Ukraine war pushes global food prices to all-time high

BY ONOME AMUGE

World food commodity prices leapt to their highest levels ever in March, as Russia’s lingering attack on Ukraine and the retaliatory economic sanctions imposed by the Western nations against Russia, inflicted more shocks across markets for staple grains and vegetable oils, the Food and Agriculture Organisation of the United Nations (FAO) reported in its monthly food price index report.

The FAO food price index which tracks monthly changes in the international prices of commonly-traded food commodities averaged 159.3 points in March, climbing 33.6 percent year-on-year and 12.6 percent above the 140.7 points recorded in February, its previous highest level since its inception in 1990.

The FAO cereal price index rose 17.1 percent in March, bolstered by large rises in wheat and other coarse grain prices, an increase largely attributed to the war in Ukraine.

World wheat prices soared 19.7 percent, exacerbated by concerns over crop conditions in the U.S. Maize prices recorded a similar trend with a 19.1 percent month-on-month increase, hitting a record high along with those of barley and sorghum.

The FAO vegetable oil price index rose 23.2 percent, to record the highest quotation level, driven by higher valuations for sunflower seed oil, of which Ukraine is the world’s leading exporter.

Palm , soy and rapeseed oil prices also rose sharply as a result of the higher sunflower seed oil prices and the rising crude oil prices, with soy oil prices supported further by concerns over reduced exports by South America.

The FAO sugar price index was up 6.7 percent from February, reversing recent declines to reach a level over 20 percent higher than in March 2021. Higher crude oil prices along with currency appreciation of the Brazilian Real were attributed as driving factors for the increase. However, favourable production prospects in India prevented larger monthly price increases.

The FAO meat price index increased by 4.8 percent in March to reach an all-time high, led by surging pig meat prices related to a shortfall of slaughter pigs in Western Europe. International poultry prices also surged in step with reduced supplies from leading exporting countries following avian flu outbreaks.

The FAO dairy price index was 2.6 percent higher month-on-month and rose 23.6 percent year-on-year, as quotations for butter and milk powders rose sharply amid a surge in import demand for near and long-term deliveries, especially from Asian markets.

On the other hand, contrasting trends across the various origins and qualities kept the March value of FAO’s rice price index little changed from February as it stood 10 percent below the level recorded a year earlier.

In its cereal supply and demand estimates, which includes a forecast for global wheat production in 2022, the FAO lowered its projection to 784 million tonnes, from 790 million tonnes projected the previous month.

The agency factored in expectations that at least 20 percent of Ukraine’s planted area to winter crops, notably winter wheat, may not be harvested due to direct destruction, constrained access or a lack of resources to harvest crops. This is in contrast to reports of continued conducive weather conditions in Russia, as well as prospective production trends in China, the European Union, India, and North America.

Meanwhile, coarse grain production prospects remain favourable in Argentina, Brazil and South Africa.

FAO cut its forecast for world trade in cereals in the current marketing year to 469 million tonnes, marking a contraction from the 2020/21 level. This was largely attributed to the war in Ukraine. On the other hand, it is expected that the European Union and India will increase wheat exports, while Argentina, India and the U.S. will partially compensate for the loss of exports from the Black Sea region by shipping more maize into the global market.

Global cereal utilisation in 2021/22 is projected at 2.7 billion tonnes, including a record level for rice, with increases also expected for maize and wheat.

Global cereal stocks ending in 2022 are forecast to rise by 2.4 percent from their opening levels, largely due to higher wheat and maize stocks in Russia and Ukraine on account of lower expected exports.