The UN’s Food Prices Index has declined for the fifth month in a row, indicating that one of the major factors driving up global living costs may be easing.
The index dropped to 138 in August, making it lower than it was before Russia invaded Ukraine. Both countries were significant crop exporters, including sunflower oil, corn, and wheat.
According to the UN FAO (UN Food and Agriculture Organization), the UN-backed pact to reopen Ukrainian ports in July has lowered cereal and vegetable oil costs.
This has resulted in increased supplies reaching international markets.
According to the FAO’s Erin Collier, “prices fell for various reasons.”
Cereals have been the “primary driver” of this year’s increase in food costs, according to Ms. Collier, but supplies are now growing since “the crop looks a little bit better, notably in Canada, the United States, and Russia.” All three countries are big wheat exporters.
In other food categories, “a relaxation of export restrictions aided in the reduction of sugar and oil costs, and weaker demand for specific items aided in the reduction of meat and dairy prices,” Ms. Collier added.
Because of Indonesia’s temporary drop in palm oil export levies, food makers now have additional options for the vegetable oils they rely on in large amounts.
Food prices fueling inflation
Food prices have been a major contributor to global inflation.
This week, the Eurozone revealed that inflation in August was 9.1% on an annualized basis. Again, energy was the highest contributor, accounting for 38.3% of the increase, although unprocessed food came in second at 10.9%.
Recent inflation numbers from the United Kingdom and the United States depict a similar image.
The FAO index, a highly watched barometer, also revealed price decreases in the FAO’s other food categories: dairy, meat, and sugar. In addition, it stated that beef and other bovine product prices had “decreased due to weak domestic demand in some leading exporting countries,” possibly indicating consumer shifts to cheaper alternatives.
However, due to ongoing supply chain issues and the time it takes to implement pricing changes, Ms. Haque stated that not all countries would instantly benefit from the decreased rates.
The FAO index has dropped dramatically from its record high of 159.7 in March, although it is still 10 points higher than a year earlier. According to Ms. Haque, price volatility has increased, citing recent heatwaves in Europe and floods in Pakistan as examples of the growing impact of extreme weather on crop prices.
More obstacles lie ahead
Ukraine’s agriculture minister, Mykola Solsky, warned last week that the war might harm upcoming harvests. Because of the Russian invasion, the area available for growing wheat and barley for next year’s harvest is expected to see a 20% decrease. In addition, according to the Ukrainian Agrarian Council, a lack of funding will reduce output.
Ms. Collier emphasized that, despite the recent drops, global food prices remain higher than they were at their peak in 2011.