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Food prices hit all time high as cost of cereal and vegetable oils spike

The Food and Agriculture Organization of the United Nations (FAO) Food Price Index rocketed to an all-time high in March, as Russia’s invasion of Ukraine spurs supply shortages and drives-up cereal and vegetable oil prices.

The FAO Food Price Index (FFPI) tracks monthly changes in the international prices of a basket of commonly traded commodities.

Beside constituting the highest ever world food commodity prices, March’s index was a sudden leap, inclining sharply from costs in February, the FAO added.

The FAO’s most recent report averaged 159.3 points in March 2022, up 17.9 points from February; a 12.6% leap – the new highest level since the creation of the FFPI in 1990.

The increases were driven by inflating costs for vegetable oils (23.2% growth since Feb 2022), cereals (17.1% growth), sugar (up 6.7%), meat (up 4.8%) and dairy (2.6% growth), said the FAO.

Year-on-year, the FFPI was 33.6% higher in March 2022 than during the same period in 2021.

Ukraine driving cereal and vegetable oil prices upwards

The FAO said that the 17.1% spike in its Cereal Price Index from February to March 2022 was driven by large rises in wheat and all coarse grain prices, largely as a result of the war in Ukraine.

It added that data from the past three years shows that the Russian Federation and Ukraine combined have accounted for half of global wheat and maize exports, with around 30% from Russia and 20% from Ukraine.

The growth of global wheat prices was also further exacerbated by concerns over crop conditions in the US, resulting in 19.7% price growth between February and March 2022, while maize prices saw a 19.1% month-on-month increase – another record.

High maize prices also reportedly impacted the cost of other coarse grains, with sorghum prices increasing by 17.3% month-on-month, while the FAO said supply uncertainties have added further pressure on already tight barley markets, pushing prices up 27.1% from February.

There was also a 23.2% month-on-month increase in its Vegetable Oil Price Index, driven by higher quotations for sunflower seed oil, of which Ukraine is the world’s leading exporter.

Palm, soy, and rapeseed oil prices were reported to be spiking as a result of higher sunflower seed oil prices and rising crude oil prices, with soy oil prices further underpinned by concerns over reduced exports by South America, said the UN agency.

US food prices will continue to rise, say USDA

Meanwhile, the United States Department of Agriculture (USDA) published its Food Price Outlook for 2022 also showing price hikes. The Consumer Price Index (CPI) for all US food (economy-wide) increased by 1% from February to March 2022 before seasonal adjustment, and was up 8.8% from March 2021.

The trend was particularly apparent for ‘food-at-home’ – food bought at the grocery store or supermarket – where CPI increased 1.5% from February to March 2022, a year-on-year rise of 10%. Food bought in restaurants grew 0.3% month-on-month and 6.9% year-on-year.

“The impacts of the conflict in Ukraine and the recent increases in interest rates by the Federal Reserve are expected to put upward and downward pressures on food prices, respectively,” said the USDA.

It predicted that all food prices will now increase between 5% and 6% in 2022.

Food prices begin to bite the UK shopper

While it has been clear that globally traded commodity prices have spiked in recent months as a direct result of ongoing socioeconomic issues, the impact of the Ukraine crisis – and other worldwide problems – on final grocery and food retail prices has been less clear.

A new report from Kantar has therefore focused on the issue, and shows that UK grocery price inflation is at its highest level since 2011, with like-for-like grocery price inflation hitting 5.9% in April 2022.

According to Kantar, the average UK household food bill could increase by an extra £271 (€322) per year, as supply chain issues, the Ukraine war and rising raw material costs are all contributing to soaring food prices.

“A lot of this is going on non-discretionary, everyday essentials which will prove difficult to cut back on as budgets are squeezed,” said Kantar in a recent release. “We’re seeing a clear flight to value as shoppers watch their pennies.”

The group also said that the war in Ukraine has increased public awareness of supply pressures, with evidence of some shoppers stockpiling as they prepare for limited availability and with higher prices in the long-term.

“Last weekend several supermarkets introduced restrictions on cooking oil purchases as concerned consumers filled up their cupboards,” said Kantar. “The combination of rising prices and increased demand saw the cooking oil market grow by 17% over April.”

It added that sunflower oil and vegetable oil grew even faster, up by 27% and 40% respectively.