Global food prices reached an all-time high in February, the Food and Agriculture Organization (FAO) reported on Friday. The Food Price Index, which tracks the international prices of a items such as vegetable oils and dairy products, averaged 140.7 points last month, or nearly four per cent up from January. This is also 24.1 percent over the level a year earlier and 3.1 points higher than in February 2011. Factors behind food inflation "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," said FAO economist Upali Galketi Aratchilage. "All these factors tend to squeeze profit margins of food producers, discouraging them from investing and expanding production." As the Food Price Index measures average prices over the month, the February reading only partly incorporates market effects stemming from the conflict in Ukraine. Rise in demand The overall rise last month was driven by an 8.5 percent increase in the FAO Vegetable Oils Price Index, a new record high. This was mostly due to sustained global import demand, which coincided with a few supply-side factors, such as lower soybean production prospects in South America. The Dairy Price Index averaged 6.4 percent higher in February than January, supported by lower-than-expected milk supplies in Western Europe and Oceania, as well as persistent import demand, especially from North Asia and the Middle East. Last month, the Cereal Price Index increased 3.0 percent over January. Contributing factors include rising quotations for maize and other coarse grains, caused by continued concerns over crop conditions in South America, uncertainty about maize exports from Ukraine, and rising wheat export prices. Strong global import demand contributed to the 1.1 percent rise in the Meat Price Index. Other factors included tight supplies of slaughter-ready cattle in Brazil and a high demand for herd rebuilding in Australia. The FAO Sugar Price Index declined by nearly two percent amid favorable production prospects in India, Thailand and other major exporters, as well as improved growing conditions in Brazil. Cereal forecast FAO has also published a preliminary forecast that shows worldwide cereal output is on course to increase to 790 million tons this year. Anticipated high yields and extensive planting in North America and Asia, should offset a likely slight decrease in the European Union and the adverse impact of drought conditions on crops in some of the North African countries. The agency has updated its forecast for world cereal production in 2021, which is now pegged at 2,796 million tons, a 0.7 percent increase from the year before. The forecast for world trade in cereals was also raised to 484 million tons, up nearly one per cent from the 2020/2021 level. The forecast does not assume potential impacts from the conflict in Ukraine, and FAO is closely monitoring the developments and will assess impacts in due course. Fears for food security Relatedly, the head of the International Fund for Agricultural Development (IFAD) has highlighted how the crisis in Ukraine could impact global food security. IFAD President Gilbert F. Houngbo said continuation of the conflict, which is already a tragedy for those directly involved, will be catastrophic for the entire world, particularly for people already struggling to feed their families. He warned that the fighting could limit the world's supply of staple crops like wheat, corn and sunflower oil, resulting in skyrocketing food prices and hunger. This could jeopardize global food security and heighten geopolitical tensions. "This area of the Black Sea plays a major role in the global food system, exporting at least 12 percent of the food calories traded in the world," said Houngbo. "Forty percent of wheat and corn exports from Ukraine go to the Middle East and Africa, which are already grappling with hunger issues, and where further food shortages or price increases could stoke social unrest." — UN News
