Global food prices cool from record levels but remain elevated – UN Food and Agriculture Organization
Global food prices fell for the fourth consecutive month in July, the UN’s Food and Agriculture Organization (FAO) said on 5 August. That is a rare piece of good news on the inflation front. But prices remain at elevated levels and, in South Africa, food inflation has continued to accelerate.
The FAO’s Food Price Index (FPI) measures a basket composed of the most globally traded commodities that wind up on your table. It scaled a record high in March of 159.3 points in the immediate wake of Russia’s invasion of Ukraine, a major grain producer.
Since then, the index has been in decline each month and reached an average of 140.9 points in July, down 13.3 points or 8.6% from June. This was its steepest monthly fall since October 2008. The recent UN-brokered deal on Ukrainian grain exports was cited as a key contributing factor.
That is a good sign – well, some farmers and traders might disagree – but food prices remain elevated. In July, the FPI was still 16.4 points or 13.1% over what obtained in the same month last year.
“The decline in food commodity prices from very high levels is welcome, especially when seen from a food access viewpoint,” Maximo Torero, the FAO’s chief economist, was quoted as saying by the UN news service.
“However, many uncertainties remain, including high fertiliser prices that can impact future production prospects and farmers’ livelihoods, a bleak global economic outlook, and currency movements, all of which pose serious strains for global food security.”
Meanwhile, in South Africa, food inflation is still heating up.
Food inflation for consumers in South Africa was running at 9% in June compared with 7.8% in May, according to the latest Consumer Price Index releases from Stats SA. In April, it was 6.3%.
Domestic food prices are a key driver of domestic inflation, which raced to a 13-year high of 7.4% in June, uncomfortably outside the 3% to 6% range targeted by the South African Reserve Bank (Sarb). This in turn explains why Sarb has been aggressively raising interest rates.
But if global food prices have turned a corner, one would expect domestic food inflation to also start slowing down eventually. Indeed, food prices might even be higher in South Africa currently, were it not for the decline tracked by the FAO’s FPI.
Millions of South Africans are going hungry and food inflation worsens their plight. Hopefully, South Africa will also start turning the corner soon. DM/BM