After the wholesale price of food first saw a slump during the coronavirus pandemic, the global FAO Food Price Index showed a steep increase since the fall. Most recently, food around the world was 7.5 percent pricier than the 2014-2016 average, on which the index baseline of 100 points is calculated. The December figure is the highest of any month in six years.
According to the FAO, falling palm oil inventories had caused the product’s price to rally, driving up the Vegetable Oil Price Index by almost 5 percent in December after a jump up of 14.5 percent in November. This, in turn, contributed majorly to the overall rise in the food price index. Dry weather and production disruptions due to COVID-19 coupled with high demand from India’s Diwali festival as well as from China led to the depletion of the inventories.
In December, rising meat and dairy prices (up 1.7 and 3.2 percent, respectively) also contributed to the overall rise in food prices. According to Reuters, dairy demand in Oceania and Western Europe was to blame, as well as higher poultry prices triggered by avian flu outbreak in Europe.
Speculation about whether the disruptions of the coronavirus crisis would drive up food prices have been abound, but due to the COVID-related economic downturn, supply chain disruptions and falling out-of-house demand, they started to decrease from the beginning of 2020, reaching a low in May. According to the U.N., falling mineral oil prices also factored into the initial deterioration of food prices as many alternative fuels, which are made out of food stocks, saw demand fall. As the crisis wore on and countries reopened at least partially, global demand and prices picked up again in the summer. As the example of palm oil inventories shows, COVID-related disruptions (or those in which COVID-19 is a factor) do have the power to let prices trend upwards in the current market environment.