The United Nations has the data of the food price index, it tracks the monthly change in the price of food items.
The 5 major commodities in food items are
Cereals
Vegetable Oils
Sugar
Meats
Dairy Products
This year, March the food price index recorded the highest price levels in its three decade history. The UN body chief economist warned prices won't be going back to normal anytime soon.
Reasons for this price increase are linked with various factors, major ones being the Russia and Ukraine war.
Ukraine is known for its fertile soils. It is a top exporter of sunflower oil, corn and grains.
Ukraine and Russia combined produce more than a quarter of the global wheat supply.
There are 50 countries dependent on Russia and Ukraine exports. Some of them are Eritrea, Armenia, Mongolia, Georgia, etc.,
Another major reason, energy prices. Gas prices are increasing, which impacts the industries which produce fertilizers.
Natural gas is used as raw material and fuel for making nitrogen fertilizers. 80% of production cost goes to this.
Natural gas prices are soaring in Europe, it is almost 300% over the last 12 months. Cost of Fertilizers went up too.
Russia and China have banned fertilizer exports to save the domestic markets. Food items that are highly reliant on fertilizers are Wheat, Rice, Maize etc.
In addition the demand for alternative fossil fuels like biofuels such as vegetable oils like palm and rapeseed oil, limits the land for other food crops.
Similarly the energy crops exports are also getting banned. Indonesia, the world’s largest exporter of vegetable oil, imposed 3 weeks ban on the international sales of its palm oil. India banned wheat export.
Financial companies are also warning many economies will fall into recession by next year. When people are spending major income on food items that will make them spend little on other items.
