Can Food Prices Be Expected to Drop with Crude Oil Futures?

Crude oil prices are dropping back to pre-war levels and if you may recall, food prices have soared over the years with the primary blame being attributed to higher delivery costs…but now times are again a changing. Crude oil futures are down. 44 cents currently trading at $29.00 per barrel at the New York Mercantile Exchange.

A United Nations Food & Agriculture Organization study took monthly data of oil and food prices and determined a higher ratio of food cost since the year 2000 than the prior decade which can only be because of increasing oil costs. Since 2014, however, there has been a disconnect as food prices have been outperforming the cost of oil, but at the same time allowing more food production.

Laura Taylor, a senior market strategist at RJO Futures in Chicago, shared her fundamental view of the crude oil futures market by stating,There was a lag in higher food costs when crude oil (futures) began its ascent over a decade ago. Now that crude oil prices are returning to pre-war levels, maybe food companies are compensating for their prior losses before food prices come back to more affordable levels.” Taylor added,With increased food production (with lower energy costs), companies can be compensated earlier with more available product so there is a possibility of higher food costs not lasting that much longer.”

Crude oil futures trend is down with no bottom yet in sight. The technical indicators used to measure strength in the crude oil market illustrate the high probability of lower prices ahead – a major plus for consumers.

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