Rome April 21 2022: The historically high food and agriculture commodity prices are likely to sustain for multiple upcoming seasons driven by various factors like the Russia-Ukraine conflict and high farm input prices, economist with United Nations Food and Agriculture Organization, Monika Tothova said in an interview with S&P Global Commodity Insights.
"It is very likely that food prices are going to stay elevated, given by the supply and demand shock but also by the higher cost of agriculture inputs," Tothova said.
"It is difficult to say how long the high food prices can last because we need to see how long the Russia-Ukraine conflict is going to last, but even if the goal was to finish immediately, it will take some time for the exports to go back to pre-war levels, and we will still have the high input prices," said Tothova. "It is likely to be for a while -- we are talking about seasons rather than months of high prices," she added.
At present, food prices are at levels never seen before. The FAO Food Price Index averaged 159.3 points in March, up 34% year on year, registering the highest level since its inception in 1990.
Prices for food commodities have been high for the past few years due to the supply-chain disruptions stemming from the COVID-19 pandemic, unfavorable weather events around the globe and high global demand, and Russia's invasion of Ukraine has propelled the prices higher. "Even before the start of the war in Ukraine, we were in an environment of pretty high prices, so when the shock came it created an additional imbalance sending prices even higher," said Tothova.
Russia is the top exporter of wheat and fertilizers, while Ukraine is a leading exporter of corn and sunflower oil. The war created uncertainty over production and exports from the region, propelling prices. The FAO has warned that the ongoing Russia-Ukraine war can further push global food and feed prices by 8%-22% from the already-elevated levels.
"What happens now will depend on how long the war is going to continue -- how much crop Ukraine is able to produce and how much of that is actually able to go to the world markets -- but all in all, it is very likely that prices are likely to be very high compared with historical levels," said Tothova. "With the seasonality of agricultural commodities, things naturally take a bit longer," she said.
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