Global food prices climb closer to record, boosting inflation angst

Food prices have climbed closer to a record high, giving consumers and governments around the world an even bigger inflation headache.

A UN gauge of global food prices rose 1.2% last month, threatening to make it more expensive for households to put a meal on the table.

It’s more evidence of inflation soaring in the world’s largest economies and may make it even harder for the poorest countries to import food, worsening a hunger crisis.

Prices have jumped for multiple reasons: bad weather hurt harvests; higher shipping rates, worker shortages and an energy crunch hit supply chains; and fertiliser costs have surged too.

It typically takes a while for commodity costs to trickle down to supermarkets, but the rally is evoking memories of spikes in 2008 and 2011 that contributed to global food crises.

November’s push higher was mainly driven by grains and dairy. Prices of vegetable oils and meat declined, the UN’s Food and Agriculture Organisation (FAO) said in a report on Thursday.

Higher food prices are pressuring consumer budgets already strained by the Covid crisis and high energy costs. It’s looking likely that shoppers will feel the effects of inflation for months to come as economies reopen in the wake of the pandemic.

That’s creating a policy dilemma for central banks over how fast to dial back stimulus measures. This week, Federal Reserve chair Jerome Powell said its next meeting should discuss whether to wrap up bond purchases a few months sooner, and retired the word “transitory” to describe high inflation.

The FAO last month said the world’s food-import bill should climb even more than expected to a record this year because of high staple and freight costs.

Officials in areas such as North Africa — one of the world’s top grain importers — and Turkey are already facing difficulties shielding citizens from costly food. Elsewhere, Serbia is capping the price of some staples, including milk and flour, to curb price increases.

Bloomberg