Global food supplies are threatened by drought stretching from China to the U.S.
Crop production declines due to drought in the United States and China,
causing concerns about global food supplies and affecting inflation expectations.
At a time when the world desperately needs to replenish grain reserves,
which have fallen dramatically due to trade unrest in the Baltic Sea and
bad weather in some of the largest growth areas,
the results shown by a tour of industry officials in US fields included severe crop
damage due to extreme heat and water shortages.
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Increased outflows for US corporate bond funds in 2022.
Oil prices rise as concerns over supply and demand outlook ease.
Weather fluctuations
While drought has caused losses in Europe, China and India,
difficulties remain over any export forecasts for Ukraine,
which is the primary source of corn and vegetable oils.
“He is concerned about the rebuilding of stocks in 2023
by the results of the crop inspection round that will take place this week,
” said a former USDA official.
“Although Ukraine’s ports are back to work,
production is still below normal.”
Declines in corn, wheat, and soybean prices continue to make futures contracts highly volatile,
which could lead to higher prices again until the end of the harvest season.
Food shortage and its impact
The marked shortage of cereals and soybeans,
whose indices traded more than 40% above the five-year average,
while rising grain prices strongly impacted the global inflation crisis.
Food shortages also had a strong impact on the Sri Lankan government earlier
this year following the depletion of foreign exchange reserves needed to buy imports.
In the United States, too, the maize crop is the main and most widespread crop,
and weak production has the effect of increasing pressure on South America
to produce abundant crops to cover the global deficit next year.
The situation could also worsen further if China decides to import grains in light of its drought.
It is estimated that the decline in US crop production fell by about 4%
compared to government expectations,
and this decline was also due to the drought in the United States and the shortage
of winter wheat and soybeans as well in Brazil.
artıcal name Global food supplies are threatened by drought stretching
Increased outflows for US corporate bond funds in 2022.
US high-yield corporate bond funds have seen a rise
and represent their second largest outflow this year as recession fears mount,
also in conjunction with Federal Reserve Chairman Jerome Powell’s speech last Friday.
Refinitiv Lipper data indicates that investors pulled out $4.57 billion last week,
while US investment-rated bond funds saw outflows,
with investors withdrawing $806 million from exchange-traded mutual funds.
At a time when corporate bonds are in trouble,
as investors exit their holdings after the increase in the summer period,
as money managers watched the “Powell” speech closely to look for any clues
indicating the path of raising interest rates in the future,
while some signs appear Inflation has already peaked,
and the need to maintain interest rate increases has been
emphasized by Federal Reserve officials.
The yield of junk bonds rose during six consecutive sessions
before remaining at 8% last Wednesday,
which is the highest level in four weeks, and during that time,
margins expanded to 447 basis points,
as the “CCC” debt rating approached The level of risk premium
that is classified as defaulting.
artıcal name Global food supplies are threatened by drought
Oil prices rise as concerns over supply and demand outlook ease.
At the beginning of the week’s trading session,
oil rose supported by easing concerns about supply and demand expectations.
This comes in light of some hints from the OPEC+ alliance to intervene
and support the stability of crude markets if necessary.
The rise in oil prices also supported the security situation in Libya,
which may have an impact on production and export.
After central banks issued several warnings about tightening monetary policies
and indicating that high-interest rates would last longer,
all reasons put pressure on oil futures.
This comes as Saudi Arabia and some OPEC members hint that
they may cut production to balance the market.
Iran has announced that its negotiations with the United States on the European
Union’s proposal to revive the nuclear agreement will be completed next month,
opening the way for expectations of increasing oil flows again.
Severe energy shortage
In a research note, Goldman Sachs said that oil has room to rise,
given the shortage of other raw materials for energy,
which also includes natural gas.
Analysts see declining oil supplies as an opportunity for long-term investment.
Oil prices rose as WTI crude rose in October delivery by 1.2% to $94.19 a barrel,
and Brent crude deliveries in October rose to $1101.89 a barrel by 0.9%.
Crude oil is on track to decline for the third month in a row amid fears of slowing
global growth as central banks tighten their policy sharply,
which also hurts consumption.
Warnings from Jerome came first of his need for higher rates,
while an ECB official said there was no “big option” but
pressure even if the region’s economy slides into recession.
artıcal name Global food supplies are threatened by drought