Bread in Russia, rice in Nigeria, and beef in Argentina – seemingly unrelated foods on different continents around the world – have recently shown a common feature: price increases.
According to the World Bank, global Food prices have increased by 20% overall in 2020 due to the impact of the Communist pneumonia Epidemic. However, after 2021, the momentum of food price hikes is on a “100-foot pole further” pattern, which has caused governments considerable headaches.
In February this year, international sorghum prices rose by a staggering 82.1% year-on-year (compared to the same period last year, the same below), international corn prices rose by 45.5% year-on-year, while wheat also rose by 19.8%.
The Food and Agriculture Organization of the United Nations (FAO) said that in February 2021, the monthly food price index has achieved “nine consecutive increases”, the index increased to 116, compared with the same period in 2020, an increase of 26.5%. This index also hit the highest level since July 2014.
In an interview with the first financial reporter, Zhongkai College of Agricultural Engineering, Associate Professor of the College of Economics and Business, China Agricultural Green Development Research Association director Mi Jian analysis, caused the above food prices rose mainly due to three reasons: firstly, the relative shortage of supply caused by climate problems; secondly, the world’s major economies began to recover, the demand for food increased greatly; and then the new round of global Inflation pushed up food prices.
In the granary but no food
Argentina is a vast, fertile and productive country, with a relatively limited domestic market and a large supply of agricultural products to the international market, known as the “granary and meat bank of the world”. However, in the current Argentina, the people’s Life is not only not “full of wine and food”, and many people look like they can not eat the bread.
In the streets of the Argentine capital Buenos Aires, many bakeries have been lined up in front of their doors before the end of business, but they are not here to buy bread, but to wait for the bakeries to close and receive free leftover bread near the end of its shelf life.
Argentina’s economy shrank by 10 percent in 2020 due to the epidemic, and inflation reached 8 percent in each of the first two months of the year. Inflation has pushed food prices up sharply. Compared to the second half of last year, the average price of fruit in Argentina increased by up to 228%, in addition to 114% increase in the price of potatoes, 103% increase in the average price of meat, and 88% increase in the price of vegetables.
Not only Argentina, the world’s other major food exporter – Russia also ran into similar trouble.
According to figures released by the Russian statistics department, food prices in Russia rose by 7.9% in 2020. Sugar products rose 13.6 percent, fruit products rose 12.9 percent and bread and cereal products rose 8.6 percent. A Moscow citizen said that bread that used to be procured for 800 rubles now costs 1,000 rubles (about 86 yuan).
In mid-December last year, at a conference on economic issues hosted by Russian President Vladimir Putin, rising basic food prices became one of the main topics. The Russian government subsequently announced a series of measures to curb food prices.
As the world’s largest wheat exporter, Russia responded to the pressure of increased domestic food inflation by introducing measures at the end of January to establish export quotas for major food commodities and increase export tariffs on wheat within the quotas, which exacerbated supply constraints on the international market.
Major food producers like Argentina and Russia are having a hard Time controlling soaring food prices in the short term. Then, for those countries that rely heavily on imports, the pressure on food supply and prices is even more self-evident.
Take Nigeria, Africa’s top economy, for example, whose National Bureau of Statistics data show that in February 2021, the national food inflation rate rose 21.79% year-on-year, the highest level in 15 years.
Although Nigeria is able to grow rice, it still needs to import large amounts of rice to supplement it. The price of a serving of local retail rice, typically 2 kilograms, was 550 naira (about $8.50) before the epidemic closed the city last year, rose to 800 naira (about $13.60) by last October, and is now at 900 naira (about $15).
Food prices in China’s near neighbor, South Korea, are already not low, and the recent upward trend is also more obvious. In January this year, Korea’s food prices rose by 6.5% year-on-year, ranking 4th among OECD member countries after Turkey (18.1%), Chile (7.8%) and Iceland (6.7%). Due to the Chinese New Year and other factors, food prices in Korea rose by 9.7% in February, the highest in the past decade. Among them, the prices of onions and eggs rose 227.5% and 41.7% respectively, and many people chose to grow onions at Home for this reason.
For the global food and food prices in general, the reason, Mi Jian to the most recent increase in sorghum and corn as a case study. He told the first financial, the United States is the world’s main exporter of corn and sorghum, the recent dry weather in the United States, especially in the southwest of the main grain-producing areas of the drought has seriously affected agricultural production. In addition, South American countries and countries such as Nigeria are also major producers of corn and sorghum, but these countries have been affected to varying degrees by supply chain disruptions caused by bad weather or epidemics, reducing supply.
At the same time, the demand side of the grain is on the rise. China was one of the first countries in the world to contain the epidemic, and domestic production and life recovered rapidly, with some industries recovering beyond expectations and domestic food consumption returning to normal, said Jian Mi. And the U.S. after a series of stimulus policies, residential consumption, including food consumption, has been restored, the U.S. domestic food prices have been higher than before the epidemic, in general, the global major economies of food consumption rapidly recovered.
In addition, Jian Mi also believes that the role of monetary policy to push up food prices can not be ignored. He said that several developed economies around the world have taken a lot of economic stimulus measures in the past year or so in response to the epidemic, including massive fiscal measures and extremely accommodative monetary policies. This has led to an extreme abundance of liquidity globally, and this newly increased liquidity has stepped up purchases of different assets, including bulk agricultural products, pushing up a new round of inflationary expectations globally.
The response
Against the backdrop of rising food prices and tight supply, Singapore, which imports more than 90% of its food, has fared quite well.
In fact, long before the epidemic struck, Singapore had set up its own food contingency plan, the essence of which was “not to put eggs in one basket”.
Eggs, for example, are normally supplied by Malaysia, Singapore’s land-based neighbor. However, Singapore does not simply rely on Malaysia, but has developed many sources of supply in advance, so that in the event of an emergency, Singapore can readily import from countries such as Australia, South Korea, Thailand and the United States. Moreover, these sources are not randomly selected, but will choose the output of countries far greater than domestic consumption.
Although Singapore is known as a “city state”, it has not abandoned its emphasis and investment in agriculture. Currently, Singapore produces about 10% of its total food needs. In 2019, the Singapore Food Authority has set a target – the “30-30 Vision” – to increase this percentage to 30% by 2030, using measures such as indoor agriculture to improve Singapore’s food security and counteract the impact of external factors on Singapore’s food supply. Based on this, Singapore has consistently ranked high in the Global Food Security Index reports published by the Economist Intelligence Unit in previous years.
Currently, many countries are also responding to the current difficulties by broadening their sources of supply. Mi Jian also appears quite optimistic about this round of international food price increases. He believes that the high tension on the global food supply side will not exist for a long time. He analyzed that the factors affecting the global food supply chain are gradually weakening, the global inoculation of the new crown pneumonia vaccine is gradually being implemented, and the tightness of the food supply chain in some countries will gradually recover. “Major producing countries, such as the U.S. and South America, are experiencing dry weather that has been rare for decades, and the impact will not last long.” He said.
The outlook for the future also conveys good news. The U.N. Food and Agriculture Organization recently raised its 2020 world cereal production forecast to 2.761 billion tons, up 1.9 percent from the previous year, and predicted that global wheat production could increase for a third consecutive year and hit a new record of 780 million tons in 2021.
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