FAO Warns: World Faces New Wave of Food Price Inflation

Maximo Torero, Chief Economist at the United Nations Food and Agriculture Organization (FAO), warned that the world faces a new wave of food price inflation. He attributed this to Middle East and Ukraine tensions, plus the El Niño phenomenon, as key factors driving cost increases and declining crop yields globally. While food prices were a major driver of global inflation in 2022, they remained relatively stable this year, even mitigating some energy-cost-driven increases. However, this calm is likely temporary. Factors such as rising crude oil prices, global fertilizer and diesel shortages, and adverse weather all impact costs. These will inevitably reflect in consumer prices, even if delayed. Torero, in press statements, predicted commodity prices would begin to rise now, with food prices increasing by year-end and further escalating next year. He noted the transmission from commodity to final food price takes three to six months. Despite recent increases in wheat, corn, and rice prices, most still reflect relatively good harvests, not potential difficulties expected next year. Torero explained the Strait of Hormuz poses a problem for all commodity inputs and agricultural systems, due to Brent crude use in pumping, packaging, processing, transport, and natural gas in fertilizer plants. Damage to Russia's oil and gas infrastructure, from the Ukraine conflict, also cut the export market for diesel and natural gas, both vital for food production. As commodity prices are global, hardship spreads worldwide, even if wealthier nations have greater liquidity to support producers. Global wheat and corn cultivation declined in the first three months of regional tensions, prompting some American producers to switch to soybeans due to lower fertilizer requirements. The El Niño weather phenomenon is likely very strong this year, leading to significant changes in rainfall patterns. This will impact commodity prices and push tens of millions into acute food insecurity. In India, the monsoon season has already been delayed, and rainfall this month is expected to be below average, potentially harming rice production and affecting global commodity prices.