Global food prices have been falling since mid-2022 owing to several factors, including the resumption of exports from Ukrainian ports under the Black Sea Grain Initiative (BSGI).
The Food and Agriculture Organisation’s Food Price Index declined by 19.7% year-on-year in April 2023 to 127.2%.
Data analyst Trading Economics reports that in the European Union (EU), although food inflation has gone down, but yet it is still in the double digit – 15.04% in May compared to 16.41% in the previous month.
In the bigger economies of the EU, France and Germany for instance, food inflation is at 13.6% and 13.4% respectively in June compared to 14.3% and 14.5% in May.
In the Eastern European countries, Poland scored a 18.9% food inflation in May compared to 19.7% in the previous month, while for the same month, the Czech Republic has a food inflation rate of 14.5% (17.3% previously), Bulgaria 14.38% (15.85% previously) and Romania 18.73% (19.84% previously).
In the Baltic countries, Estonia scored a 19.5% food inflation in June compared to 20.4% in the previous month, while for the same month, Latvia’s rate was 14.4% (17.9% previously) and Lithuania 14.4% (18.2% previously).
In the UK, inflation currently stands at 8.7% in May, unchanged from April but food prices have gone up much more than that. Grocery inflation hit a high of 18.3% in May (19% in April) – adding more than £800 to the typical annual family food bill.
And their nemesis – Russia – has a food inflation rate of 0.2% (very low) in June compared to -1% in May.
For comparison, let’s take a look at the food inflation rate for some Asean countries. Brunei and Cambodia have a food inflation rate of 2.8% and 2.26% respectively in April, while Malaysia and Singapore each has a rate of 5.9% and 6.8% respectively in May, and Indonesia, 2.85% in June.
Only two Asean countries have a double digit food inflation – Laos (42.73%) and Myanmar (18.43%).
For those countries with double digit food inflation, it is not clear when food prices will start to come down as there are multiple factors that will need to stabilise before prices can reduce.
Most analysts opine the war in Ukraine needs to come to an end and then a period of stabilisation on all the other costs facing food businesses needs to take place before any meaningful reductions in food inflation can start occurring.
According to these analysts, there are a lot of complex reasons food prices have been going up since last year.
Rising labour, energy, and transport costs are major contributors to the increases, as well as the war in Ukraine and production difficulties caused by severe weather conditions.
The war in Ukraine has impacted commodities like wheat, grain and vegetable oils, while broader supply chain issues since the pandemic have also contributed.
And then there’s the cost of energy to manufacture food products. Salary rises due to inflation have also not helped keep food costs down.
It is the small businesses that produce and sell food which are feeling the pinch – many can only survive by putting up prices.
In going through all the data in Trading Economics, we can discern some interesting patterns.
In the first place there seem to be a general downward trend in food inflation in almost all countries starting from the middle of last year when the BSGI was introduced in July 2022, hot on the heels of a peak in food prices for months after the Ukraine war began in Feb last year.
Now just imagine if Russia withdraws from the BSGI when it expires on July 18; the downward trend in food inflation that the world is enjoying now will definitely be reversed, sparking a global food crisis again!
Also this downward trend in food prices is very marginal in the EU countries such that even after the fall in food prices there, food inflation remains at double digit rate in the EU countries, unlike the one digit figure experienced by almost all Asean countries with the exception of Laos and Myanmar.
Why would the EU countries’ food inflation mirror that of poorer countries like Ethiopia, Sierra Leone, Senegal and Haiti, in term of being in double digit?
Could it be that it is the unilateral shock and awe sanction that the EU imposed on Russia has boomeranged on all EU countries such that their food inflation are in double digit whereas Russia’s food inflation is very low at 0.2%?
And almost all Asian countries including Asean, majority of whom do not support the EU sanction on Russia, have a one digit food inflation rate.
Isn’t this a strong enough reason for the EU countries not to put obstacles in the Russian exports of its food and fertilisers by acceding to the Russian request of lifting sanction on their agricultural exports so that it will continue to participate in the BSGI, and thereby prevent a global food crisis?
Also, taking into account that the war in Ukraine needs to come to an end for a period of stabilisation on all the other costs facing food businesses to take place before any meaningful reductions in food inflation can start occurring, isn’t it the time for the EU countries, majority of whose members are also in Nato to put pressure on the US to end the war by cajoling Ukraine to enter into negotiation with Russia?
After all, the world has already suffered enough from this war, and it needs to be stopped.
Jamari Mohtar is the Editor of Let’s Talk!, an e-newsletter on current affair.
