Reports from the United Nations show that global food prices rose in August to their highest levels since February. The Food and Agriculture Organization (FAO) Food Price Index rose from 94.1pts in July to 96.1pts in August, with the organization citing sturdier consumer demand and a weaker US dollar as the main factors behind the uptrend.
As lockdowns ease globally, resurgent demand across countries, including China, led to an increase in prices of Sorghum and Maize. One of the world’s largest sugar exporters, Thailand, continued to experience dry weather conditions, subsequently leading to a sharp dip in sugarcane production.
This, alongside stronger demand from China, led to an uptrend in August sugar prices (+8.25% MoM), as it edged up to USD13.25/lbs. Eurozone inflation remained at 1.0% in August – below the European Central Bank’s 2.0% target, while China’s inflation eased from 2.70% in July to 2.40% in August.
So far, in H2:2020, the mood has been largely positive in global financial markets as asset prices are looking to bounce back from the COVID-19 blow which triggered massive selloffs in March. This has been in concert with support from central banks who have largely retained their expansionary policies.
In the US, while the political landscape remains heated in a build-up to the presidential elections in November, the dollar has shed some weight as investors ditch low yielding dollar securities for precious metals and higher yields elsewhere.
Meanwhile, in the global oil market, prices reached a peak of USD46.36pb in the last week of August – the highest since March. However, the outlook for crude oil prices is still coloured by uncertainties regarding a recovery in fuel demand amidst the COVID-19 pandemic, rising U.S rig counts and incomplete supply cuts compliance from OPEC+.