Food price inflation continues putting people’s food security at risk
FAO’s Food Price Index edged up slightly in April 2023, the first increase following 12 consecutive months of decline. The increase in this index for internationally traded food commodities was caused by a sharp rise in sugar prices and a moderate rise in meat prices. International prices for cereals, dairy and vegetable oils continued their prolonged decline after peaking in March 2022. Among cereals, only rice prices were up, but this rise was outweighed by further declines in the prices for wheat and maize. The main drivers behind these trends are explained in this month’s Market Monitor.
Despite the now yearlong decline in international prices, most people have not seen the cost of the food they buy come down. Instead, consumer food price inflation remains stubbornly high in much of the world. The food price inflation “heat maps”, presented on the next page, compare levels of annualized inflation rates between March-April 2022 (when international prices peaked) and those a year later.
As illustrated in these maps, consumer food price inflation remains elevated in many high-income countries. In much of Europe, food prices edged up further during 2022 and early 2023 reaching rates of well over 10 percent on average. Food inflation still stood at near 20 percent in the United Kingdom and 15 percent or more in Germany and France by April 2023. Higher energy prices and a stronger US dollar, among other economywide factors, continue pushing up overall price levels in Europe, including those for food commodities and services. In the United States, inflation decelerated somewhat from over 10 percent a year ago to near 8 percent owing in part to monetary tightening, but food inflation remains significant as overall inflationary pressures (including rising wage costs) are waning only very slowly.
Food inflation moderated somewhat in the Russian Federation, China, India, Indonesia, and a few other Asian countries, owing in good part to government support policies. With few exceptions, food inflation remains high and accelerated further in other low- and middle-income countries. For instance, in Pakistan (following floods), Sudan (increased political tensions and droughts), Egypt (rising import costs), and Turkey (macroeconomic woes) food inflation edged up to around 50 percent or more, while Argentina, Venezuela and Zimbabwe recorded consumer price increases of well over 100 percent by April 2023. The poor suffer the most from high food prices, as they spend high shares of their incomes on food and have weak capacity to cope with price shocks. The 2023 Global Report on Food Crises estimates that food-price and related economic shocks were the main of three interrelated drivers of acute food insecurity in 27 of 58 countries/territories analyzed, pushing 84 million people into crisis-level or worse acute food insecurity, while being compounding factors to conflict or weather extremes that caused another 174 million people facing the same fate during 2022.
Nearly all of the affected populations live in low-income, net food-importing countries. These countries did not benefit from falling international food prices in good part because their currencies lost value at an abnormally fast rate relative to the US dollar, which pushed up the domestic cost of food imports. As these vulnerable countries sunk deeper into the high price cycle, the ability of governments to cope with the compounding effect of the war in Ukraine was limited by import reliance and high debt obligations after the COVID-19 pandemic. While governments took measures (mostly temporary ones) to lessen the burden of high prices such as targeted cash transfers to vulnerable households, they have been unable to sustain these. The coping capacity of vulnerable households equally has eroded, as many had previously taken on debt, sold assets and/or depleted food stocks to cope with the livelihood losses and inflation during the COVID-19 pandemic and have had to continue these practices with persistent high food price inflation. To cope with the further reduction in purchasing power, populations with low incomes in both developed and developing countries may be forced to make tradeoffs, such as reducing portions and skipping meals, that negatively affect current and future food and nutrition security.
Despite falling international food prices, food affordability thus remains a challenge at both the macroeconomic and household levels, threatening the food security of vulnerable households around the world.