29.05.2021 – 09:35
The cost of raw materials going into making breakfast products has risen since the pandemic began, raising fears that a wide-ranging commodity boom could boost global food prices for consumers.
Prices for wholesale contracts for coffee, milk, sugar, wheat, oats and orange juice have risen 28 percent on average from 2019 levels, according to trading in future U.S. markets. For carnivores, adding pork to that list pushes the average price increase to 32 percent.
The cost of raw ingredients accounts for only a fraction of the total price paid for products in the supermarket or restaurants, but significant cost increases are likely to be passed on to consumers, analysts said.
In recent months, a large number of food companies including Switzerland’s Nestlé and Anglo-Dutch Unilever have reported price increases as raw material costs rise. Higher food prices have become a political concern in some developing countries such as Ethiopia and Nigeria, and are pushing towards consumer prices even in developed economies.
“Food inflation is very real in many countries. It will not disappear soon. “ said Abdolreza Abbassian, senior economist at the UN Food and Agriculture Organization. In April, the FAO real food price index, which tracks a wide range of products, reached its highest level in a decade.
Strong demand from China, grain accumulation by governments since the Covid-19 outbreak, and dry weather in major exporting countries have all contributed to rising agricultural prices.
Wheat prices have risen 16 percent since the beginning of last year, while corn has risen more than 60 percent. Corn has grown more from Chinese purchases, which in turn is pushing higher prices for alternative cereals, including wheat. The price of butter has also risen. Global export prices have risen by more than a third over the past year, according to the European Commission.
For countries that import a large portion of their food, such as Egypt and Pakistan, a rapid rise in transportation costs has added to the price of ingredients. The Baltic Dry Index, a benchmark for the bulk of transportation costs, has reached its highest point in more than a decade, rising to the back of rising commodity demand and driven by cramps pandemic.
Transport delays have strengthened the availability of coffee beans, increasing costs for bakers and cafes. Future Arabica coffee prices are at their highest level in more than four years, with drought in Brazil further squeezing supplies from the world’s largest producer.
Future milk prices have been volatile in the last 18 months; currently, they are 12 percent higher than the average recorded in 2019. China’s appetite for milk has been very strong over the past year, noted John Lancaster at StoneX commodity agents. New Zealand’s Fonterra, the world’s largest exporter of milk, said earlier this week that milk prices could reach record levels over the next year.
Early pandemic accumulation helped boost future sugar prices by 25 percent by early 2020, while orange juice revenue increased by one-fifth for the same period.
Future soybean oil prices have risen almost 90 per cent since the beginning of last year, while soybeans have risen by almost 60 per cent.
In developing countries, where food is less processed and the share of disposable income spent on produce tends to be higher, rising prices of agricultural products will be felt much more. It will be more acute for those living in extreme poverty, a group that has been inflated by about 90 million people during the pandemic, according to the World Bank, growing significantly for the first time in two decades.
“It is more sensitive for developing countries because in terms of access to food, you may have lost your job. . . [dhe] you do not have the security nets you have in the west. “ explained Abbassian. Where there are fragile governments, “It will become a political issue.”
Future prices for white corn used for the pope, a corn porridge eaten in many parts of Africa, have risen 16 percent in the South African exchange over the past 18 months. For rice, the main ingredient of mollusks, a dish eaten in many countries in Asia, future prices have risen by more than a third.
“My biggest fear is not breakfast today, but tomorrow morning”, said Abbassian.
Translated and adapted for Konica.al by Financial Times
