Global Food Prices on the Uptick
This article is published in collaboration with Statista
by Katharina Buchholz
After the wholesale price of food initially slumped during the coronavirus pandemic, the global FAO Food Price Index has shown a steep increase since the fall. Most recently, food around the world was 16 percent pricier than the 2014-2016 average, on which the index baseline of 100 points is calculated. The February figure is the highest of any month in more than six years.
Palm oil prices have been driving the increase in the index since the fourth quarter of 2020, but global cereal prices also showed an significant bump in February 2021, together creating a level of food prices not seen in years. Dry weather and production disruptions due to COVID-19 coupled with high demand from India's Diwali festival as well as from China led to the depletion of global palm oil inventories, in turn driving up prices. For cereals, strong demand from China increased prices, especially for sorghum. Worsening crop prospects in Europe and the U.S. had led to the price of maize rising in January. The crop maintained that price level in February.
Speculation about whether the disruptions of the coronavirus pandemic would drive up food prices have been abound, but due to the COVID-related economic downturn and falling out-of-house demand, they actually decreased at the start of 2020, reaching a low in May. Accordin to the U.N., falling mineral oil prices also factored into the initial deterioration of food prices as many alternative fuels, which are made out of food stocks, saw demand fall. As the crisis wore on and countries reopened at least partially, global demand and prices picked up again in the summer. As the example of palm oil inventories shows, COVID-related disruptions (or those in which COVID-19 is a factor) do have the power to let prices trend upwards in the current market environment.
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