Here's more on that and other food stories from around the world: 

Inflation Relief

Runaway food inflation may be tamed soon — at least temporarily — as farm commodities tumble after a surge that pushed up prices of everything from bread to chicken wings.

Fear of grain shortages following Russia's invasion of Ukraine is giving way to optimism that key producers will reap harvests large enough to help replenish war-pinched reserves. There are now also worries that an economic slump could slash demand. 

Even if reduced rates of increase linger, high prices for food will likely continue to pressure the needy. The outlook for grain supplies from key exporters remains uncertain, and Goldman Sachs, among the more bullish commodity-watchers, said prices haven't peaked.

Wastewater Beer

"NEWBrew" is no ordinary beer. The new Singapore blond ale is made with recycled sewage

The idea of processing sewage into drinking water, once largely resisted, has been gaining support in the past decade as the world's supply of fresh water is increasingly under stress.

Key to expanding the technology is to persuade the public that, once the water has been processed, it's just water. Some who have sampled NEWBrew say they find that it's a refreshing, light-tasting ale that's perfect for Singapore's tropical climate. 

MSG-Free Chicken

Popeyes blames supply chain problems for its plans to delay getting rid of monosodium glutamate, commonly known as MSG, from its fried chicken. 

A box of fried chicken and biscuits is arranged for a photograph outside a Popeyes Louisiana Kitchen Inc. fast food restaurant in Jeffersonville, Indiana, U.S., on Tuesday, Feb. 21, 2017.  Photographer: Luke Sharrett/Bloomberg

The chain will remove the flavor enhancer -- which has garnered both fans and enemies -- by the end of 2025, three years later than its prior commitment.

Restaurants have been trying to improve the health and environmental impact of their menus, removing artificial colors and preservatives. Other chains have delayed better-ingredient vows due to supply-chain hiccups during the course of the Covid-19 pandemic. Chipotle Mexican Grill, for example, has struggled to source humane-certified chicken. 

More Food for Thought

The price of basic goods in UK stores is rising at the fastest pace in almost 14 years, leaving poorer families taking drastic action to make ends meet. 

The British Retail Consortium said shops are having to pass on some of the burden of soaring raw-material costs, leading to the biggest price increases since September 2008. Separate research found that millions of low-income households are going without essentials, falling behind on bills and taking on debts. 

The crisis has been exacerbated by the war in Ukraine, which has created shortages of key inputs such as fertilizer and animal feed.

Meanwhile, on the UK luxury market, premium caviar has been harder to get. When the UK government slapped sanctions on Russia's luxury goods exports in April, caviar was on the list. But in reality it's not the invasion of Ukraine that has hit the industry the hardest: It's Brexit.

Sing Yee Ong and Jasmine Ng in Singapore

Charted Territory

Households and inflation hawks will be watching Chinese pork prices with trepidation. Live hog futures traded in Dalian have surged to their strongest in a year, while wholesale prices are at a six-month peak. Higher costs look set to persist in the short-term as the latest virus outbreak is brought under control and meat consumption rebounds. And supply issues around China's favorite meat, which has the biggest weighting among foodstuffs in the consumer price index, could mean that pork prices are at the start of a longer-lasting, cyclical upswing that poses an inflation risk to the wider economy, according to Ming Ming, chief economist at Citic Securities Co. 

Today's Must Reads

  • Fewer pigs | In a country renowned for its sausages, Germany's pig herd has plummeted to its smallest level in decades. 

  • Bee crisis | Blueberry growers in Canada are facing a shortage of the honeybees they depend on to boost their production of the country's most valuable fruit crop. 

  • Kiwifruit dwindle | New Zealand's kiwifruit harvest is falling short of expectations after poor weather hit yields and growers struggle to find the migrant labor normally used to pick the vines.

  • King corn | Corn is again the top US crop after soaring grain prices motivated farmers to shrug off weather woes and high fertilizer costs to plant more than expected while cutting back on soybeans. 

  • Baby formula | Meiji Holdings Co. plans to enter the $5.9 billion US baby formula market, joining Nestle SA, Danone DA and other global giants seeking to supply powdered milk to ease a national shortage.

  • New supply | Singapore has approved chicken imports from Indonesia as the city-state seeks to diversify its supplies after neighboring Malaysia restricted shipments.

On the Bloomberg Terminal

  • Salmon soars | Salmon prices could outperform broad agriculture commodities in the second half as the total harvest for the year is poised to drop for the first time since 2016. 

  • Pricey meat | With almost half of global corn production ending up as animal feed, the price of meat protein for European packaged-food companies will remain elevated, according to Bloomberg Intelligence.

  • Bigger inventory | Food companies such as Conagra, Tyson and McCormick have increased inventory levels to be better positioned to endure prolonged disruptions in the supply chain, Bloomberg Intelligence said.

  • Use the AHOY function to track global commodities trade flows.

  • Click HERE for automated stories about supply chains.

  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.

  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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