Dive Brief:
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A glut of Brazilian soybeans has depressed prices by 21% since the summer and is preventing those farmers from selling, according to Baking Business.
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The Brazilian harvest is expected to increase to 108 million tons this year — 11.5 million tons more than last year, according to the U.S. Department of Agriculture. North American soybean planting is expected to be up 7% this year, also restricting South American prices.
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North American soybean prices have remained firm, however, with a 5% increase in North American exports. For major grain processors like ADM and Bunge, this combination has restricted margins, so they are holding back on processing, causing a weak start to the year.
Dive Insight:
The speed with which grain prices impact food manufacturers and consumers is partly dependent on the type of grain and how it is used in the food supply. Increased wheat prices, for example, rapidly translate into higher prices for flour and bread. Growing use of soybeans and corn for the ethanol market has also led to higher prices for feed suppliers, which then has had a additive effect for meat, poultry and dairy prices.
The World Bank has said that Latin America is well-placed to benefit from higher food prices and demand for increased production. The region has also dealt with fluctuating food prices better than any other by strengthening public policies and crisis response mechanisms. Coupled with general economic growth in the region, this has prevented vulnerable people from slipping into poverty as food prices have increased.
In North America, even though farm-level soybean prices were up 18.9% in February compared to a year earlier, wholesale fats and oils prices have risen more slowly. February prices were 5.8% over last year’s level, limiting the impact on food prices.
Farmers tend to plan their crop rotations years in advance — particularly for soy, which is hard to plant two years in a row because of disease risk. This means the current situation is unlikely to have an immediate effect on food prices.