The UN’s Food and Agricultural Organization tracks food prices around the world via its Food Price Index. This is calculated as the average of five commodity group price indexes, weighted by their shares of global exports in the years 2014–2016. The five commodity groups are: cereals, vegetable oils, dairy, meat and sugars.
It’s important to note: the index doesn’t directly guage the price of food in the shops; it measures the price of food commodities. The former varies from country to country, and depends on factors like local regulations and supply chain issues. But generally speaking, if the Food Price Index rises, the price of food in the shops will rise too.
The chart below plots the index from 1962 to 2022, based on inflation-adjusted prices. The figure given for 2022 is the average for the first three months of the year.
As you can see, the index is currently at its highest ever level. In fact, the value for March (the latest available) was 159, compared to ‘only’ 136 in January – meaning the index has continued to rise over the past three months.
The last time food prices were as high as they are now was during the 1970s oil crisis. In 1973, OPEC imposed an oil embargo against countries that had backed Israel during the Yom Kippur War. This led to a quadrupling of the price of oil, with knock-on effects in other areas of the economy, including food production.
What explains the recent uptick? Well, the first major culprit is the pandemic, and more specifically lockdowns, which caused immense disruption to global supply chains. (Note: since the chart above is based on inflation-adjusted prices, the changes can’t be explained by loose monetary policy.)
The second major culprit is the war in Ukraine, which has put substantial upward pressure on food prices since February. Ukraine and Russia are major supplies of not only wheat, but also sunflower oil and fertilizer.
The combination of sanctions, disruptions caused by the conflict itself, and Russia’s self-imposed export ban, has reduced the volume of exports reaching global markets. And these effects have been compounded by the rising cost of natural gas – a major input to fertilizer production.