Food inflation risks are brewing across the supermarket again

As cocoa steals the spotlight with its red-hot rally, prices of other major crops are also ticking up — reviving the risk of food inflation that has remained stubbornly high in parts of the world.

Palm oil — used across a host of grocery items — is at a 17-month high, robusta coffee futures are the priciest since at least 2008, and white corn is up more than 30% this year. Bad weather shrivelling harvests and tightening supplies is a key driver behind the latest increases.

While it takes time for changes in wholesale prices to filter through to retailers, the gains could start to reverse a lengthy downturn across food-commodity prices and mean consumers eventually feel the pinch at the supermarket beyond just chocolate bars. Food inflation is running above overall inflation in more than 60% of 167 countries most recently assessed, the World Bank said in a report in late March.

In Vietnam, heat waves are hitting growing regions in the world's largest robusta coffee shipper. Production problems are also made worse by farmers shifting to alternative crops like durian and avocados. That has helped push robusta — the type of coffee that goes into espresso and instant drinks — up nearly 70% in the past year.

Meanwhile, drier and hotter-than-usual weather linked to El Niño is hurting the outlook for South Africa's key corn harvest. The looming shortage has fuelled a rally in white-corn prices and could force significant imports of the food staple — used to make corn meal known locally as pap — for the first time since 2017.

Then there's palm oil, the world's most-consumed vegetable oil found in everything from candy and cookies to lipstick. Worries about lower-than-expected supplies from top two growers Indonesia and Malaysia has boosted futures to their highest since 2022.

Another grain to watch is wheat. Although Russia's bumper harvests have helped cool global prices from record highs in 2022, geopolitical risks still linger as it maintains its invasion of Ukraine and both sides target infrastructure. That could once again disrupt crop shipments out of the breadbasket region.

"Ukraine's resilience in maintaining agricultural production amidst the war underscores its role as a global supplier, but prospects for peace remain uncertain, exacerbating market volatility," the World Bank report said.

Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.