World food prices rebounded in January according to the UN FAO’s food price index, which tracks a basket of 95 globally traded food commodities. The index moved closer to the record high from 2011, a year when surging prices of cereals and rising cost of living in general helped trigger the Arab Spring. However, taking the base effect into consideration, the year-on-year rise slowed to 19.5% from the 40% recorded last May.
Higher food prices during the past year have been driven by a combination of a post-pandemic economic recovery raising demand, a troubled weather year, and the prospect for another season’s production being interrupted by La Ninã developments, Covid outbreaks challenging supply chains, labour shortages and more recently, rising production costs via surging fertilizer prices and rising cost of fuels, such as diesel.
Vegetable oils led by soybeans and palm oil have topped the table this year with support coming from strong demand for plant-based fuels as crude oil continues to rally. Palm oil futures traded in Malaysia hit a record this past week on concerns over tight supply after top grower Indonesia announced export curbs to control domestic prices. Soybeans were supported by continued downgrades to Brazilian crop estimates due to adverse weather while political unrest in Argentina, the world’s largest exporter of soybean products, also helped create nervous trading.
Staying with export curbs, Russia announced a two-month ban on ammonium nitrate exports to ensure a successful domestic sowing season with ample supply. The price of ammonium nitrate has seen a four-fold increase during the past year amid surging natural gas, commonly used as feedstock to produce two nitrogen-based fertilizers – ammonia and urea. With Russia being one of the world’s largest exporters, the impact will be felt not only in Europe but also in Ukraine, a major producer of high-quality wheat, corn, and edible oils.