Global food prices will continue to increase even though inflation in many countries is waning, analysts are predicting.
The reasons: Russia’s withdrawal from the Ukraine grain export deal, other supply chain disruptions, and unusually hot weather that has parched crops in key growing regions.
“Adverse weather conditions, in light of the unfolding climate crisis, may push up food prices,” Christine Lagarde, president of the European Central Bank, acknowledged in a recent public statement.
A particularly strong El Niño is expected to reduce harvests in key parts of South Asia.
The weather’s effect has been particularly painful in India, where heavy rains flooded out rice crops and spiked the price of the diet staple sharply higher.
Also, $24.5 billion worth of embargoes remain in place covering Russian exports of food, animal feed, and fertilizer that were enacted after its Ukraine invasion.
The United Nations’ food price index of cereal grains, dairy, meat, sugar, and vegetable oils rose 1.3 percent in July from June, the second rise in four months. The index had been declining since March 2022 just after Russia invaded Ukraine, when it struck a 50-year high.
U.K. food prices rose 17.4 percent in June, year on year. Costs were up 14.3 percent in France and 8.9 percent in Japan. Prices in the U.S. have risen 4.6 percent from a year ago, far below the August 2022 peak of 13.5 percent.
In the U.K., an investigation of food producers and retailers found no evidence that they had raised prices to maintain profit margins. The French government has asked producers to identify foods for which prices can be frozen or cut in coming weeks.
TRENDPOST: Food inflation is largely out of the control of central banks and interest rates. Prices will continue to be at the mercy of the world’s “new normal” of routine weather extremes, and to some extent geopolitical conflicts, such as the grain cut-offs by Russia in their fight to defeat Ukraine.
TREND FORECAST: At the same time, extreme weather will drive people out of some areas now being farmed.
As the world’s growing population must be fed with less land and water, foods demanding large amounts of those resources, such as grains and meats, will rise in price, forcing more people to shift to the plant-centered diet that health advocates call for.