Despite the now year-long decline in international food
commodity prices, most people have not seen a reduction in the cost of the food
they buy. Instead, consumer food price inflation remains stubbornly high in
much of the world, says the Agricultural Market Information System (AMIS) in
its June Market Monitor report.
Food prices edged up further during 2022 and early 2023 in much of Europe, reaching rates of well over 10 percent on average. Food inflation still stood at near 20 percent in the United Kingdom and 15 percent or more in Germany and France by April 2023. In the United States, inflation decelerated slightly from over 10 percent a year ago to near 8 percent owing in part to monetary tightening, but overall inflationary pressures (including rising wage costs) remain important drivers.
Food inflation moderated somewhat in the Russian Federation, China, India, Indonesia, and a few other Asian countries, mainly linked to government support policies. “With few exceptions, food inflation remains high and accelerated further in other low- and middle-income countries.” AMIS said. “For instance, in Pakistan (following floods), Sudan (increased political tensions and droughts), Egypt (rising import costs), and Turkey (macroeconomic woes) food inflation edged up to around 50 percent or more, while Argentina, Venezuela and Zimbabwe recorded consumer price increases of well over 100 percent by April 2023.”
Nearly all of the affected populations live in low-income, net food-importing countries. These countries did not benefit from falling international food prices because their currencies lost value at an abnormally fast rate relative to the US dollar, which pushed up the domestic cost of food. As these vulnerable countries sunk deeper into the high price cycle, the ability of governments to cope with the compounding effect of the war in Ukraine was limited by import reliance and high debt obligations after the COVID-19 pandemic.
While governments took measures to lessen the burden of high prices such as targeted cash transfers to vulnerable households, they have been unable to sustain these. The coping capacity of vulnerable households equally has eroded, as many had previously taken on debt, sold assets and/or depleted food stocks to maintain their livelihoods during the COVID-19 pandemic and have had to continue these practices with persistent high food price inflation.
In view of the further reduction in purchasing power, populations with low incomes in both developed and developing countries may be forced to make tradeoffs, such as reducing portions and skipping meals, that negatively affect current and future food and nutrition security, AMIS warns. “Despite falling international food prices, food affordability thus remains a challenge at both the macroeconomic and household levels, threatening the food security of vulnerable households around the world.” the report concludes.