Food commodity prices reach highest levels ever

World food commodity prices took a significant jump in March to reach their highest levels ever according to the Food and Agriculture Organisation of the United Nations. As war raged in Ukraine, it sent shock wave through all commodity markets including grains and vegetable oils. The FAO Food Price Index averaged 159.3 points in March, up 12.6 per cent from February when it had reached its highest level since 1990. In March the index was 33.6 percent higher than March 2021.

While food prices have increased somewhat in western economics, consumers have yet to feel the real impact of rising food prices. This is in stark contrast to developing countries where the impact of the war in Ukraine on global food prices pushing commodity prices to levels not seen since 2011. While the increase in global food prices has been steady in all countries in west Africa, a staggering 40 percent jump from the five-year-average has been witnessed in Liberia, Sierra Leone, Nigeria, Burkina Faso, Tago, Niger, Mali and Mauritania. This has resulted in pushing basic meals out of reach for millions of women, men and children according to the UN world food programme.

Euro area annual inflation is expected to be 7.5 percent in March 2022, up from 5.9 percent in February. Food, alcohol and tobacco price inflation was up .8 percent to 5 percent in March and 3.9 percent year-on-year. Similarly in Ireland, prices were 1.9 percent higher in March compared with February and 6.7 percent higher year-on-year. Food prices were up 0.9 percent on February and 3.9 percent on March 2021 indicating that Irish consumers have yet to feel the impact of the commodity price hikes seen in global commodity markets. The ESRI forecasts Irish annual inflation of 6.7 percent for 2022. While consumer prices typically lag global commodity prices, food price inflation in Ireland appears to be lagging other countries. In the USA, food prices increased 7.9 percent for the year ended February 2022 which is the largest 12 months advance since 1981.

The FAO Cereal price index was 17.1 percent higher in March than in February resulting from significant price rises in wheat and all coarse grains as a result of the war in Ukraine. World wheat prices soared by 19.7 percent during the month, exacerbated by concerns over crop conditions in the USA according to FAO. Maize prices up 19.1 percent month-on-month hit a record high along with those of barley and sorghum. FAO’s rice price index saw little change month on month and is still 10 percent below the level of last year.

The FAO vegetable oil price index rose 23.2 percent, on the back of high quotations for sunflower oil of which Ukraine is the world’s largest exporter. This has resulted in upward pressure on all vegetable oil prices and is likely to add price support across the fats market including butter prices. The Dairy price index was up 2.6 percent and was 23.6 percent higher than March 2021.

As the numbers of people facing food insecurity in West Africa continues to grow, rising food prices have yet to impact Irish or indeed European consumers. As of now, consumers have been largely focused on significantly increased energy prices and indeed concerns about availability. However, as the cost of the weekly shop starts to inch noticeably higher, consumers may become more exercised. The West’s continued support for Ukraine relies on strong support from the electorate. However, as inflation starts to erode further into people’s income, and the impact of the war and sanctions on western economies grows, politicians may need to look at measures to curb food price inflation.