US drought to push Singapore inflation up

The second driest weather in 118 years experienced by US in June-July this year spells trouble ahead.

Singapore's inflation in the coming months may not only be about skyrocketing housing and transpo costs. MayBank KimEng said in a research report that there is also a danger of upward pressures on global inflation as food commodities surged on US drought.

Here's from MayBank KimEng:

The record temperatures in the US with reported scorching of corn crops have led to price of Yellow Corn to spike by +30% over the past one month. Other crops that recorded surging prices include Soybean Meal (+31%), Wheat (+30%), Yellow Soybean (+24%) and Maize (+20%).

Second driest weather in118 years during June-July 2012 led to the US government declaring almost 1,300 counties in 29 states as natural-disaster areas because of the drought.

Crude oil prices have also rebounded over the past month by +11.8% while natural gas rose by +15.7%. Our calculation showed global inflation rate eased for a ninth consecutive month in May 2012 to +2.7% YoY (Apr 2012: +3.0% YoY), but the risk on the upside now in light of these recent commodity price trends.

In addition to the weatherrelated food commodity supply shock, speculators betting on further policy easing and non-conventional measures by major central banks could drive commodity prices higher in the short-term even as global economic fundamentals remain shaky.

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