Global food prices see the biggest increase in a decade

Global food prices soared in May by the largest rate in 10 years, and a closely watched index rose by 40%, sparking concerns about further increases in food prices later this year.

The year-on-year increase in the monthly food price index of the United Nations Food and Agriculture Organization was the largest since 2011, indicating that the inflation that was initially triggered by the interruption of the pandemic is accelerating.

The surge in China’s demand for grains and soybeans, coupled with the severe drought in Brazil and the growing demand for vegetable oils for biodiesel, has increased the pressure on prices.

The index is an important benchmark for international trade in agricultural products, and the increase has brought it to the highest level since September 2011.

Rising world market prices will further increase food price inflation in poorer countries that rely on imported staple foods. For richer countries, the cost of raw materials only accounts for a portion of the total price of supermarket or restaurant products.

But soaring commodity prices are affecting food prices. the company Nestlé and Coca-Cola have announced that they will pass on price increases, while economists and analysts warn that the return of consumers who eat out will increase price pressure.

“The reduction in eating out cannot be fully compensated by eating at home, but as people start to eat in restaurants again, you will see food prices rise,” said Abdulreza Abbasian, senior economist at FAO .

Labor costs, transportation costs, and transport It is expected to push up prices in the coming months. Caroline Bain of Capital Investment Macros said: “With the increase in oil prices and transportation bottlenecks, the base of transportation costs increases, and there is a lot of pressure on the system to increase prices.”

In the UK and Europe, food inflation has been relatively suppressed, but this week the UK retail consortium caveat Prices will rise in the second half of the year.

The upward pressure will exacerbate food price inflation that has affected many countries. According to FAO data, global food consumer price inflation in 2020 jumped from 4.6% in 2019 to 6.3%.

The pandemic has disrupted the food supply chain and affected the production and distribution of food. The food price inflation rate in South America is 21%, Africa and South Asia is 12%, and Oceania is 8%, making them the most affected regions.

FAO's monthly food price index year-on-year change (%) line chart shows global food prices soaring

Analysts said that Brazil is a major exporter of corn and soybeans. Bad weather and rising demand for soybean oil from biodiesel have pushed up prices.

“China continues to buy, but it turns out that the drought in Brazil is worse than expected, and everyone has to pray that the weather in the United States will get better,” Abbas said.

Global food CPI inflation rate (%) histogram shows rising food price inflation

Countries that rely on overseas producers to produce staple foods have been hit by rising global food prices. This issue has become a political concern for some developing countries such as Ethiopia and Nigeria.

Some exporting countries have introduced export tariffs, such as Russia levying on their wheat sales, while other countries, including Argentina, are discussing a controversial export tariff. ban Regarding beef exports.

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