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With inflation on the rise, many food items have seen their prices soar. While this is happening some products like coffee and avocado are seeing dipped in price tags while others such as cooking oil followed suit.
The recent developments have led to a drop of the cost for these items, but the rates are still heftier than their usual selling price.
The price of Indian sunflower oil dropped 7% in May and June, while palm oil prices also lurched downward by 12%. This data came from an agricultural commodities data group, Tridge.
With the recent conflict between Russia and Ukraine, avocado prices have surged high. However, in July, the price went down by 5%.
The three largest avocado producing countries, Mexico, Peru, and Colombia, have now announced a price drop, said Tridge.
Mexico and Colombia have seen a significant decrease in the prices of avocadoes sold wholesale. The drop was especially large in June and July, when it went down by 27% in Mexico and over 40% in Colombia.
The lowering of prices for avocadoes can be attributed to a few factors, but one important reason is the overwhelming supply from Peruvian sources. It has caused pressure on local markets which results in lower pricing across borders.
Fear of recession
When prices increase, people’s consumption of goods decreases even if these are necessary for them.
There has been a significant drop in the amount of food that people are consuming as they’re afraid another recession might happen, according to Tridge spokesperson Minwoo Nam.
Nam stated, “There are multiple factors affecting the market. First of all, global recession fear is dampening the demand outlook.”
“Also because prices went too high, [so] consumers are spending less or looking for substitutes,” he added. Sunflower oil, for example, is now being used as a substitute.
Tridge reported that several market participants and traders have started their liquidations on hedge funds, but Nam said inflation is not yet that visible despite consumers adjusting their consumption of goods.
“We can say concern for food inflation has somewhat abated, but the prices of many agri-products are still high compared to average years. Contractionary policies are certainly affecting the market,” Nam said.
Supply chain disruption
Data shows that the continuing shortage of food and other products is exacerbated by the increasing demand among consumers.
Nam commended several key efforts from governments and central banks to freeze prices in an effort to cope with the volatile market that is subject to many factors at present time.
Nam added, “It doesn’t seem likely that food prices suddenly fall into recessionary territory. However, the likelihood of fiercer inflation has decreased.”
The prices for food and agriculture products are near high records. However, the Food and Agriculture Organization of the United Nations has recorded three falls in a row with their food index tracking, that shows the fluctuations of food prices every month.
The price of meat and dairy went up, while the prices for cereal, sugar, and vegetable oils decreased, according to the index.
Wheat prices have been on a steady decline this year, and in June they decreased. The figure is still higher though compared to last years’ level by 48.5%.
Russia and Ukraine have agreed to resume grain exports over the Black Sea after several months of being blocked. This news has boosted the confidence of the markets.
In a recent interview, Nomura chief economist Sonal Varma said that while commodity prices in the Asia-Pacific region have increased, they are not anywhere near the highest on record.
There are many countries in the region that will most likely see prices surge over next few months. This includes Philippines, India and Singapore among others according to Nomura.