Mar 05, 2022: World food prices hit a record high in February, led by a surge in vegetable oils and dairy products, to post a 24.1% increase year-on-year, according to the Food and Agriculture Organization (FAO), a Rome-based UN agency.
FAO's food price index, which tracks the most globally traded food commodities, averaged 140.7 points last month against a downwardly revised 135.4 in January. That figure was previously given as 135.7.
Higher food prices have contributed to a broader surge in inflation as economies recover from the coronavirus crisis and the FAO has warned that the higher costs are putting poorer populations at risk in countries reliant on imports.
As the FAO's Food Price Index measures average prices over the month, the agency said the February reading only partly incorporates market effects stemming from the conflict in Ukraine.
“Concerns over crop conditions and adequate export availabilities explain only a part of the current global food price increases. A much bigger push for food price inflation comes from outside food production, particularly the energy, fertilizer and feed sectors,” FAO economist Upali Galketi Aratchilage said in a statement.
“All these factors tend to squeeze profit margins of food producers, discouraging them from investing and expanding production.”
The overall rise last month was driven by an 8.5 per cent increase in the FAO Vegetable Oils Price Index, a new record high.
This was mostly due to sustained global import demand, which coincided with a few supply-side factors, such as lower soybean production prospects in South America.
The Dairy Price Index averaged 6.4 per cent higher in February than January, supported by lower-than-expected milk supplies in Western Europe and Oceania, as well as persistent import demand, especially from North Asia and the Middle East.
Last month, the Cereal Price Index increased 3.0 per cent over January. Contributing factors included rising quotations for maize and other coarse grains, caused by continued concerns over crop conditions in South America, uncertainty about maize exports from Ukraine, and rising wheat export prices.
Strong global import demand contributed to the 1.1 per cent rise in the Meat Price Index. Other factors included tight supplies of slaughter-ready cattle in Brazil and a high demand for herd rebuilding in Australia.
The FAO Sugar Price Index declined by nearly two per cent amid favourable production prospects in India, Thailand and other major exporters, as well as improved growing conditions in Brazil.
FAO has also published a preliminary forecast that shows worldwide cereal output is on course to increase to 790 million tonnes this year.
Anticipated high yields and extensive planting in North America and Asia, should offset a likely slight decrease in the European Union and the adverse impact of drought conditions on crops in some of the North African countries.
The agency has updated its forecast for world cereal production in 2021, which is now pegged at 2,796 million tonnes, a 0.7 percent increase from the year before.
The forecast for world trade in cereals was also raised to 484 million tonnes, up nearly one per cent from the 2020/2021 level. The forecast does not assume potential impacts from the conflict in Ukraine, and FAO is closely monitoring the developments and will assess impacts in due course.
Relatedly, the head of the International Fund for Agricultural Development (IFAD) has highlighted how the crisis in Ukraine could impact global food security.
IFAD President Gilbert Houngbo said continuation of the conflict, which is already a tragedy for those directly involved, will be catastrophic for the entire world, particularly for people already struggling to feed their families.
He warned that the fighting could limit the world’s supply of staple crops like wheat, corn and sunflower oil, resulting in skyrocketing food prices and hunger. This could jeopardize global food security and heighten geopolitical tensions.
“This area of the Black Sea plays a major role in the global food system, exporting at least 12 percent of the food calories traded in the world,” said Mr. Houngbo.
“Forty percent of wheat and corn exports from Ukraine go to the Middle East and Africa, which are already grappling with hunger issues, and where further food shortages or price increases could stoke social unrest.”