A combination of factors including the war in Ukraine, high energy prices, logistics constraints and localised production issues around the world mean that the world could be facing higher food prices for many years to come, if not indefinitely.
In the UK, the British Retail Consortium (BRC) reported that food prices are suffering their highest rate of inflation in 14 years: up 3.1% on a year ago in June, up from 2.8% in May – the highest rate of inflation since September 2008, according to the BRC-NielsenIQ shop price index.
The Guardian reports that, ‘Food inflation jumped to 5.6% in June, up from 4.3% in May, driven by fresh food prices up 6.2% on June last year – the highest inflation rate since May 2009.’
“Typically, when we’re in a tight supply-demand environment you can rebuild it in a single growing season,” Jason Newton, chief economist for fertiliser producer Nutrien Ltd told Reuters. “Where we are today, and the constraints around boosting production and (war in) Ukraine … it’s two to three years before you get out of the current environment.”
His comments came just a week after UN Secretary-General Antonio Guterres said the world faces an unprecedented hunger crisis, with a risk of multiple famines this year and a worse situation in 2023.
One of the biggest factors is global corn and cereal stocks and yields, with tight supplies since the beginning of the Covid-19 pandemic, exacerbated by below average crops and production issues, including fertiliser costs. According to Reuters, ‘US farmers may also leave unplanted some 3.2 million acres earmarked for corn and instead file prevented planting insurance claims.’
However, the factors which affect major commodity crops also extend to other types of food including fresh produce. High input and energy costs around the world, including the US and the UK, are causing many growers to cut put production or abandon certain crops altogether. Andersons’ latest estimates for June show that Agflation now stands at 25.3%, the highest level in decades.