IMF says rising food prices will be felt much more in the coming months
Rising global food prices for producers are making headlines and worrying the public. The most recent data shows moderation in consumer food price inflation globally, but that could change in the coming months. This would only add to the high prices that consumers in many countries already experienced last year.
These are the conclusions of three economists from the International Monetary Fund (IMF). They highlight in an article that if prices eventually rise again, there are likely to be considerable differences between countries.
Christian Bogmans, Andrea Pescatori, and Ervin Prifti say that due to several factors, consumers in emerging markets and developing economies still struggling with the pandemic are likely to feel the effect more. These considerations are due to four facts, quote IMF specialists:
Fact 1: Food price inflation began to rise before the pandemic.
Economists indicate that rising consumer food price inflation predates the pandemic. In the summer of 2018, China was hit by an outbreak of African swine fever, which wiped out much of China’s pig herds, accounting for more than 50% of the world’s pigs.
Fact #2: Early lockdown measures and supply chain disruptions induced an increase in consumer food prices.
Financial experts note that the onset of the pandemic, disruptions to the food supply chain, the shift from food services (such as dining out) to retail supermarkets, and the accumulation of consumer stocks (along with a sharp appreciation of the U.S. dollar) drove up consumer food price indices in many countries.
They add that while food prices in their supermarket (i.e., consumer food prices) may have risen, it is an exaggeration to say that they are growing at their fastest rate in years.
“It takes at least 6 to 12 months before consumer prices reflect changes in producer prices. Moreover, on average, the transference of prices from producer to consumer is only about 20%,” say IMF economists.
Fact #3: Shipping and transportation costs skyrocket.
As measured by the Baltic Dry Index (a measure of shipping costs), ocean freight rates have increased two to three times in the past 12 months, while rising gasoline prices and a shortage of truck drivers in some regions are driving up the cost of trucking services. Higher transportation costs will eventually increase food inflation for the consumer.
Fact #4: Food producer prices globally have recovered to multi-year highs.
Since their peak in April 2020, international food prices (producers) have risen by 47.2 percent, reaching their highest (actual) levels in May 2021 since 2014 (the highest level in history in terms of current dollars). Between May 2020 and May 2021, soybean and corn prices increased by more than 86 and 111 percent, respectively.