According to the United Nation’s Food and Agriculture Organization (FAO), February saw world food prices, led by vegetable oils and dairy products, surge to record highs, marking a 20.7% increase year-on-year.
The FAO’s food price index (FFPI), which is “a measure of the monthly change in international prices of a basket of food commodities,” averaged 140.7 points in February, “up 5.3 points (3.9 percent) from January and as much as 24.1 points (20.7 percent) above its level a year ago.”
The climb marks a dismal all-time high, breaking the Feb. 2011 record by 3.1 points.
In addition to the price of vegetable oils and dairy products going up 8.5% and 6.5% from January, respectively, cereals and meat prices also increased, while the price of sugar fell for the third consecutive month.
Crop conditions and export availabilities are only part of the problem, says FAO economist Upali Galketi Aratchilage.
“A much bigger push for food price inflation comes from outside food production,” Aratchilage explains, “particularly the energy, fertilizer and feed sectors. All these factors tend to squeeze profit margins of food producers, discouraging them from investing and expanding production.”
A Jan. 2022 article from Texas Agriculture Daily stated the cost of fertilizer had already jumped 200% year-over-year, with higher prices — as much as 80% higher — expected in 2022, creating “a challenging environment for which the farm safety net is ill-prepared.”
And those frightening numbers came before Russia, which supplies 21% of the global potash market, including 7.8% imported by the United States, invaded Ukraine.
Russia and Ukraine export 25% of the world’s wheat products. If you think food prices are high now, just wait until sanctions truly hit and the arms shipments get sent to Ukraine to prolong the war interminably
— George Papadopoulos (@GeorgePapa19) March 6, 2022
Indeed, Reuters notes that much of the FOA data for the February report was compiled prior to the Russian aggression.
“Concerns over tensions in the Black Sea area were already weighing on agricultural markets even before the violence fared, but analysts warn a prolonged conflict could have a major impact on grain exports,” writes Reuters, adding that “Ukraine and Russia account for about 80% of global exports of sunflower oil.”
Maize and wheat prices were up 5.1% and 2.1% respectively, “largely reflecting uncertainty about global supply flows from Black Sea ports.”
The possible impact of the conflict between Russia and Ukraine has yet to be truly seen, however Commerzbank warns prices are certain to keep going up.
“There is no end in sight to the upswing because 30% of the world’s wheat exports have been cut off from the global market by the war,” Commerzbank told Seeking Alpha.
And according to University of Illinois agricultural economist Scott Irwin, the current situation in the Black Sea will be “the biggest supply shock to global grain markets in my lifetime.”
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