Global food prices surge to highest levels in a decade
UN measure of costs surges as a result of drought and Covid-19, leaving poorest nations most vulnerable
Global food prices extended their rally to the highest in almost a decade, heightening concern about bulging grocery bills as economies struggle to recover from the Covid-19 crisis.
A UN gauge of world food costs rose for a 12th straight month in May, its longest stretch in a decade. The continued advance risks accelerating broader inflation, complicating central banks’ efforts to provide more stimulus.
Drought in key Brazilian growing regions is crippling crops from maize to coffee, and growth vegetable oil production has slowed in Southeast Asia. That’s boosting costs for livestock producers and risks further straining global grain stockpiles that have been depleted by soaring Chinese demand. The surge has stirred memories of 2008 and 2011, when high food prices led to riots in more than 30 nations.
“We have very little room for any unexpected surge in demand in any country,” Abdolreza Abbassian, a senior economist at the UN’s Food and Agriculture Organization, said by phone. “Any of those things could push prices up further than they are now, and then we could start getting worried.”
The prolonged gains across staple commodities are trickling through to store shelves, with countries from Kenya to Mexico reporting higher food costs. The pain could be particularly pronounced in some of the poorest import-dependent nations, which have limited purchasing power and social safety nets as they grapple with the pandemic.
The UN’s index is at its highest since September 2011, with last month’s gain of 4.8% being the most in more than 10 years. All five components of the index rose during the month, led by vegetable oils, grain and sugar.
The world’s hunger problem has already reached its worst in years as the pandemic worsens food inequalities, compounding extreme weather and political conflicts.
There were other elements that worsened rocketing food costs a decade ago. For example, oil prices neared $150 a barrel — double current levels — and there was a wave of trade restrictions by major grain shippers. Costs for rice, one of the world’s staples, have remained relatively subdued during the current agricultural price surge.
Gains in the past year have been fuelled by China’s “unpredictably huge” purchases of foreign grain, and world reserves could hold relatively flat in the coming season, Abbassian said. Summer weather across the northern hemisphere will be crucial to determine if US and European harvests can make up for crop shortfalls elsewhere.
“We are not in the situation we were back in 2008-2010 when inventories were really low and a lot of things were going on,” Abbassian said. “However, we are in sort of a borderline. It’s a borderline that needs to be monitored very closely over the next few weeks, because weather is either going to really make it or create really big problems.”
Bloomberg News. More stories like this are available on bloomberg.com
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