Ukraine war drives international food prices to ‘new all-time high’

“It is now more than two years that the COVID-19 pandemic continues to negatively impact our lives, our health and our economies,” saidFAO chief QU Dongyu.

Explaining that the neediest “face greater exposure to the pandemic and are the most affected by rising food and fuel prices,” he pointed out that prices for staple foodstuffs such as wheat and vegetable oils have soared, “imposing extraordinary costs on global consumers, particularly the poorest”.

Repercussions of war

Conflict has driven up international prices for wheat, maize and vegetable oils, as war in the Black Sea region spread shocks through the markets trading in these staples.

The FAO Food Price Index averaged 159.3 points in March, up 12.6 per cent from February when it had already reached its highest level since its inception in 1990.

The Index tracks monthly changes in the prices of a basket of commonly traded food commodities. Last month’s prices were 33.6 per cent higher overall, than March last year.

Driven by soaring wheat and coarse grain prices – largely as a result of the war in Ukraine – the FAO Cereal Price Index was 17.1 per cent higher in March than it was just a month earlier.

Over the past three years, Russia and Ukraine combined, accounted for around 30 per cent and 20 per cent of global wheat and maize exports, respectively.

Harvest falls short

FAO’s newly released Cereal Supply and Demand Brief estimates that at least 20 per cent of Ukraine’s winter crops that were planted, may not be harvested.

But, it also points to a worldwide cereal production of 2,799 million tonnes, up slightly from 2020, with rice production reaching an all-time high of 520.3 million tonnes.

And global cereal use in 2021-22 is projected to reach 2,789 million tonnes, including a record level for rice, with increases also expected for maize and wheat.

Global cereal stocks are forecast to rise by 2.4 per cent by the end of this year, from their opening levels, largely due to higher wheat and maize stocks in Russia and Ukraine, on account of lower expected exports.

FAO lowered its forecast for world trade in cereals in the current marketing year to 469 million tonnes, marking a contraction from the 2020-21 level, largely due to the war in Ukraine and based on currently available information.

Expectations point to the European Union and India increasing wheat exports, while Argentina, India and the United States ship are likely to ship more maize – partially compensating for the loss of exports from the Black Sea region.

Oil and sugar

The FAO Vegetable Oil Price Index rose 23.2 per cent, driven by higher quotations for sunflower seed oil, of which Ukraine is the world’s leading exporter.

Palm, soy and rapeseed oil prices also rose markedly as a result of the higher sunflower seed oil prices and the rising crude oil prices – with soy oil prices further underpinned by concerns over reduced South American exports.

FAO’s Sugar Price Index rose 6.7 per cent from February, reversing recent declines to reach a level more than 20 per cent higher than in March 2021.

Higher crude oil prices were a driving factor, along with currency appreciation of the Brazilian Real, while favorable production prospects in India prevented larger monthly price increases.

Meat and dairy

Meanwhile, surging pig meat prices related to a shortfall in animals for slaughter in Western Europe, drove the FAO Meat Price Index up by 4.8 per cent in March to reach an all-time high.

International poultry prices also firmed in step with reduced supplies from leading exporting countries following avian flu outbreaks.

Amid a surge in import demand for near and long-term deliveries, especially from Asian markets, quotations for butter and milk powders rose steeply, driving the FAO Dairy Price Index up 2.6 per cent, making it 23.6 per cent higher than in March 2021.