Some soft commodity prices are surging, adding to consumer woes
cnbc.comSurging prices for soft commodities, from orange juice to live cattle, are complicating the inflation picture.
A host of agricultural commodities have climbed in recent months, driven by weather-related damage and rising climate risks around the globe, resulting in tighter supplies. The higher prices add another layer of pain to consumers' wallets at a time when stubborn core inflation, excluding food and energy, stood at 4.3% in August.
Futures contracts on orange juice, live cattle, raw sugar and cocoa each hit their highs for the year this month. All are in «supply-driven bull markets right now,» said Paul Caruso, director of commodity investments at Ancora.
The S&P GSCI Softs index, a sub-index of the S&P GSCI commodities index that measures only soft commodities, has jumped more than 18% so far this year.
Orange juice has shot up due to a short global citrus supply and hurricanes last fall that hit Florida, the primary producer of orange juice for the U.S. Major exporters, including Brazil and Mexico, also lowered their estimated orange crop yields for the year due to warmer temperatures making harvests more difficult.
The juice futures market reached a record $3.50 per pound this month. Live cattle futures similarly hit a record, reaching $1.9205 per pound.
Meat prices have been driven by shrinking U.S. cattle herds, continued beef demand, plus higher input costs for labor and fuel. A prolonged drought in the Midwest earlier this year damaged grasslands and hay crops, forcing some farmers to cull their herds. Data from the U.S. Department of Agriculture forecasts declining supplies this year and next, and potentially through 2025 and 2026, before supplies are rebuilt.
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