The Global Food Price Index Hits an All-Time High... Surges Due to the Ukraine Crisis Impact

[Asia Economy Sejong=Reporter Son Seon-hee] The global food price index has reached an all-time high. Food prices surged due to overlapping factors including global supply chain disruptions, abnormal weather, and recently, geopolitical risks stemming from the Russia-Ukraine conflict.

According to the Ministry of Agriculture, Food and Rural Affairs on the 5th, the United Nations Food and Agriculture Organization (FAO) announced the "February 2022 Global Food Price Index" at 140.7 (2014-2016 average=100), up 3.9% from the previous month (135.4). This is the highest level in history since the index was first calculated 61 years ago. Price indices for all items except sugar rose, with particularly high increases in the oils and dairy product indices.

FAO surveys international price trends for 24 items (95 prices) and publishes monthly food price indices by five commodity groups (cereals, oils, meat, dairy, sugar).

Last month, the cereal price index rose 3.0% from the previous month to 144.8. Compared to the same month a year ago, it increased by 14.8%. Wheat prices rose due to anticipated export difficulties from major Black Sea exporters Russia and Ukraine, while corn prices increased due to concerns over crop conditions in Argentina and Brazil, rising wheat prices, and export uncertainties from Ukraine. Rice prices rose due to currency appreciation in some exporting countries and increased demand from East Asian countries.

The oils index rose 8.5% from the previous month (185.9) to 201.7, soaring 36.7% year-on-year. Palm oil prices increased due to expected export reductions from Indonesia, the world's largest palm oil exporter, while soybean oil prices rose amid forecasts of poor production in South America. Sunflower oil prices increased due to concerns over weak exports from the Black Sea region.

The dairy index rose 6.4% from the previous month (132.6) to 141.1, up 24.8% year-on-year. The price increase was influenced by lower-than-expected supply in Western Europe and Oceania and strong import demand from North Asia and the Middle East.

The meat index rose 1.1% from the previous month (111.5) to 112.8, increasing 15.3% year-on-year. Beef prices rose due to reduced slaughter volumes in Brazil and strong global import demand, while pork prices increased reflecting supply slowdowns and rising demand in the US and Europe. Conversely, lamb prices fell due to increased exports from Oceania, and poultry prices declined due to reduced imports by China and decreased domestic demand in Brazil.

Sugar was the only item to decline, falling 1.9% from the previous month (112.7) to 110.6. However, it rose 10.4% year-on-year. Sugar prices dropped due to optimistic production forecasts in major exporters India and Thailand, improved cultivation conditions in Brazil, and falling ethanol prices.

FAO forecasts that global cereal production for 2021/2022 will reach 2.7956 billion tons, a 0.7% (20.5 million tons) increase compared to 2020/2021. During the same period, global cereal consumption is expected to rise 1.5% (40.9 million tons) to 2.816 billion tons. Ending stocks for 2021/2022 are projected to increase 0.5% (4.5 million tons) to 835.8 million tons compared to the previous year.

As international grain prices continue to rise, the government is closely monitoring related trends and devising countermeasures centered on the "International Grain Supply and Demand Committee." Interest rates for feed and food raw material purchase funds (KRW 64.7 billion for feed, KRW 128 billion for food) have been lowered by 0.5 percentage points from 2.5~3.0% to 2.0~2.5%. Additionally, the quota for duty-free raw materials that can substitute feed grains has been increased (hulled barley from 40,000 tons to 100,000 tons, wheat bran from 30,000 tons to 60,000 tons).

Furthermore, the Ministry of Agriculture, Food and Rural Affairs will operate a "Food Export Company Consultation Center" to monitor daily raw material supply situations including industry inventory and contracts, in response to increased volatility in international grain prices due to the Russia-Ukraine conflict.

The ministry stated, "We will closely communicate with the industry to minimize domestic impacts from instability in the international grain market caused by the Russia-Ukraine situation, continuously monitor market conditions, and actively consider additional necessary measures."

This content was produced with the assistance of AI translation services.