Why global food prices are soaring
A UN index tracking staples from wheat to vegetable oils climbed 3% to a new decade high in October
Global food costs jumped last month, extending a march towards a record and piling more inflationary pressure on consumers and governments.
A UN index tracking staples from wheat to vegetable oils climbed 3% to a fresh decade high in October, threatening even higher grocery bills for households that have already been strained by the pandemic.
That could also add to central banks’ inflation worries and risks worsening global hunger, which is already at a multiyear high.
Bad weather hit harvests around the world this year, freight costs soared and labour shortages have roiled the food supply chain from farms to supermarkets.
An energy crisis has also been a headache, causing a knock-on risk of bigger fertiliser bills for farmers.
“The issue with the inputs and fertilisers and its implications for next year’s crop is a concern,” said Abdolreza Abbassian, a senior economist at the UN’s Food and Agriculture Organisation (FAO).
“By now, the market has factored in most of the supply and demand issues. But the market has by no means factored in next year’s prospects in production.”
Some regions are likely to continue to face food-security challenges. On Thursday, the UN raised its outlook for global wheat trade to a record as purchases climb in Middle Eastern nations from Iran to Afghanistan.
We cannot afford a bad year in 2022 for important cropsAbdolreza Abbassian, UN Food and Agriculture Organisation
Droughts there slashed crops, boosting dependency on imported grain at a time when prices are soaring.
“This came at the worst time for those countries because world prices are just so high,” Abbassian said. “We cannot afford a bad year in 2022 for important crops.”
The price gains are stirring memories of spikes in 2008 and 2011 that contributed to global food crises. Even though it takes time for commodity costs to trickle to grocery shelves, officials in areas such as North Africa and Turkey are already facing difficulties shielding shoppers from the blow.
Bigger expenses for farmers could also curb northern hemisphere plantings now under way, according to the FAO.
October’s food-price gains were mostly driven by higher costs for grains and vegetable oils, the FAO said in a report.
Still, there are signs of stabilising prices for some foods, with meat and sugar falling last month, said Abbassian. Global grain and oilseed supplies are proving sufficient to meet demand, and prices for rice — one of the world’s vital staples — remain subdued, he said.
“On the demand side, we’re beginning to get a better hold of what we actually need, so that uncertainty is perhaps diminishing,” he said.
Bloomberg News. More stories like this are available on bloomberg.com