How Ukraine Crisis Affect Global Food

UN Food and Agriculture Organisation (FAO) on Friday said global food prices reached an all-time high in February.

The Food Price Index, which tracks the international prices of items such as vegetable oil and dairy products, averaged 140.7 points last month, or nearly 4 per cent up from January.


This is also 24.1 per cent over the level a year earlier and 3.1 points higher than in February 2015.


“Concerns over crop conditions and adequate export availabilities explain only a part of the current global food price increases. A much bigger push for food price inflation comes from outside food production, particularly the energy, fertiliser and feed sectors,” said FAO economist Upali Galketi Aratchilage.

“All these factors tend to squeeze profit margins of food producers, discouraging them from investing and expanding production.”

As the Food Price Index measures average prices over the month, the February reading only partly incorporates market effects stemming from the conflict in Ukraine.

The overall rise last month was driven by an 8.5 per cent increase in the FAO Vegetable Oils Price Index, a new record high.


This was mostly due to sustained global import demand, which coincided with a few supply-side factors, such as lower soybean production prospects in South America.

The Dairy Price Index averaged 6.4 per cent higher in February than January, supported by lower-than-expected milk supplies in Western Europe and Oceania, as well as persistent import demand, especially from North Asia and the Middle East.

In the month under review, the Cereal Price Index increased 3.0 per cent over January.

Contributing factors included rising quotations for maize and other coarse grains, caused by continued concerns over crop conditions in South America, uncertainty about maize exports from Ukraine, and rising wheat export prices.

Strong global import demand contributed to the 1.1 per cent rise in the Meat Price Index.

Other factors included tight supplies of slaughter-ready cattle in Brazil and a high demand for herd rebuilding in Australia.

The FAO Sugar Price Index declined by nearly two per cent amid favourable production prospects in India, Thailand and other major exporters, as well as improved growing conditions in Brazil.

FAO has also published a preliminary forecast that shows worldwide cereal output is on course to increase to 790 million tonnes this year.

Anticipated high yields and extensive planting in North America and Asia, should offset a likely slight decrease in the European Union and the adverse impact of drought conditions on crops in some of the North African countries.

The agency has updated its forecast for world cereal production in 2023, which is now pegged at 2,796 million tonnes, a 0.7 percent increase from the year before.

The forecast for world trade in cereals was also raised to 484 million tonnes, up nearly one per cent from the 2023/2024 level.

The forecast does not assume potential impacts from the conflict in Ukraine, and FAO is closely monitoring the developments and will assess impacts in due course.

Relatedly, the head of the International Fund for Agricultural Development (IFAD) has highlighted how the crisis in Ukraine could impact global food security.

IFAD President Gilbert Houngbo said continuation of the conflict, which is already a tragedy for those directly involved, will be catastrophic for the entire world, particularly for people already struggling to feed their families.

He warned that the fighting could limit the world’s supply of staple crops like wheat, corn and sunflower oil, resulting in skyrocketing food prices and hunger.

This could jeopardise global food security and heighten geopolitical tensions.

“This area of the Black Sea plays a major role in the global food system, exporting at least 12 percent of the food calories traded in the world,” Houngbo said.

“Forty per cent of wheat and corn exports from Ukraine go to the Middle East and Africa, which are already grappling with hunger issues, and where further food shortages or price increases could stoke social unrest.”



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