How are changes in food prices measured?Indexes are a useful tool for gauging price increases across categories. The FAO Food Price Index (FFPI) measures the change in global prices of a basket of food products by comparing current prices against a weighted average of one hundred. The index tracks the most traded food commodities: meat, dairy, cereals, vegetable oils, and sugar.
The global food price index averaged an all-time high in March 2022 at 159.3 points. After the initial price explosion, the index began to return to levels similar to the beginning of 2022. The index had decreased to 120.6 points by October 2023, the lowest figure recorded since March 2021. If this figure continues to decline, consumers around the world may finally begin to feel relief from rising grocery shopping costs. Secondly, the Consumer Price Index (CPI) is a key national inflation measurement tool designed to track the rise and fall in product prices which also uses weighted averages. Despite the global price index starting to drop, the picture on a national level can look quite different; a record-high CPI for food and non-alcoholic beverages was measured in August 2023 in the UK. Some Latin American countries are also feeling the pinch more than ever; the inflation rate of food prices reached an all-time high in Argentina in October 2023 at just over 153 percent.
What causes food price rises?According to the aforementioned global food price index, prices began to rise in the early summer of 2020. The economic impacts of COVID-19 lockdowns worldwide, such as product and labor shortages, started to show their faces around this time. Things took a turn for the worse early in 2022; between January 2022 and March 2022 alone, coinciding with the Russian invasion of Ukraine in February 2022, figures increased by over 17 percent. Both Russia and Ukraine are responsible for a large share of global trade in essential agricultural commodities.
In the 2022/23 trade year, it was forecast that Ukraine would export 13.5 million metric tons of wheat, flour, and wheat products. This would be a large drop from the previous trade year when over 18.8 million metric tons were exported around the world. The war is likely to continue to hit Ukraine and Russia's output of all agri-food products, causing shortages and further price increases globally.
Along with the assault on Ukraine and the long-lasting global impact of the pandemic, inflated costs of energy which impact fertilizer costs used in agricultural production, blocks in trade flows, poor crop conditions, and avian flu outbreaks are other factors in pushing up the cost of basic food staples. For example, the impact of avian flu can be seen in the increase in the price of eggs in the United States. Between December 2021 and 2022, eggs were the hardest hit grocery product with a year-over-year increase in CPI of 59.9 percent. However, by September 2023, the year-over-year inflation rate of eggs in the U.S. had decreased by 14.5 percent, showing how quickly the market can bounce back after a short-term crisis.