The cost of commodities that make up a typical breakfast has soared 55% in a single year, led by major spikes in cocoa and pork, the latest Breakfast Commodity Index from trading and investing platform eToro has found.
The rate of price growth amongst breakfast food staples dramatically outpaced the 3.2% rise in the UK Consumer Price Index (CPI) over the same period, indicating consumers are likely to face further price pressures.
There are considerable pressures being felt in both the cocoa and coffee markets, the consequence of a shortage of rainfall in some growing areas. In addition, there are supply disruptions in the coffee export market. Commodities traders in Chicago and New York say there is plenty of scope for other food-related commodities to see a similar squeeze as we have seen with the so-called ‘cocoa effect’ if severe weather conditions persist into the second half of this year.
The cocoa market bull run has caused commodities traders to extend their coverage of the date due for wheat futures in anticipation of a possible price spike if we see poor weather conditions in the so-called bread baskets of Russia and the US.
Seismic price divergence in breakfast food commodities
Ben Laidler, Global Markets Strategist at eToro, said: “Prices of staple foods experienced immense volatility since the pandemic and the onset of the war in Ukraine. While we have seen some of these supply chain pressures subside, extreme weather and disease in the global south have caused heightened volatility in some key breakfast food prices. Cocoa, orange and coffee harvests have been most heavily impacted over the past year, with many producers now running at reduced capacity and turning to reserve stocks where possible.”
It’s possible that the seismic price divergence we’re seeing in breakfast food commodities may begin to impact consumer behaviour, as the price of some breakfast items such as wheat and milk fall and other items such as orange juice, cocoa and coffee reach record highs.
Dramatic rise for cocoa prices
Cocoa prices have experienced the most dramatic rise of all breakfast-related commodities, increasing by 270% in the past year. Severe drought in West Africa, a region which produces 80% of the world’s cocoa, has contributed significantly to shortage in supply and rising prices.
Cocoa is regarded as a relatively high risk and low volume market. Much of the cocoa futures market is dominated by funds and it is seeing some volatility now, which should make cocoa traders cautious. Recent plunges in cocoa futures are being attributed to higher margin requirements imposed by the ICE Futures US exchange in New York. This forced some traders to quit cocoa positions early.
New intel from Brussels and the World Cocoa Conference at the end of April had indicated that there may be an increase in cocoa production globally this year. But farmers responding to higher prices face a three year time lag if they want to increase production, as that is how long it takes cocoa trees to mature.
Orange juice futures up 39% in 12 months
Orange juice has experienced similar weather-induced supply pressures caused by crop disease and extreme weather events in the United States, southern Europe and Brazil, rising 39% in the past 12 months.
Pork spot prices were down considerably, off by 24% over 24 months, but have rallied considerably in the last 12 months with a gain of over 60%.
By contrast, the price of wheat and milk have fallen by 14.4% and 3.9% in the past year.
