Climate change and the war in Ukraine are set to keep food prices at far higher levels than before the Covid-19 pandemic, despite signs of moderation in global commodity markets, economists and agriculture experts have warned.
Wholesale food prices have stabilized over recent months, raising hopes that the surge in the retail cost of staples such as rice, bread and milk seen in the past two years will diminish in 2023.
The latest update of the food price index of internationally traded agricultural commodities, compiled by the UN Food and Agricultural Organization (FAO), published on Friday, posted its eighth consecutive monthly decline in November since peaking in March. The November index showed prices were just 0.3 per cent higher than a year earlier.
However, the stabilization in international markets is yet to translate into lower inflation for households around the world.
Even if this does happen over time, costs are likely to remain well above pre-pandemic levels as the war and weather events limit producers’ ability to take advantage of higher prices by increasing supply.
“Normally the cure for high prices is high prices,” said Carlos Mera, senior analyst at Rabobank. “We do see a weakness in demand, but production has not been very elastic.”
After several years of bumper crops thanks to favorable weather conditions, grain prices firmed up during the pandemic because of hoarding by consumers, companies and governments. Even before Russia’s February invasion of Ukraine, which caused prices to spike because of the importance of both countries