Global food prices still above pre-war, covid levels: UNCTAD

This assume significance for India as it is witnessing a sharp surge in food prices, including those of milk. Inflation in the food basket in February was at 5.95%, up from 5.94% in January. The food basket has a weightage of 39.06% in the overall Consumer Price Index.

The Food and Agriculture Organization (FAO) reports that food prices are almost 18% lower than their all-time high in March 2022, following the start of the war in Ukraine. This downward trend in prices was supported by the efforts of the Black Sea Grain Initiative, UNCTAD said.

“However, price levels are still high when compared to pre-war and pre-pandemic levels. Food prices in January 2023 were 45 per cent above the average over the past two decades.

Furthermore, concerns persist for the stability of future food prices, which may be undermined by climatic factors, risk of market disruptions, export restrictions, high energy costs, and weakening global demand for food,” the report added.

The UN and Turkey had brokered the deal between Russia and Ukraine in July last year that allowed Ukraine — one of the world’s key breadbaskets — to ship food and fertilizer from three of its Black Sea ports.

Besides, a separate memorandum of understanding between the United Nations and Russia is aimed at overcoming obstacles to Moscow’s shipments of fertilizer to global markets.

While most developing countries are paying lower prices when compared to the record highs seen in May 2022, currency depreciations have partly eroded the benefits of declining international prices.

In some cases, depreciations have been so sharp that the wheat price in domestic currency surpasses record levels. This is the case, for instance, in Egypt, Suriname, South Sudan and Ghana, the report further added.

Between the onset of the war and the implementation of the grain initiative, rivers became the main shipping routes for Ukrainian exports. Before the war, more than 90% of ships had departed from seaports. However, with the war, this share abruptly dropped to 20%. After the signing of the initiative, the share almost doubled, the report observed.

Trade along rivers has become more important compared to the pre-war period. Trade diversion towards river ports – in particular the river Danube – is also reflected in trade statistics.

But trade via inland waterways comes at a higher cost. River routes cannot handle large dry bulk vessels but instead employ small cargo and multipurpose vessels carrying lower volumes.

Furthermore, if the grain’s destination is overseas, as is the case for most developing and least developed countries, it takes more time to reach its final destination when needing to transit the European Union.