According to the UN Food and Agriculture Organization (FAO), the global food price index averaged 159.3 points in March, surpassing the previous record of 137.6 points set 11 years ago in February 2011.
Root Causes of the Global Food Price Surge
There are several key factors behind the recent spike in food prices.
Major Volatilities Influencing Food Prices
One of the primary reasons for this surge is the increased volatility that the FAO index has experienced over the past two years, driven by the Covid-19 pandemic and the Russia-Ukraine conflict. The index reached a four-year low of 91.1 points in May 2020 as demand plummeted due to pandemic-induced lockdowns across countries. However, with the easing of these restrictions and the return of demand, supply chain disruptions ensued, causing shortages in everything from laborers to packaging materials and shipping containers.
Aggravating Factors: Supply Shortages and Geopolitical Tensions
The supply shortages have been exacerbated due to escalated tensions in the Black Sea region, leading to a 17.5% rise in the index between January and March 2021. The FAO’s cereal and vegetable oil price indices reached record highs of 170.1 points and 248.6 points, respectively, in March 2021. Additionally, the closure of ports in the Black Sea and Azov Sea, coupled with the cutoff of Russian banks from the international payment system, have resulted in massive shipping disruptions from this crucial agricultural commodities supply region.
Understanding the FAO Food Price Index
Established in 1996, the FAO Food Price Index (FFPI) is a tool that tracks monthly changes in international food commodity prices. The Index measures changes in a diverse basket of food commodities, such as cereals, oilseeds, dairy products, meat, and sugar, using 2014-16 as the base period.
Role of the Food and Agriculture Organization
The FAO is a United Nations specialized agency that spearheads international efforts to eradicate hunger. It marks its founding anniversary every year on October 16th, celebrated globally as World Food Day. Based in Rome, Italy, it operates alongside sister agencies, the World Food Programme and the International Fund for Agricultural Development (IFAD).
Noteworthy Initiatives Undertaken by the FAO
The FAO carries out several initiatives associated with global agricultural practices and food standards. These include the Globally Important Agricultural Heritage Systems (GIAHS), monitoring the worldwide Desert Locust situation, and managing the Joint FAO/WHO Food Standards Programme through the Codex Alimentarius Commission. The organization also adopted the International Treaty on Plant Genetic Resources for Food and Agriculture in 2001.
FAO’s Flagship Publications
The FAO publishes several reports offering critical insights into global agricultural and food patterns. These publications include The State of World Fisheries and Aquaculture (SOFIA), The State of the World’s Forests (SOFO), The State of Food Security and Nutrition in the World (SOFI), The State of Food and Agriculture (SOFA) and The State of Agricultural Commodity Markets (SOCO).