The oil market has held above $100 per barrel through May, but the bigger story for food and beverage buyers is what is happening next. Investment funds that spent the first months of the Iran conflict accumulating crude oil positions are now rotating into agricultural commodities. Positions are building in corn, soybeans, and soybean oil, driven by concern over fertiliser shortages and higher expected biodiesel demand. Funds began the year net short across agricultural commodities and switched to net long at the start of March. That rotation could build a structurally higher floor under agricultural prices at the exact moment consumers are already stretched.
The macro backdrop frames the pressure. US consumer sentiment hit a record low of 48.2 in May, with gasoline prices averaging over $4.40 per gallon. US wholesale prices rose 6% year-on-year in April, the highest rate since the energy shock of 2022. In Europe, April flash CPI hit 3%, industrial PMIs fell below 50, and the ECB is weighing whether June data will justify a rate hike. China grew exports 14% year-on-year in April, but producer prices rose 2.8% year-on-year, the highest rate since 2022, and oil and gas extraction prices jumped 28.6%.
For food and beverage buyers, the relevant question is not just where oil prices are today. It is whether a prolonged conflict translates into structurally higher input costs across the ingredient supply chain, at a time when consumer demand is already showing strain. US beef prices hit all-time highs in April on drought and high feed costs. Several commodity categories are seeing funds accumulate long positions for the first time since early in the year. A Japanese food manufacturer is reportedly resorting to black and white packaging due to naphtha shortages.
Commodity market visibility is becoming more important than ever.
Read the full macro market analysis on Vesper: https://app.vespertool.com/market-analysis/2998