Climate and wars boost global food index to record high
Climate and wars boost global food index to record high
The global pressures acting on food prices originate from the worsening of extreme climate changes and geopolitical events. In September 2019, the global food price index stood at 93.4 points and since then rose to 124.4 points last September - a figure that represents a decade high
In September 2019, the global food price index stood at 93.4 points, and since then it surged to an all-time high of 160.2 in March 2022 before gradually declining to 124.4 by last September—a level that represents a decade-high. The index, which reflects the forces influencing a variety of food products, tracks five key components: vegetable oils, grains, sugar, meat, and dairy products.
Global pressures on food prices stem from climate change and an increase in extreme weather events, as well as geopolitical factors. Currently, particular emphasis is on the impact of extended shipping routes due to Houthi attacks in the Red Sea. Prior to the recent Middle East security escalation, significant pressure on food prices was caused by the Russian invasion of Ukraine, which drove grain prices to unprecedented levels. Although these prices have since moderated, food prices remain historically high. Since the United Nations began tracking food prices in 1961, record figures were previously set in 1974 and 1975 following the oil price spike in 1973, which triggered global inflation and affected the cost of food production and distribution. Except for those years, today's prices, in real terms, are the highest on record.
On the climate front, droughts and floods are disrupting the growth and supply of various foods worldwide, including wheat, olive oil, fish, seafood, rice, and grapes for wine production. Lower production of these goods naturally leads to shortages and price increases. In the European Union, for example, olive oil prices have been steadily rising since 2020, with a 45% increase in the past year alone. Since September 2019, wheat prices have risen by 12%, reaching $5.40 per bushel. Coffee prices have surged by 301% since September 2019, climbing to about $2.70 per pound (a 13-year high), while cocoa prices have hit an all-time high of approximately $7,000 per ton, compared to around $3,000 per ton in September 2019. This jump in cocoa prices is largely due to a global shortage following a severe drought in West Africa, which accounts for about 80% of global production.
The COVID-19 pandemic, which emerged at the end of 2019, had a dramatic impact on food prices. Lockdowns forced people to stay home, leading to increased demand, while food production slowed due to the need for stricter safety protocols and a reduction in available labor. Although the world has begun recovering from the pandemic's effects, new pressures emerged in February 2022 with Russia’s invasion of Ukraine, often referred to as the "breadbasket of Europe," creating further strain on global food prices. The war particularly affected the prices of grains and vegetable oils, two of the five components of the global food price index. In the European Union, food price inflation peaked in March 2023 at 19.2%, but has since trended downward and stabilized at around 1.8%.
In the United States, food prices have increased by 28% since 2019, driven by rising operational expenses, supply chain disruptions, and high profitability among food companies that sought to maintain or improve their margins amid challenging conditions. A 22% increase in fuel prices in the U.S. since early 2020, combined with rising labor costs, contributed to the higher operating expenses.
One example of the complex factors driving food prices is beef in the U.S., where prices hit an all-time high in February 2022. While they have since moderated, they remain 6.5% higher than in September 2019. Beef prices, a staple in the American diet, have been consistently climbing due to years of drought, high grain prices, and rising interest rates, all of which have burdened cattle farmers and reduced herd sizes. As a result, the current U.S. cattle population is the smallest since 1951. In early 2022, the American food basket took another hit with the outbreak of bird flu, from which the egg market has yet to recover.
Meanwhile, profits for food chains increased over the past few years. According to a report by the Federal Trade Commission published last March, food and beverage manufacturers' revenues exceeded expenses by more than 6% in 2021, a record at the time for this profitability index. By 2023, this figure had risen to 7%, highlighting the sector's growing profitability despite ongoing challenges.
