According to the latest FAO Food Price Index data, global food prices rose again in April after a year.
Specific data show that the global food price index was 127.2 points in April, up 0.6% from March. The FAO's monthly global food price index once approached a record high of 170 points after the outbreak of the Ukraine crisis in late February last year. Subsequently, this index began to fall after countries began to coordinate food exports from two major agricultural exporting countries, Russia and Ukraine. The latest data released in April also dropped 31.2 points compared to the same period in 2022.
However, as FAO chief economist Maximo Torero said, global food prices have loosened but prices remain high and still pose a challenge to food security, "As the economy recovers from a severe slowdown, demand will increase, giving food prices an upward impetus."
In addition, the UN World Food Programme has previously warned that the global food situation will remain at an unprecedented level of risk in 2023 as regional conflicts, economic downturns, extreme weather and rising fertilizer prices continue to disrupt food production.
What factors contributed to the rise in the food price index?
Sugar contributed to the rise in the global food price index this month, according to data from the FAO. The FAO Sugar Price Index averaged 149.4 points in April, up 22.4 points (17.6 percent) from the previous month, marking the third consecutive month of upward movement and a new high since October 2011.
According to the FAO, the surge in sugar prices this month is mainly due to further downward revisions to production forecasts in countries such as India, as well as Thailand and the EU production is less than expected, leading to high market concerns about the tight global supply situation in the 2022/23 season. Despite the positive outlook for this year's sugarcane crop in Brazil, the slow progress of the harvest due to the above-average rainfall also further supported sugar prices. In addition, higher international crude oil prices combined with a stronger Brazilian real against the U.S. dollar also pushed world sugar prices upward overall.
Also up was the meat price index, which averaged 114.5 points in April, up 1.5 points (1.3%) from March. According to the FAO, international pork offers rose the most in April due to increased import purchases from Asian countries, while supplies from some major exporting countries continued to be constrained due to high production costs and animal health issues. Meanwhile, world poultry prices rebounded after nine consecutive months of declines, due to increased import demand from Asia and continued supply constraints in many regions due to widespread outbreaks of avian influenza. International beef prices rose this month due to declining beef cattle sales. In contrast, international lamb prices were largely stable.
However, the global grains, dairy products and vegetable oil price index was further weakened from the previous month.
What variables deserve our attention?
The 18th of this month is the deadline for the expiration of another the Black Sea Grain Initiative. Last July, Russia and Ukraine signed the Black Sea Grain Initiative under the good offices of the United Nations and Turkey to jointly guarantee the safe export of Ukrainian agricultural products via the Black Sea and alleviate the global food crisis caused by the conflict between Russia and Ukraine. The Initiative is valid for 120 days and was successfully renewed for another 120 days in November 2022.
On March 18 of this year, Russia and Ukraine agreed on a second extension of the Black Sea Grain Initiative, however, the two sides disagreed on the extension period and Russia announced that it would only agree to extend the agreement for another 60 days and said it would only consider a further extension if it met its own requirements related to the export of grain and fertilizer products.
In view of the impending expiration of the agreement, Russian Foreign Ministry spokeswoman Zakharova previously said that negotiations have been held with the UN side on topics such as whether to extend the agreement and to discuss access to global markets for Russian agricultural products and fertilizers. All along, although Western sanctions have not directly targeted Russian food or agricultural products, they have set a number of conditions in logistics, shipping and insurance, which have deterred importers from doing so. According to Russian media reports, the Russian side believes that there are still obstacles to the export of Russian agricultural products and fertilizers, and no real progress has been made on financial and logistical issues.
Although negotiations continue, Torero has said that it is important to renew the Black Sea Grain Initiative to avoid a surge in wheat and corn prices.
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