Global food prices hit 10-year high, UN reports

Economists are concerned higher shopping bills could threaten the world’s economic recovery from coronavirus

Supermarket prices are expected to surge as the world overcomes the adverse economic effects of coronavirus (AFP via Getty Images)

Global food prices jumped at their fastest monthly rate for more than a decade in May, according to the United Nations, amplifying fears that coronavirus-driven inflation is accelerating.

The UN Food and Agriculture Organisation’s (FAO) food price index, which tracks global prices of a range of food including cereals, oilseeds, dairy products, meat and sugar, also climbed for a twelfth straight month.

According to the FAO, food prices in May were 4.8 per cent higher than in April – the biggest monthly rise since October 2010 – and 39.7 per cent higher than in May 2020.

All five components of the index rose, led by the surging cost of vegetable oils, grain and sugar. This pushed the index up to its highest overall level since September 2011.

The increased costs are a result of renewed demand in some countries and a backlog of low production due to coronavirus.

Suppliers around the world have been affected by disruptions to labour, shipping and transport during the pandemic – with costs set to get higher over the coming months.

“We have very little room for any production shock. We have very little room for any unexpected surge in demand in any country,” Abdolreza Abbassian, senior economist at the FAO, told Bloomberg.

“Any of those things could push prices up further than they are now, and then we could start getting worried.”

As a result, concerns are mounting about broader inflation and how higher shopping bills will impact the world’s economic recovery.

Earlier this week, the British Retail Consortium (BRC) warned UK consumers that they could face more expensive receipts in the autumn as costs climb.

“While prices are currently falling thanks to fierce competition between retailers, there are many cost pressures around the corner,” Helen Dickinson, BRC’s chief executive, said.

It is projected the higher inflation will hit poorer countries reliant on imports for staple goods the worst. For richer countries, the cost of raw ingredients accounts for only part of the overall price paid for products at supermarkets and restaurants.

But the rise in raw material prices has been so steep that big companies such as Nestlé and Coca-Cola have said they would pass on any increases, reports in the Financial Times suggest.

Experts also warned that high demand and low production would lead to rising inflation as economies exit lockdown, including the return to eating out which could add to price pressures.

“The decline in eating out was not totally compensated with eating at home, but as people start to go to restaurants again, you will see food prices rise,” Mr Abbassian added.

Additionally, market and supply disruptions due to restrictions on movement have created local shortages and higher prices – vegetable oil production growth, for instance, has slowed right down in southeast Asia.

Elsewhere, though, some industries could see a strong recovery. The FAO forecasts record global cereal production this year, which could help to ease price hikes.