Global food prices falling, but Asia’s food costs could still soar

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A employee holds grains of wheat at a storage barn in Polykastro, Greece on July 1, 2022. A truck unloads harvested wheat into heaps at a grain storage barn in Polykastro, Greece, on Friday, July 1, 2022. World meals costs surged to a file after Russia’s Feb. 24 invasion disrupted exports of grain and vegetable oil by means of Ukraine’s Black Sea ports, including to value pressures from logistics snarl-ups and a rebound in client demand after the coronavirus pandemic. Photographer: Konstantinos Tsakalidis/Bloomberg by way of Getty Photographs

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Meals costs worldwide have fallen for the third straight month, however costs are nonetheless hovering close to historic highs in March, in accordance with the United Nations Meals and Agriculture Group.

One economist at Nomura says Asia has but to see the height in meals costs, which can seemingly come through the July to September quarter.

Sonal Varma, chief economist for India and Asia (ex-Japan) on the Japanese financial institution advised CNBC modifications in meals costs in Asia are inclined to lag behind world actions as governments put in place subsidies and worth controls to ease costs briefly.

The FAO food price index, which tracks the month-to-month change within the world costs of a basket of meals commodities, fell 2.3% in June in comparison with a month in the past.

It was led by a decline within the worldwide costs of vegetable oils, cereals and sugar, however continues to be 23.1% increased than a yr in the past. 

The FAO index in June hovered at 154.2 factors — the bottom interval being common costs between 2014 and 2016 — simply barely beneath the 159.7 factors studying in March, following Russia’s invasion of Ukraine.

Affect on Asia

In response to Nomura, international locations like Singapore, South Korea, the Philippines, and India will seemingly see the best will increase in meals costs within the second half of this yr.

In a word printed in June, Varma and her crew stated web meals imports account for over 2% of the Philippines’ gross home product, the second highest in Asia (ex-Japan) after Hong Kong. Meals additionally instructions a excessive share — almost 35% — of the nation’s client worth index basket.

South Korea and Singapore are also at risk as they rely closely on meals imports.

And whereas India is self-sufficient on wheat and rice, the nation’s ongoing heatwave, a monsoon delay, and rising costs of different meals objects like meat and eggs will seemingly push costs up. 

As a substitute of putting in export bans, which distort meals costs, Varma stated governments ought to use “focused type(s) of fiscal assist” to assist low-income individuals at this level of time. 

“Decrease-income households usually spend an enormous chunk of their consumption on meals, so it is extra essential to guard them,” she stated. 

Wheat costs up almost 50% on-year

In response to the FAO meals worth index, cereal costs — the class wheat falls beneath — fell 4.1% in June in comparison with Might, however continues to be 27.6% increased than a yr in the past. 

Wheat costs fell by 5.7% in June, however was nonetheless increased by 48.5% in comparison with a yr in the past on account of the Russia-Ukraine warfare. Russia and Ukraine collectively account for 28.47% of global wheat exports in 2020, the Observatory of Financial Complexity discovered. 

Decrease wheat costs have been attributable to higher crop circumstances, seasonal availability from new harvests within the northern hemisphere, and extra exports from Russia, the FAO stated. 

Vegetable oil costs fell essentially the most, by 7.6% from the earlier month. Palm oil costs dropped as world provide elevated, whereas lesser demand for sunflower and soy oil additionally lowered costs. Sugar costs slid 2.6% month on month as provide elevated and demand shrank.

Meat costs at file excessive

Meat and dairy shoppers had much less to cheer about.

Meat costs hit a file excessive in June, climbing 1.7% from Might and 12.7% from a yr in the past, as provide continued to be curtailed by the warfare. Chook flu outbreaks within the Northern Hemisphere additionally impacted meat costs.

Dairy was 4.1% costlier than Might, and 24.9% extra expensive than June final yr. Cheese costs rose essentially the most, pushed by stockpiling and a heatwave in Europe, FAO stated.

FAO warned that whereas meals costs fell in June, “elements that drove world costs excessive within the first place are nonetheless at play.”

These embody “robust world demand, antagonistic climate in some main international locations, excessive manufacturing and transportation prices, and provide chain disruptions attributable to COVID-19, compounded by the uncertainties stemming from the continued warfare in Ukraine,” FAO’s chief economist Maximo Torero Cullen stated in an announcement. 

Meals costs are usually not prone to fall considerably over time, Nomura’s Varma stated. 

“The demand for a few of these merchandise is comparatively inelastic,” she stated, including {that a} recession won’t trigger “a cloth decline in costs.”



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