Food prices are always a hot-button topic and they have reemerged as one this year. As the global economy emerges from the pandemic, food prices in several countries have posted sizable increases, with the Washington Post highlighting the situation in Russia, Nigeria and Argentina.
The UN Food and Agriculture Organization (FAO) will update its global food price index this week after the month-ago increase sent global food prices according to their Food Price Index to the highest level since 2011.
"A variety of factors are to blame, including a surge in orders from China, fluctuating oil prices, a sliding U.S. dollar, and looming above all: the pandemic, and in some places, reopening," the Post noted. However, they also noted, "Global prices, like the FAO index tracks, and the price that a consumer pays are rarely in sync."
And more are starting to mention climate change as a potential long-term factor for the food price outlook.
In Nigeria, the Post details the prices for a pot of jollof rice have risen, with the rice component up 10%, the price of a small tin of tomatoes used to make the dish is up 29% and onion prices are up by one-third, according to a Nigerian research firm. In fact, the item notes that the price of onions in Lagos, Nigeria, has doubled in price and there have been heists targeting onions.
Border closures enacted during the pandemic tightened food supplies along with the devaluation of Nigeria's currency.
In Russia, the world's top exporter of wheat, pasta prices have gone up dramatically. This has pushed up the vegetable, meat, dairy and pasta staple borscht. In all, prices for ingredients have risen some 12% since before the pandemic hit. But pasta prices caught the attention of President Vladimir Putin who decried people eating "navy-style pasta" which is a Soviet-era dish eaten during hard times. "This is unacceptable," Putin said, "with such large harvests."
The situation has seen export limits put on wheat and other grains along with price controls on pasta. But even those actions have not made consumers in Russia feel any relief as the post noted poll results this spring rated food prices as the country's biggest issue by 58% of Russians.
But those government actions can only work so long and the heavy hand of government often times leads to problems returning and potentially becoming even more severe.
Enter Argentina, where the country's beef has been a key example of the food price situation. Over the past year, the price per kilogram of short ribs is up over 90%, according to the Institute for Promotion of Argentine Beef.
The situation reached a point where the country opted to halt all beef exports for a month and they have come to agreement on resuming those exports, but only at 50% of the prior volume through the end of the year.
But developing countries in particular are wary and sometimes outright scared of food-price increases. Hungry citizen become unhappy citizens and those can lead to great pressure on governments for actions to address those rising costs.
Here in the U.S., commodity prices have risen this year on a surge in Chinese demand for corn and other grains as the country seeks to make sure it has enough feed to produce meats and other proteins for their expanding economy. Couple that with dry conditions in areas like the Northern Plains where hard red spring wheat and durum, the latter being the main wheat used to make pasta, and wheat prices have soared on the Minneapolis futures market.
Indeed, consumers here are facing higher costs. USDA has raised its forecast for overall food price inflation and its outlook for food at home (grocery store) and food away from home (restaurant) prices. Overall food price inflation is now seen at 2.5% to 3.5% in 2021, up from their month-ago outlook that food price inflation would be 2% to 3%. Grocery store prices are now seen rising 2% to 3% in 2021 compared with their month-ago outlook that grocery store price would rise 1.5% to 2.5%. Restaurant prices are now seen up 3% to 4% from 2020 levels, an increase from the prior outlook that they would increase 2.5% to 3.5%.
The updated forecasts also mean that prices are seen rising for all three categories by more than their 20-year average. Those averages are 2.4% for all food prices, 2.8% for restaurant prices, and 2% for grocery store prices.
Even with the latest increase in USDA's forecasts, food prices in 2021 are not yet seen rising as much as they did in 2020. The pandemic obviously is factoring into the price situation. But, in the U.S., leading up to 2020 and now 2021, consumers saw grocery store prices either increasing at less than the 20-year average or decreasing over the 2015 to 2019.
So we will see. The food price situation in the U.S. is rising, but other countries are seeing even greater impacts. But the situation needs to be watched closely, especially if major trading partners opt to try and keep more supplies at home as that could open market opportunities for U.S. producers, Washington Insider believes.