“Big agriculture is having a field day,” says The Economist. Food prices are soaring amid “transport logjams and paltry harvests”. The UN’s Food and Agriculture Organisation’s price index hit its highest level since 2011 in May. Soybean prices have risen by 56% in 12 months; corn is up by 68%.
When lockdowns were first imposed there was concern that global supply chains would buckle and prices would spiral, says Florian Zandt on weforum.org. In the event, prices slumped. Lower oil prices reduced demand for biodiesel, an alternative use for some crops. Yet prices began to rally last summer and have since soared to multi-year highs. Despite a pullback in June, average global food prices are “still 25% more expensive than the 2014-2016 average”.
Reopening restaurants have shifted demand back towards “meat, fish and dairy”, says The Economist. As Alain Goubau, an Ontario farmer, puts it: “A year ago we were trying to get rid of milk… Now we are adding as many cows as we can.” That in turn drives up crop prices because livestock need to eat: it takes more grain to produce an animal calorie than to produce a calorie of bread.
Article continues belowTry 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Soaring food prices are bad news for the world’s poor. Covid-19 has “dramatically increased the number of people affected by chronic hunger”, writes Elise Labott in Foreign Policy. That is fuelling protests from Haiti to South Africa. The post-pandemic world will be a “tinderbox”.