World food prices have reached new record heights, according to fresh UN data, with the conflict in Ukraine and a possible US ban on Russian oil yet to be factored in.
The rise in global food prices in February was led by vegetable oil and dairy products, with the cost of cereals and meat also increasing, the UN’s Food and Agriculture Organization said. It reported the FAO Food Price Index climbed to an average of 140.7 points, up 3.9% month-on-month and 20.7% above year-ago levels.
Russia invaded Ukraine on 24 February, raising concerns over the supply of grains on international markets and fertilizer out of Russia. Meanwhile, US Secretary of State Antony Blinken reportedly said yesterday (6 March) the Biden administration and its allies were discussing a ban on Russian oil supplies.
Russia is the second-largest global exporter of oil behind Saudi Arabia. The prospect of a ban drove Brent crude to US$139 a barrel today, the highest since the $147.50 all-time high reached in 2008. Ukraine is the world’s largest exporter of sunflower oil and the fifth-largest supplier of wheat, with Russia ranked top.
The FAO noted “the February reading only partly incorporates market effects stemming from the conflict in Ukraine”.
Its economist Upali Galketi Aratchilage added: “Concerns over crop conditions and adequate export availabilities explain only a part of the current global food price increases.
“A much bigger push for food price inflation comes from outside food production, particularly the energy, fertilizer and feed sectors. All these factors tend to squeeze profit margins of food producers, discouraging them from investing and expanding production.”
The FAO Food Price Index consists of five commodity sub-indices. The gauge had notched up record highs last year, rounding out 2021 at a ten-year peak.
In February, the vegetable oil index rose 8.5% month-on-month to an unprecedented 201.7, led by palm, soy and sunflower oils.
“International sunflower oil prices also increased markedly, underpinned by concerns over the disruptions in the Black Sea region, which could potentially lower exports. Surging crude oil prices also lent support to the vegetable oil complex,” the FAO said.
The cereal price index climbed 3% to 144.8 month-on-month, with wheat up 2.1%, “largely reflecting new global supply uncertainties amidst disruptions in the Black Sea region that could potentially hinder exports from Ukraine and the Russian Federation”, the organisation explained.
Maize, sorghum and barley prices all increased.
Dairy was up for a sixth straight month, with the sub-gauge rising 6.4% in February to 141.1. Meat climbed 1.1% to 112.8 and was up 15.3% from a year earlier.
“In February, international bovine meat quotations reached a new record high, driven by strong global import demand amidst tight supplies of slaughter-ready cattle in Brazil and high demand for herd rebuilding in Australia,” the FAO said.
The sugar index bucked the trend, falling 1.9% from January to 110.6, its lowest level since last July.