The big narrative is that world food prices are rising. But let’s take a closer look.
World Food Prices
1. A long list of commodities are pricier.
Led by soybean oil, prices of major agricultural commodities are soaring. Far exceeding all others, the jump in soybean oil prices was 124 percent:
2. During the past year, the world food price trend is up.
While food prices dipped slightly during June 2021, still, they have risen 33.9 percent since June 2020. More specifically, meat and sugar continued their upward trajectory but vegetable oils and cereals did not:
3. To see the climb, we can look at three commodity categories.
During most of 2020 and the beginning of 2021, including corn, wheat, and rice, the Cereal index made the biggest leap:
4. The rise began before the pandemic.
Shown in purple, the food inflation line started its ascent during 2019:
5. The reasons for the price hikes are varied.
When I looked for why, there were three top reasons. On the demand side, China is buying more soy products and soybeans while biofuels are siphoning food related soybean oil purchases. As for supply cutbacks, they came from drier weather in countries that included Brazil, Argentina, Ukraine, Russia, and the U.S. In addition, when the pandemic upset traditional supply chains, freight rates popped up:
6. As a result, many of the world’s lowest income nations are seeing food prices soar.
The increase in the cost of a food basket skyrocketed in Lebanon, Sudan, and Syria:
Our Bottom Line: World Hunger
Updated on July 1st, the World Bank divides the world into four income groups. Their metric is per capita GNI (per person gross national income). Their categories are low*, lower-middle ($1,046-$4,095), upper middle ($4,096-$12,695), and high income (>$12,695) countries.
We need only compare the following maps to see the countries that will suffer the most from rising world food prices:
The low income countries (above) are the populations without a healthy diet (below):
Although the impact of higher food prices will vary, low income nations are most vulnerable. They include populations in sub-Saharan Africa, the Middle East and North Africa that depend on food imports where world prices and currency depreciation will have the greatest impact. Also, as we would expect, consumers in low income countries spend a large proportion of their income on food that will grow as prices rise.
My sources and more: My Bloomberg email newsletter alerted me to the details about rising food prices. From there, FT had more detail on prices, and WSJ on soybean oil. But my best sources were the FAO (UN Food and Agriculture Organization) and the IMF blog.
*The World Bank listed no amount next to low income. I assume the range is less than the ones they cite.