Global food price index hits all-time high in February

BY: ONOME AMUGE

Quotations for global food commodities swung towards an all time high in February, led by vegetable oils and dairy products, according to the Food and Agriculture Organisation (FAO) of the United Nations.

The FAO food price index which tracks monthly changes in the international prices of commonly-traded food commodities averaged 140.7 points in February, 3.9 percent higher than 135.7 points recorded in January, and was up 20.7 percent year-on-year.

Details highlighted in the report, however, partly incorporated market effects stemming from the Russia-Ukraine crisis as the international food agency explained that sustained global import demand and reduced exports led to a sharp rise in the vegetable oils price index.

The surge was also attributed to other supply factors, including a decline in palm oil export availability in Indonesia, lower soybean production prospects in South America and lower sunflower oil exports due to conflict in the Black Sea region.

Upali Galketi Aratchilage, an economist at the FAO, noted that concerns over crop conditions and adequate export availability explain only a part of the current global food price hike.

Aratchilage explained that a much bigger push for food price inflation wasn’t particularly from food production, noting that the energy, fertiliser and feed sectors, which tend to squeeze profit margins of food producers, discouraged producers from investing and expanding production.

The overall rise for February was driven by an 8.5 percent increase in the FAO vegetable oils price index, a new record high.

This, according to the FAO, 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.

In the month under review, dairy price index averaged 6.4 percent higher, 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.

The FAO Cereal Price Index was up three percent from January, led by rising quotations for coarse grains. Corn prices rose 5.1 percent, underpinned by crop condition concerns in South America, the uncertainty surrounding exports from Ukraine and rising wheat export prices.

Concerns about trade flows from the Black Sea region also raised world wheat prices by 2.1 percent, the FAO said.

Supported by strong global import demand, the meat price index rose 1.1 percent. The FAO also listed tight supplies of slaughter-ready cattle in Brazil and a high demand for herd rebuilding in Australia as contributory factors.

On the contrary, the FAO sugar price index declined by nearly two percent amid favourable production prospects in India, Thailand and other major exporters, as well as improved growing conditions in Brazil.

FAO revised cereal production outlook for 2022
FAO also published a 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 are expected to 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 also 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 percent from the 2020/2021 level.

FAO said the forecast does not assume potential impacts from the conflict in Ukraine as it is closely monitoring the developments which will be assessed and reported in due course.

In his assessment on how the crisis in Ukraine could impact global food security, Gilbert Houngbo, president of the International Fund for Agricultural Development (IFAD), warned that a prolonged conflict could limit the world’s supply of staple crops like wheat, corn and sunflower oil, resulting in skyrocketing food prices and hunger.

According to Houngbo, the Black Sea area plays a major role in the global food system, exporting at least 12 percent of the food calories traded in the world.

“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,” he stated.