Surge in vegetable oils, dairy products led to acceleration of inflation; Data mostly recorded before the Russian invasion
Surge in vegetable oils, dairy products led to acceleration of inflation; Data mostly recorded before the Russian invasion
World food prices hit a record high in February, led by increases in vegetable oils and dairy products, and rose 20.7% year-on-year, the UN food agency said on Friday.
The Food and Agriculture Organization’s (FAO) Food Price Index, which tracks the world’s most traded groceries, averaged 140.7 points last month from a downward revised 135.4 in January. This number was previously reported as 135.7.
Higher food prices have contributed to a broader rise in inflation as economies recover from the coronavirus crisis, and the FAO has warned that the higher costs endanger poorer sections of the population in countries that rely on imports.
FAO economist Upali Galketi Aratchilage said concerns about harvest conditions and export availability provided only a partial explanation for the rise in global food prices.
“A much larger push for food price inflation is coming from outside of food production, specifically the energy, fertilizer and feed sectors,” he said. “All of these factors tend to squeeze food manufacturers’ profit margins and discourage them from investing and expanding production.”
The data for the February report was largely compiled prior to the Russian invasion of Ukraine. Concerns over tensions in the Black Sea region were already weighing on agricultural markets before the violence flared up, but analysts warn that a prolonged conflict could have a major impact on grain exports.
The FAO said its vegetable oil index rose 8.5% mom in February to hit another record high, driven by rising palm, soybean and sunflower oil prices. Ukraine and Russia account for about 80% of world sunflower oil exports.
The grain price index rose 3.0% for the month, corn prices rose 5.1% and wheat prices rose 2.1%, largely reflecting uncertainty about global supply flows from Black Sea ports.
The FAO milk price index rose 6.4%, the sixth straight monthly increase, helped by tight global supplies, while meat prices rose 1.1% in February.
In contrast, sugar was the only index to decline, down 1.9% mom, partly due to benign production prospects in big exporters India and Thailand.
The FAO also released its first forecasts for grain production in 2022, and saw global wheat production increase to 790 million tons from 775.4 million in 2021, thanks in part to hopes of high yields and extensive plantings in Canada, the United States and Asia.
However, the UN agency warned that its forecasts did not take into account the possible impact of the conflict between Russia and Ukraine.
The FAO said corn production in Argentina and Brazil is forecast at well-above-average levels in 2022, particularly in Brazil, where the corn harvest hit a record high of 112 million tons.
Global grain use was forecast to increase by 1.5% over 2020/21 levels in 2021/22, reaching 2.802 billion tonnes. The FAO forecast for global grain stocks by the end of the 2022 season was 836 million tonnes.
