Food prices are at their highest since records began 60 years ago, and are set to continue rising, according to the most recent commodity outlook published by the World Bank.
The report predicts that wheat will rise in value by 42.7%, barley by 33.3%, 20% for soybeans, 29.8% for oils and more than 40% for chicken, with increases directly linked to the cessation of exports from Ukraine and Russia.
Adverse growing conditions in China and North America are set to further exacerbate the issue, meaning a drop in prices will not be expected in the near future.
“We expect reduced crop supplies – caused by the weak Canadian canola crop, the short South American crops, and now the disruptions in the Black Sea region – to drive continued tightness in global grain markets for the next few years,” said Juan Luciano – chief executive of Archer Daniels Midland – one of the world’s biggest food commodity traders.
The US-based firm has recently announced a 53% increase in net earnings for the first quarter of the 2022 calendar year, up to $1.05billion.
While wheat supplies could be secured from other exporters in the short term, doubt lingers over the global yield as fertilizer prices are expected to rise by 69% this year alone.
“There’s a real risk that as farmers start to use fewer fertilisers, agricultural yields will decline,” said Senior Economist from the World Bank, Peter Nagle.
Overall, commodity values are expected to peak in 2022 and remain much higher than previous predictions with much riding on the conflict in Ukraine. The World Bank has reported that food prices are unlikely to soften until the end of 2024.
In addition to the increase in food and fertiliser costs, the impact on global markets is being further exacerbated by energy prices which are at their highest since the 1973 oil crisis.
“Overall, this amounts to the largest commodity shock we’ve experienced since the 1970s. As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel and fertilizers,” said Indermit Gill, vice president for equitable growth, finance, and institutions at the World Bank.
Energy prices are set to continue to rise – by more than 50% this year, before softening in 2023 and 2024, but some economists are predicting that the volatility of the global grain market could keep prices up over the medium term.
American financier CoBank has predicted that the impact on the availability of grain will likely linger for more than two years.
“We expect a significant tightening in available stocks-to-use ratios for both corn and wheat,” said Kenneth Zuckerberg, CoBank’s lead grain and farm supply economist.
“Grain prices will remain elevated and volatile for the foreseeable future. It’s an environment that will require U.S. grain cooperatives and exporters to maintain high capital levels and excess liquidity to fund operational and risk management activities.”