Details Cookies
Cookie Policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Finally, some good news as food prices ease Finally, some good news as food prices ease Finally, some good news as food prices ease

Finally, some good news as food prices ease

Ole Hansen

Head of Commodity Strategy

Summary:  Global food price inflation has since peaking in March shown signs of easing, and so far, this month we are seeing most major commodity futures trading lower. If sustained it will come as a welcome relief to consumers around the world, many experiencing hardship from the recent surge in cost-of-living expenses. The weakness has been led by wheat and edible oils; the two food categories impacted the most by Russia's war in Ukraine. However, given the continued tightness and worries about Ukraine, an extended decline seems unlikely until this season's production levels become clearer

Global food price inflation, currently running at a near 23% on an annual basis according to the FAO, has since peaking in March showed signs of easing. The Global Food Price index compiled monthly by the UN organisation reached a record peak in March after Russia’s attack on Ukraine, a key global supplier of high-quality wheat and the biggest exporter of sunflower oil, helped turbocharge prices to levels raising concerns of a global food crisis.

Since then, however, some of the worries have started to ease with palm oil prices suffering a steep decline on the prospect for increased supplies from Indonesia, a major producer who temporarily implemented export restrictions back in March. Winter wheat harvesting in Europe and North America meanwhile have eased some of the supply concerns triggered by lack of Black Sea shipments from Ukraine.

The prospect of sharply lower prices, however, remains doubtful with weather worries still a key focus in countries like India and key growing regions in France. In addition, and important from a food security perspective next winter, negotiations to export Ukrainian grain through a protected corridor in the Black Sea has made little progress, and unless Ukraine can empty its silos before the next albeit much reduced harvest arrives, the prospect of lower-than-expected available supply will linger on.

In order to gauge the level of tightness in each market, we often look at the 12-month spread between the spot futures contract and the one expiring one year into the future. The chart below shows very clearly how the agricultural market has changed during the past couple of years. During a six-year period from 2014 the agriculture market witnessed a period of ample supply driven by crop friendly weather and low input costs. During this time, the market was trading in contango meaning spot prices commanded the lowest price relative to deferred.

This benign and calm period was suddenly disrupted in early 2020 when the pandemic led to a temporary breakdown in supply channels. In addition, the weather phenomena of colder than normal temperatures in the region of the equatorial Pacific Ocean, called La Ninã started to create challenging growing conditions, especially in South America, but also the USA and Australia. These price supportive developments were then turbocharged in early 2022 by surging cost of diesel and fertilizers and by Russia’s attack on Ukraine, a major global supplier of key food items from wheat and corn to sunflower oil.

However, the easing conditions since the March peak has seen the CBOT wheat one-year spread from a near 15% backwardation to a small contango. In Europe however, the one year spread in Paris Milling wheat remains elevated at a near 15% backwardation, highlighting current challenges to the European crop outlook and uncertainties about the outlook for new crop supplies from Ukraine this coming autumn.

Managed money accounts, also known as speculators, given how they leverage their positions using futures markets, have been net sellers of the nine food commodity futures tracked in this update since late April, almost one month before prices started to turn lower. Whether it was overbought markets or the temptation to book some profit following a strong run up in prices remains unclear, but from a record 1,112,000 lots representing a nominal value of $51.6 billion on April 22, that figure had dropped to 750,000 lots and $35 billion during the latest reporting week to June 14.

Since April, head and shoulder formations have emerged on CBOT wheat charts, both the current front month of September and the December contract, which best reflects the final availability following this season's harvest. For the recent weakness to stick and extend, the break below necklines at $10.37 in September (last at $10.36) and around $10.48 in December (last at $10.52) needs to be decisively broken.

Source: Saxo Group

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.