Rising prices, which food products now cost the most?

Rising prices

The repercussions of the Russian invasion of Ukraine continue to endanger global food security, pushing food prices higher and higher. Compared to a year ago, the cost of wheat has increased by 50%, due to the interruptions in exports due to the Russian blockade of Ukrainian ports and the bans imposed by some countries such as India. Milk, sugar and oils, on the other hand, suffered a slight decline, compared to the highs recorded in March, while meat and rice continue to rise. The price of rice, however, is what worries the most, in fact, despite having recorded a moderate increase, for now, if it were to undergo a further surge it could seriously jeopardize the stability of many developing countries.

Currently, according to the food price index of the United Nations Food and Agriculture Organization, the main drops have been recorded in the cost of vegetable oils (-3.5%), mainly on palm oils , sunflower, soybean and rapeseed, thanks to the lifting of Indonesia's ban on palm oil exports. Costs on dairy products also dropped, with a drop of 3.5%, the first in eight months. However, this is a temporary decrease, mainly due to the decrease in purchase interest due to the continuous lockdowns in China. While meat has increased by about 20% since the beginning of the year, with an increase of 0.5 in the last month.

Instead, the cost of rice in international markets continues to grow for the fifth consecutive month, reaching the highest levels in one year. According to experts, production is still abundant and this helps to avoid a sudden surge, but prices must be kept under control, because they could be negatively affected by the general increase in the cost of all agricultural products and by a possible increase in demand.

"We need to monitor rice prices in the future, because rising wheat prices could lead to a substitution with rice, increasing demand and reducing existing stocks," Sonal Varma, head, told CNBC economist of the Japanese bank Nomura. In recent months, in fact, the increases in fertilizers and energy, added to those on wheat, cereals, meat and oils have destabilized the markets, making rice a valid alternative to more expensive products.

At the root of this global food crisis there are several factors, but experts agree in pointing to the imperialist and aggressive policy of the Kremlin as the trigger: in fact, by invading Ukraine and indiscriminately destroying its civil infrastructures, Russia blocked the exports of one of the world's largest producers of wheat and oils. While Western sanctions against Moscow, contrary to what has sometimes been claimed, have not co lpito its food exports and therefore did not directly contribute to the crisis.

In this uncertain situation, other large grain and cereal producers such as India have adopted protectionist policies, in order to maintain internal food security , for example by blocking exports of wheat and adding restrictions on sugar. However, these policies "worsen global price pressures," said Sonal Varma, exacerbating the situation for both developing countries and producers.

According to David Laborde, researcher at the International food policy research institute, an increase in prices "that compensates for the higher costs of food production, thus helping workers to produce more, would be preferred, rather than an export ban" which would only push prices on global markets, lowering them on domestic markets. "Right now I would be much more worried if India imposes a ban on rice exports," he told CNBC.

Indeed, according to the World Economic Forum, India and China are the top two rice producers to globally, together guaranteeing more than half of world production. If these two countries were to impose protectionist policies, the repercussions on other countries would be devastating, endangering the lives of millions of people, already harassed by a general increase in food prices of more than 75%, compared to levels prior to the coronavirus pandemic. .

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US Producer Prices Rise at a Brisk Pace, Adding to Fed Pressure

(Bloomberg) -- Prices paid to US producers surged in May, underscoring persistent inflationary pressures across the economy that are likely to keep the Federal Reserve aggressively raising interest rates.

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The producer price index for final demand increased 0.8% from April and 10.8% from a year earlier, Labor Department data showed Tuesday. That followed a 0.4% advance in the prior month.

Nearly two thirds of the May increase was due to an advance in goods prices, especially energy.

Excluding food and energy, the so-called core PPI was up 0.5% in May and rose 8.3% from May 2021.

The figures are the latest indication that inflation will remain higher for longer than most economists -- and the Fed -- had anticipated earlier. Data released last week showed consumer inflation unexpectedly accelerated to its highest level in four decades in May in a broad-based advance that crushed hopes that inflation was starting to moderate.

JPMorgan Chase & Co. and Wells Fargo & Co. are among a number of banks that are now expecting the Fed to raise interest rates by 75 basis points this week, which would be the largest since 1994. The CPI data, as well as recent inflation expectations, have surprised to the upside, likely leading the Fed to consider a hike of that magnitude.

“The latest PPI data confirm that inflation pressures continue to build across both the goods and services sectors, pressuring the FOMC to act decisively to restore price stability,” Oxford Economics’ Mahir Rasheed and Kathy Bostjancic said in a note, referring to the policy-setting Federal Open Market Committee.

While prices of some commodities have declined from an April peak, broader inflationary pressures don’t appear to be resolving any time soon.

Story continues

Russia’s war in Ukraine continues to roil food and oil supplies globally, and China has started re-imposing Covid-19 restrictions just weeks after loosening them in major cities. The coming expiration of labor contracts for over 22,000 West Coast dockworkers risks further disrupting supply chains.

“Risks to producer price inflation remains tilted to the upside in the near term, and any sustained moderation will only come gradually over the second half of 2022,” the economists said.

Goods Prices

Prices of goods climbed 1.4%, driven by a 5% increase in energy. Services prices were up 0.4% from April, after dropping in the prior month. That advance included a 2.9% jump in transportation and warehousing costs.

The median forecasts in a Bloomberg survey of economists called for a 0.8% monthly advance in the overall PPI and a 10.9% year-over-year increase.

The final demand for food index was unchanged from the previous month, restrained by declines in the costs of beef and pork. That could be encouraging for consumer meat prices down the line.

Economists look to some categories in the PPI report to gauge the impact on the personal consumption expenditures price index, which the Fed uses as its preferred inflation metric.

Producer prices excluding food, energy, and trade services -- which strips out the most volatile components of the index -- rose 0.5% in May and were up 6.8% from a year ago.

Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, increased 2.3% in May, matching the strongest since October.

(Adds economists’ comment)

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