The dramatic rise in food prices worldwide has become a prominent concern for many nations, particularly those that rely heavily on imports. This article will delve into the causes and effects of this global issue.
1. Causes
Multiple factors have contributed to the unsustainable surge in food prices. One of the key reasons includes the ongoing Russia-Ukraine conflict, which has greatly affected their exports. These two countries alone are responsible for approximately 30% of all global wheat exports. With their exports halted due to the conflict, there’s been an increase in competition for the remaining wheat available on the global market. This has subsequently led to high costs, causing hardship especially for poorer, debt-laden countries who depend on imports for their food supply.
In addition to this, climate change-induced weather extremes like droughts, floods, and heatwaves are wreaking havoc on harvests, further limiting the availability of food supplies.
Furthermore, since the food price crises that happened in 2007-2008 and 2011-2012, governments haven’t been successful in controlling excessive speculation and ensuring transparency in food stocks and commodity markets. This lack of regulation contributes to fluctuating and often skyrocketing prices.
2. Current Trend in Inflation
Data from the Food and Agriculture Organisation’s food price index shows a drastic 29.8% year-on-year increase for April 2022. In fact, the prices of all commodity groups have experienced significant hikes: Cereals (34.3%), vegetable oils (46.5%), dairy (23.5%), sugar (21.8%) and meat (16.8%). This rising trend of food inflation is noticeable worldwide mainly due to war-induced supply disruptions, unfavorable weather conditions, high crude prices pushing for greater diversion of certain crops for biofuel production and so on.
3. Global vs. Domestic Prices
The transfer of global inflation to domestic food prices primarily hinges on the proportions of a country’s consumption or production that is imported or exported. Pertinently, countries like India have seen the impacts, where up to two-thirds of its consumption and a fifth of its production are traded internationally, particularly for commodities like edible oils and cotton.
4. Addressing Food Inflation
There are a number of strategies that could potentially alleviate the issue of food inflation. These include modifying dietary habits to consume less meat and dairy products, improving grain storage techniques especially in countries heavily reliant on imports, planting a more diverse range of crops to reduce reliance on a few grains, and policy shifts to decrease dependence on fragile supply chains.
Additionally, investing in climate-smart farming techniques can safeguard harvests against global warming and provide a buffer against fluctuations in food prices.
5. The Way Forward
In order to preemptively manage situations of food price escalation, there need to be consistent policies in place related to imports. Accurate crop forecasts using satellite remote sensing and GIS techniques can also be beneficial in predicting shortfalls or surpluses in crop yield well in advance.
Updating the decade-old Consumer Price Index (CPI) base year from 2011-12 could better reflect the change in food habits and lifestyle of the population, enabling the Reserve Bank of India (RBI) to better target the non-volatile segment (core inflation).
Although global food inflation is a reality, mitigating its effects involves enhancing domestic production and implementing strong, consistent policies and technological means to better predict and respond to potential crises.
