FRANKFURT – The world is on the verge of another bout of food inflation as wars in Iran and Ukraine along with El Nino create a perfect storm of higher costs and lower crop yields, the chief economist of the United Nations Food and Agriculture Organisation said.<\/p>\n
Food prices were a key driver of the 2022 global inflation surge but have been relatively benign so far this year, even tempering in some places the surge caused by high energy costs.<\/p>\n
This calm is likely to be temporary, however, as higher crude oil prices, the loss of fertiliser from the Gulf region, the shortage of diesel in some parts of the world, and extreme weather are feeding through to costs and will show up in consumer prices, even if with a delay.<\/p>\n
Costs seen accelerating by year-end, next year<\/p>\n
\u201cI expect that commodity prices will start to increase more now… and food prices will start increasing by the end of the year, and next year for sure they will increase more,\u201d Maximo Torero told Reuters in an interview.<\/p>\n
\u201cThe transmission from the commodity to the final food price is around three to six months,\u201d he said.<\/p>\n
Although some commodity prices, such as wheat, maize and rice have increased in recent months, most still reflect relatively good harvests, rather than likely difficulties in the coming year.<\/p>\n
\u201cThe Strait of Hormuz is a problem that affects all the inputs of agricultural commodities, agricultural systems,\u201d Torero said.<\/p>\n
\u201cBrent oil, because it\u2019s used for pumping, packaging, processing, and transportation. And natural gas because it\u2019s used for fertilisers.\u201d<\/p>\n
Meanwhile, the damage inflicted by Ukraine on Russia\u2019s oil and gas infrastructure curtails the export market for diesel and natural gas, both of them key inputs in food production.<\/p>\n
Since commodity prices are global, this inflicts pain across the world, even if richer countries have more cash to buffer producers.<\/p>\n
\u201cYou\u2019re hearing this in Europe, in the US, Brazil and in Asia,\u201d Torero said.<\/p>\n
\u201cTight margins are putting stress in planting decisions.\u201d<\/p>\n
Indeed, even in the US, which is self-sufficient for most key inputs, without federal assistance farmers growing nine principal crops may lose US$32 billion (S$40 billion) in 2027, the American Farm Bureau Federation, an industry lobby group, said.<\/p>\n
On a per-acre basis, every crop analysed is projected to remain below breakeven in 2027, it said.<\/p>\n
Global wheat and corn planting was already cut in the first three months of the Iran war and some US producers have shifted to soybeans, because they require lower fertiliser inputs.<\/p>\n
Australia, one of the world\u2019s top crop exporters, recently said that winter crop production is seen down by 21 per cent in part because of a significant increase in both fuel and fertiliser prices and uncertainty over the availability of key inputs.<\/p>\n