Gelatin Prices in USA and South America Take a Bearish Turn in August 2023 Amidst Sluggish Demand

The prices of Gelatin showcased a bearish trend in the USA and South America during August 2023 due to sufficient stockpiles in the warehouse combined with lower demand from domestic and overseas markets. Demand remained lethargic due to high prices and rising inflation, which supported the downward trajectory for Gelatin prices.

The manufacturing sector in the United States was shrinking in August 2023. However, the rate of contraction has moderated, indicating that the sector may be settling down at a lower level. A steeper drop in new orders resulted in a further contraction in output as enterprises continued to liquidate their backlog and finished product stockpiles. Meanwhile, muted demand from important export markets, particularly Europe, resulted in a fresh fall in new export orders in August. These factors resulted in a sufficient supply of Gelatin in the US market, which contributed to a decline in Gelatin prices.

The consumer price index, which monitors prices for a wide range of goods and services, increased 3.7% in August compared to the previous year, as per the Bureau of Labor Statistics. Energy commodities prices, such as gas and oil, have risen 10.5 percent over the last month. Gas prices rose in August as Russia and Saudi Arabia maintained aggressive supply cutbacks, driving crude oil to a 10-month high of $91 per barrel. Because of the high inflation, customers' purchasing power was reduced, resulting in diminished demand for Gelatin in the US market.

A similar trend of Gelatin is seen in the South American region, specifically in Brazil. Brazil's manufacturing sector experienced a sharp drop in international orders in August. Also, the inflation rate rose to 4.61 percent in August, the second consecutive month, after the central bank slashed interest rates for the first time in three years. The increase is primarily attributed to the rise in energy prices, driven by higher electricity and fuel costs, as per the IBGE National Statistics Institute.

According to the ChemAnalyst forecast, the prices of Gelatin are expected to decline further in September because of persistent lower demand from end-user food and pharmaceutical industries amid adequate supply among market manufacturers and retailers. As US inflation accelerated more quickly than anticipated in August, it left the door open for additional interest-rate hikes from the Federal Reserve, which could lead to lower demand in the US market and a drop in Gelatin prices. In Brazil, inflation is expected to rise further in September, and the central bank may stop cutting Selic rates, keeping demand low and causing Gelatin prices to fall. However, the prices might rise in the last quarter because of the ease of inflation, resulting in an expansion of the Gelatin market.