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

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.