Food Price Index is highest ever, war in Ukraine a factor

The UN gauge of world food prices surged 3.9% and now is the highest in the 18-year history of the Food Price Index, said the Food and Agriculture Organization. Prices rose in part due to concerns, ahead of Russia’s invasion of Ukraine, of grain supplies from the Black Sea region.

The Food Price Index, based on prices for five groups of commodities, stood at 140.7 points at the end of February. It was nearly 21% higher than a year earlier and 3.1 points above the previous mark, set in February 2011.

Strong global demand combined with concern over supplies to drive up vegetable oil prices. “International sunflower oil prices also increased markedly, underpinned by concerns over the disruptions in the Black Sea region, which could potentially lower exports,” said the FAO. Ukraine is the world’s largest producer of sunflower oil. In addition, drought has cut into soybean production in South America.

Prices for cereal grains also are up, driven by uncertainties over wheat and corn supplies from Ukraine and Russia, major exporters of both commodities. Dairy and meat prices also rose during February, but sugar prices fell for the third month in a row.

“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, fertilizer, 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.”

The inflation rate among industrialized nations was 7.2% in January, the highest year-on-year increase in 31 years, said the OECD.

The U.S. inflation rate was 7.5% in January, the highest since 1982. Food prices were up 7%. The Labor Department was scheduled to release its monthly inflation report on Thursday.