EconomyWorld food prices hit new record on impact from...

World food prices hit new record on impact from Ukraine war

Global food prices have struck a new high, soaring at the fastest monthly rate in 14 years after the war in Ukraine hit the supply of grains and vegetable oils, in a shift likely to do the greatest harm in poorer countries around the world.

March’s food price index from the UN Food and Agriculture Organization rose to its third record high in a row, jumping 34 per cent from the same time last year, after the war shut down supply lines from Ukraine and Russia. The index was 12.6 per cent higher than in February, a rise that the organisation described as a “giant leap”.

Many poorer countries are already struggling from the impact of Covid-19, and several in the Middle East and north Africa rely on both Ukraine and Russia for their grain and vegetable oils. Food inflation has helped to spur protests in a number of countries, including Sri Lanka, where the issue has created a severe economic and political crisis.

“The ongoing conflict in Ukraine is heightening concerns about the impact on food security worldwide,” said Beth Bechdol, deputy director-general of the FAO. “We are witnessing food price increases across the board.”

According to estimates from the FAO and the Ukrainian government, 20 to 30 per cent of land in Ukraine producing winter grains, corn and sunflower will remain unplanted this spring or will be unharvested in July and August.

The resulting global gap between supply and demand for food and feed could raise international food prices by a further 8 to 22 per cent above their already elevated levels, according to the FAO.

UN FAO food price index

Russia and Ukraine are important exporters of grains and sunflower oil, accounting for about 30 per cent of global wheat trade. Russia has continued shipping wheat since it invaded its neighbour in February, but western sanctions have complicated payments, leading to supply uncertainties.

The World Bank has already warned that higher food prices could cause lasting damage to low- and middle-income countries and could contribute to pushing millions of people into poverty.

Food costs account for 17 per cent of consumer spending in advanced economies, but a much higher proportion in developing countries. For example, in sub-Saharan Africa, food accounts for 40 per cent of consumer spending.

Food price inflation had already taken root before the Ukraine war started, after poor harvests last year on the back of bad weather and a sharp rebound in post-pandemic lockdown demand. But according to the FAO, nearly 50 countries depend on Russia and Ukraine for at least 30 per cent of their wheat imports.

In 2021, 36 out of 55 countries with food crises depended on Ukrainian and Russian exports for more than 10 per cent of their total wheat imports, including 21 countries with a major food crisis.

If the shortage of food commodities persists, the global number of undernourished people could increase by 8mn to 13mn, with the most pronounced increases occurring in Asia-Pacific, followed by sub-Saharan Africa, and the near east and north Africa, said the FAO.

The fastest increases in March’s index were in vegetable oil prices, which went up by 56 per cent from a year ago, to a record high.

“International sunflower seed oil quotations increased substantially in March, fuelled by reduced export supplies amid the ongoing conflict in the Black Sea region,” the FAO said.

Cereal prices rose 37 per cent year on year, also to a record high.

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