Highest food prices since 2011 may persist for months
After rising for 12 months in a row during the pandemic, international food prices are the highest they’ve been since September 2011, said the monthly Food Price Index, released on Thursday. The index, maintained by the UN Food and Agriculture Organization, surged 4.8% in May, its largest monthly increase in nearly 11 years.
Vegetable oil, grain, and sugar prices were sharply higher due to the resurgent global economy and concerns that harvests could run later than usual or this year’s crops could be smaller than expected. Dairy and meat prices, the other two components of the index, were firm.
“The current high-price food environment appears to be mostly driven by fundamentals and will probably persist to some degree owing to the tight carryout situation projected through 2021/22,” said FAO analysts in the companion AMIS report. “The coming months will be critical for how food markets evolve. Global grain and soybean inventories could prove barely sufficient in case of a major production shortfall, while a speedier recovery in global economic activity could spur demand for these crops at a much faster rate than currently anticipated.”
The FAO attributed the 7.8% rise in vegetable oil prices to higher prices for palm, soy, and rapeseed oils. Palm oil prices were the highest in more than a decade because of rising global demand and slow growth of production in the Southeast Asian countries that dominate palm oil output.
Grain prices climbed 6% in May, led by higher prices for corn. Drought is cutting into corn prospects in Brazil, the world’s No. 3 grower. The drought in the country, which is the world’s largest sugar producer, also contributed to the 6.8% gain in sugar prices, pushing them to their highest level in four years.
In its first forecast of 2021 grain crops, the FAO estimated a global harvest of 2.82 billion tonnes, or 1.9% larger than the record set last year. Driven by world population growth, grain consumption is projected to increase 1.7%, to 2.83 billion tonnes, in 2021/22. The global grain inventory at the end of 2021/22 would be marginally larger than at the start of the marketing year, ending a three-year decline in carry-over stocks.
Corn would account for most of this year’s increase in grain production worldwide, which is predicted to rise 3.7% from 2020. Wheat production was forecast to rise by 1.4% and rice by 1%.