In the midst of the COVID-19 epidemic, many countries around the world are facing drought and crop failures. At the same time, Asian countries began to actively buy food into the reserve, while speculative capital poured into the market. In such an environment, staple foods have continued to rise in price for 8 consecutive months. In January 2021, the food price index compiled by the Food and Agriculture Organization of the United Nations reached its highest in the last 6 years.
"The indicator, which tracks 95 commodities from five key categories, added 4.3% month-over-month and 11% on an annualized basis, hitting 113.3 points, the highest since July 2014", - reports finanz.ru.
The main increase in the index was provided by the rise in prices for sugar, grain and vegetable oils. Amid drought that hit South America, corn prices in January increased by 11.2%, and compared to 2020 - by 42.3%. Wheat prices rose 6.8% over the month, while vegetable oils rose 5.8% and 27% yoy. This is the absolute maximum over the past 8 years. Due to poor harvests in the EU, Russia, Thailand and South America, sugar prices also rose, breaking the 2017 price record.
At the same time, prices for dairy products rose by 1.6% per month and by 7.1% per year, followed by meat prices. In addition to corn, soybeans have seriously risen in price on the Chicago Stock Exchange (+ 41% in six months). The situation is aggravated by the problem with the transportation of food: amid a shortage of containers, the cost of freight from China soared 3-4 times. This was not slow to affect the final cost of the product. A similar situation developed 12 years ago, when food prices soared against the backdrop of the 2007-08 drought that riots broke out in several African countries.
The continued "food inflation" provoked popular uprisings. Analysts warn that if food inflation continues now, then for poor countries, where a lot of people have lost their income and the ability to buy more expensive food, this will be the "last straw" of the coronavirus shock. In the future, this threatens a social explosion.
Economists estimate that in Russia the level of food inflation for the year was 33%, while Rosstat says inflation for the year at 5% and 5.2% in January . However, in January, Rosstat admitted that in January the growth in food prices reached 7%, which was the maximum in the last 5 years.
In ruble terms, the FAO dollar index has soared 33% over the past year. According to Rosstat, in January, food inflation hit a record five years. Experts predict that in February-March a further round of inflation in Russia should be expected to reach 5.5%, which will lead to a revision of the key rate to 25 basis points by the end of the year.