Bad crop weather in key-producing countries is a major culprit. Dryness in the U.S., Canada and France is hurting wheat plants, as well as corn in Brazil. Rain in Argentina is derailing the soy harvest. Add to that the fears of drought coming to the American Farm Belt this summer.
Meanwhile, China is gobbling up the world’s grain supplies, on track to take in its biggest haul of corn imports ever as it expands its massive hog herd. Rumors are swirling that the Asian nation is working on 1 million metric tons of new corn purchases, according to Arlan Suderman, chief commodities economist at StoneX.
“The agriculture sector looks very appealing right now and the money is chasing it,” Suderman said.
The agricultural rally is stirring food inflation fears, because staple crops heavily influence consumer prices for everything from bread and pizza dough to meat and even soda. The Bloomberg Agriculture Spot Index — which tracks key farm products — soared the most in almost nine years last week.
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The higher prices are also helping to drive even broader gains across the commodities complex, with metals such as palladium and copper rallying on a comeback in industrial operations around the world.