Global food costs rose significantly last year. Will harsh weather, soaring natural resource costs, and a Russian-Ukrainian conflict drive them higher in 2022?
The FAO’s Food Price Index analyses monthly variations in prices of regularly traded foodstuffs.
Cereal prices rose to their most excellent yearly level since 2012, 27.2 percent higher than 2020. Vegetable oil increased 65.8% from 2020. Sugar prices surged 29.8% year on year, reaching their highest level since 2016. Meat prices were 12.7% higher than in 2020. And dairy prices were 16.9% higher than in 2020.
These price increases are a concern for food policy experts or agricultural analysts. Food riots broke out in the Middle East in 2007 and 2008, ascribed by the UN rapporteur on the right to food to financial speculation and the US Department of Agriculture to export limitations.
Are Our Customers Already Suffering?
- Countries that have not faced food insecurity are already suffering the effects.
- Mumbai, a famous Japanese snack, recently saw a 20% price increase, the first since 1979.
- Shoplifting of meat, cheese, and wine has surged in Canada, merchants blaming rising food costs.
- The Israeli economy and finance ministries recently wrote to food firms, encouraging them to keep food costs stable. It occurred after the price of tinned tuna was projected to climb by up to 8% and dairy by 9%.
- So, what is causing global food price increases? Factors that should have raised concerns in 2021 hint at the possibility of significant global food price hikes in 2022.
How 2021’s Harsh Weather Rising Food Costs In 2022?
Climate change has significantly influenced agriculture; even as the Covid epidemic and its implications dominated the news narrative in 2017.
According to Refinitiv, a drought and two touches of frost in Brazil lowered coffee harvests, prompting a spike in the wholesale price of raw coffee beans.
Minted found that torrential rains and flooding in Belgium and the Netherlands lowered the EU potato crop for the first time in two decades. Potato prices are predicted to rise during 2022 due to a shortage.
Durum wheat, which is used to produce pasta, polenta, couscous, bread, and pizza crusts, has seen a 90% price spike, according to Eurostar Commodities.
Increase Of Natural Resource and Agricultural Input Price
Events as seemingly unrelated as economies reopening after months of lockdown, cold winter in Europe causing low gas storage levels, hot summer in Asia causing more gas to be used for air conditioning, and fires at Russian processing plants in August and October have had ripple effects on agricultural input prices, which may influence global food prices, have had an impact.
Natural resource scarcity affects food production because it affects agricultural inputs, particularly fertilizers. Rising coal costs last year hindered Chinese ammonia and urea output, causing China to halt exports until June 2022. According to S&P Global, the fertilizer export prohibition would impair food production in India, and the Australian government is concerned about the impact on haulers and farmers.
The price of nitrogen fertilizer grows in lockstep with natural gas. Yare International’s CEO, Svein Tore Holsether, estimates that producing one tonne of ammonia will cost $110 in summer 2020 and $1000 in fall 2021. “We risk an inferior yield next year,” Holsether added. I fear a food crisis.”
Direct And Indirect Effects on War and Sanctions:
Conflicts between large food producers are also a matter of concern. Both Russia and Ukraine’s agriculture ministers have recently stated their countries’ desire to be global food players. A Russian-Ukrainian war would immediately impact food availability and pricing.
According to Alex Smith of the Breakthrough Institute, most of Ukraine’s wheat is grown in the Kharkiv, Dnipropetrovsk, Zaporizhia, and Kherson oblasts. This might have significant political consequences in nations like Libya, Yemen, and Lebanon that rely on Ukraine for food.
Recent history has proven that the Russian-Ukrainian war may affect food supply and lives. Following the invasion of Crimea in the summer of 2014, the EU, the US, Australia, Canada, and Norway placed sanctions on Russia.
The restriction directly impacted pig farmers in Germany, fruit and vegetable growers in France, tomato, peach, mandarin orange growers in Spain, apple growers in Spain, and mackerel fishery in Scotland.
International sanctions against financial institutions (such as the exclusion of Russia from the SWIFT system) would have indirect consequences on commerce and agricultural exports, according to Dutch bank ING.
Environmental, economic, and geopolitical variables point to higher food costs in 2022. In the following months, policymakers will need to decide how to avert or resolve a food price crisis, implement political or regulatory measures, coordinate across departments or nations, and who to be involved in the food system.
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