It Just Had an Energy Crisis, Now Europe Faces a Food Shock -- Commodities Roundup

MARKET MOVEMENTS:

--Brent crude oil gained 1.6% to $78.05 a barrel.

--European benchmark natural gas falls 1.4% to EUR29.30 a megawatt hour.

--Gold futures edged up 0.1% lower at $1,977 a troy ounce.

--LME three-month copper futures fell 1.4% to $7,965 a metric ton.

--Wheat futures fell 1.1% to $6.15 a bushel.

TOP STORY:

It Just Had an Energy Crisis, Now Europe Faces a Food Shock

Fresh out of an energy crisis, Europeans are facing a food-price explosion that is changing diets and forcing consumers across the region to tighten their belts-literally.

This is happening even though inflation as a whole is falling thanks to lower energy prices, presenting a new policy challenge for governments that deployed billions in aid last year to keep businesses and households afloat through the worst energy crisis in decades.

New data on Wednesday showed inflation in the U.K. fell sharply in April as energy prices cooled, following a similar pattern around Europe and in the U.S. But food prices were 19.3% higher than a year earlier.

The continued surge in food prices has caught central bankers off guard and pressured governments that are still reeling from the cost of last year's emergency support to come to the rescue. And it is pressuring household budgets that are also under strain from rising borrowing costs.

In France, households have cut their food purchases by more than 10% since the invasion of Ukraine, while their purchases of energy have fallen by 4.8%.

In Germany, sales of food fell 1.1% in March from the previous month, and were down 10.3% from a year earlier, the largest drop since records began in 1994. According to the Federal Information Centre for Agriculture, meat consumption was lower in 2022 than at any time since records began in 1989, although it said that might partly reflect a continuing shift toward more plant-based diets.

Food retailers' profit margins have contracted because they can't pass on the entire price increases from their suppliers to their customers. Markus Mosa, chief executive of the Edeka supermarket chain, told German media that the company had stopped ordering products from several large suppliers because of rocketing prices.

A survey by the U.K.'s statistics agency earlier this month found that almost three-fifths of the poorest 20% of households were cutting back on food purchases.

OTHER STORIES:

Michelin's TBC to Divest Retail Network in US

Compagnie Generale des Etablissements Michelin said late Tuesday that U.S.-based tire distribution company TBC, which it jointly operates with Sumitomo, will divest its retail portfolio to Mavis Tire Express Service, based in New York, U.S.

The French tire maker said the divestment will allow TBC to focus on wholesale, distribution and franchise businesses. The company will also make investments toward supply-chain optimization, digital innovation and human capital, while also developing advanced tire logistics services, Michelin said.

MARKET TALKS:

Palm Oil Ends Higher on Supportive Malaysia Production Data

1026 GMT - Palm oil prices ended higher in Asia. The gains were likely a result of easing trade worries over excessive supply of the edible oil, after Malaysian official data showed a smaller-than-expected increase in May. But analysts continued to warn of expected output increases as the peak production season begins. Weakness in similar vegetable oil commodities, also pressured by high harvests this year, may further weigh on palm oil trading sentiment, analysts say. The Bursa Malaysia Derivatives contract for August delivery rose MYR28 to MYR3,406 a ton. ([e-mail])

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Oil Gains as API Figures Point to Inventory Drawdown

0736 GMT - Oil prices rise as U.S. oil stocks are projected to have slumped. Brent crude oil gains 0.8% to $77.48 a barrel. That adds to a 1.1% gain on Tuesday and takes Brent's rise to 2.5% for the week so far. Data from the American Petroleum Institute said U.S. crude oil stocks fell by 6.8 million barrels last week, while gasoline stocks dropped by 6.4 million barrels, according to market sources. That would be stocks' third consecutive weekly decline, if Department of Energy data due later Wednesday confirms the figures. Meanwhile, comments from Saudi Arabia's energy minister that oil short-sellers should "watch out" were interpreted as an implicit threat that the cartel might cut production, adding support to prices. ([e-mail])

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Metals Mixed Ahead of Fed Minutes

0731 GMT - Metals markets are mixed ahead of today's release of the minutes from the last Federal Reserve meeting. Three-month copper is down 1.1% to $7,994.50 a metric ton while nickel is up 0.8% to $21,085 a ton. Gold meanwhile is flat at $1,974 a troy ounce. Goldman Sachs says it expects short-term price weakness for industrial metals amid weakness in western economies. However, a recovery in Chinese imports should boost prices later in the year, with local inventories being run down. "That inevitably is feeding a mounting incentive for imports," the bank says in a note. It added that its three-month price target for copper is $7,750 a ton but this rises to $9,200 a ton in six months. ([e-mail])

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Palm Oil Rises, Supported by Moderate Production Growth

0307 GMT - Palm oil prices are higher in early Asian trade, supported by the moderate rise in Malaysian palm oil production. Data from the Malaysian Palm Oil Association shows production for May 1-20rose of 9% on month, compared with the expected 14% growth, says Sathia Varqa, Managing Editor of Fastmarkets Palm Oil Analytics. However, palm oil production is on a rising trajectory, while exports are seen declining he says. The weakness in palm olein prices on the Dalian Commodity Exchange may result in CPO futures paring gains, he adds. The Bursa Malaysia Derivatives contract for August delivery is MYR36 higher at MYR3,414 a ton. ([e-mail])

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Copper Declines; Weaker Prices May Prompt Chinese Buying

0254 GMT - Copper drops in early Asian trading, weighed by weak global demand and U.S. debt-ceiling discussions. Germany's factory downturn deepened, with the manufacturing index falling to 42.9, while the S&P U.S. manufacturing PMI weakened more than expected to 48.5, suggesting global demand is weak, ANZ analysts say in a research note. However, the commodity's selloff will likely encourage China to increase purchases, ANZ says. It believes the import arbitrage has reopened, making shipping the metal to China profitable. The three-month LME copper contract falls 1.3% to $8,000.00 a ton. ([e-mail])

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Iron-Ore Futures Retreat on China's Steel Mills Output Control Rumors

0217 GMT - Chinese iron-ore futures fell in early trade with market sentiment weighed by chatter of steel mills cutting production and the slower-than-expected pace of economic activity. Rumors that officials in Hebei had carried out an energy efficiency survey of steel mills raised concerns over likely reduction in crude steel production, say Baocheng Futures analysts in a note. Coupled with weak macro sentiment, the downward pressure on mineral prices is likely to continue, they add. Iron-ore contracts on the Dalian Commodity Exchange are lower across the board, with the most-traded September contract 2.6% lower at CNY697.5 a ton. ([e-mail])

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(END) Dow Jones Newswires

05-24-23 0713ET