Global food prices fall at record pace
Global food prices fell at the fastest pace in a decade in July. Ukraine, one of the top suppliers, is likely to ease global supply shortages of food grains and oilseeds as it resumes exports through the Black Sea. Analysts said that this is the main reason for the price drop. Recently, this information has emerged in a report of the Food and Agriculture Organization of the United Nations (FAO).
Russia attacked Ukraine on February 24 this year. At this time, Russian troops blocked the Black Sea port of the country. Ukraine's grain exports by sea have been suspended. As a result, the price of food products skyrocketed.
However, recently an agreement has been reached between the two countries regarding the opening of the Black Sea port. Ukraine has already started the process of grain export using the port. As a result, analysts are looking at the possibility of resolving the ongoing crisis. Meanwhile, after the agreement between the two countries, the price of food products in the international market has started to decrease. FAO's food commodity price index fell by nearly 9 percent, the lowest since January this year.
Price index of foodgrains fell by 5.6 percent compared to February. And the price of wheat decreased by 7.1 percent. Sufficient global supplies and strong competition among exporters have kept wheat prices down.
In addition, the expansion of the Black Sea Grain Initiative, which allows Ukraine to continue exporting from Black Sea ports, also contributed to the fall in wheat prices.
FAO analysts say that war and other factors have caused the price of everything from fuel to transport to rise to abnormal levels. Common people are struggling to meet the cost of living. In such a situation, relief is returning to public life by reducing the price of food products. With this, FAO's global price index of food products has fallen for four consecutive months.
FAO's food price index stood at 140.9 points last month. The index was at 154.3 points in the previous month. However, even though the monthly price has decreased, it is still higher than last year.
Those concerned said that the price of food products is still 13.1 percent higher than last year due to Russia's attack on Ukraine, hostile weather in major exporting countries and rising production and transportation costs.
FAO Chief Economist Maximo Torero said the news that food prices have come down from record highs is comforting. However, there are still many uncertainties.
According to the FAO price index, cereal prices fell by 11.5 percent in July. The price of wheat decreased by 14.5 percent. An agreement between Russia, Ukraine, Turkey and the United Nations to open up Black Sea ports has helped lower grain prices. Due to the same reason, the price of maize decreased by 10.7 percent. Seasonal production in top producers Brazil and Argentina also helped lower prices.
Meanwhile, the price of edible oil fell by 19.2 percent, which is the lowest in 10 months. According to FAO, the prices of all types of edible oils have decreased. Meanwhile, the price of palm oil has dropped significantly due to the lifting of the export ban by Indonesia. On the other hand, the price of sugar decreased by about 4 percent. Mainly due to the fear of economic slowdown, the demand for the product has declined. A currency devaluation in top producer Brazil also helped lower prices. Meanwhile, the price of dairy products decreased by 2.5 percent. Although it is 25.4 percent higher than the same period last year.
Meanwhile, even if the prices have decreased, analysts have said that there is no relief from the ongoing crisis very soon. Because the Russia-Ukraine war is unlikely to end in the near future. Deterioration in the global economy, volatility in currency markets and skyrocketing fertilizer prices could have a negative impact on production in the coming months. As a result, global food security may come under severe pressure. Analysts are considering the fall in food prices as short-term.
Scott Zuckerberg, senior economist of the Knowledge Exchange Division of Co-Bank of the United States, said that the global market for agricultural products will remain unstable next year. Instability may even be pronounced in certain areas.
In an interview given to S&P Global Platts, Zuckerberg said, the impact of the Russia-Ukraine war will not be cut in the next three years in the food grain and oilseed supply sector. We need to identify several things for next year. Circumstances will change, and this change is most likely to be negative. We need to be aware of obstacles in advance.
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