Global food prices are most likely to keep rising even after jumping to a
record high in March this year as reflected in the FAO Food Price Index
(FFPI) which averaged 159.3 points in March, up 12.6 per cent from
February when it had already reached its highest level since its inception
in 1990.

Food accounts for a much larger share of average household's total
expenditure in developing countries like Bangladesh where food,
non-alcoholic beverages and tobacco weigh very heavily on the consumer
price index (CPI), the principal measure of inflation in Bangladesh
accounting for 59 per cent of total weight. Furthermore, higher energy
prices will also feed into food prices through increased transport and
input costs.

Bank of England Governor Andrew Bailey at a parliamentary hearing last
week said a surge in food costs could have "apocalyptic" consequences for
the poorest people in society and the global economy. He further added
that "That is a major worry not just for this country but for the
developing world". Rising food prices are a catastrophe and they have been
going up very fast. Some estimates indicate prices may go up between 20-40
per cent before they settle down.

Rising global food prices to record levels are not only contributing to
rising inflation but also creating growing levels of food insecurity. The
heads of the World Bank group, International Monetary Fund, United
Nation's World Food Programme and World Trade Organisation on April 22,
2022 released a joint statement calling on the international community for
urgent action to address food insecurity, to keep trade open and support
vulnerable countries, including by providing financing to meet the most
urgent needs.

The world is, in fact, facing the rising risk a global food crisis. Food
crisis is a situation in which food availability drastically worsens
within a short period of time. The outlook for global food insecurity in
2022 is expected to deteriorate further relative to the previous years.
Food price inflation in many developing countries, particularly those with
increasingly depreciating currencies with a heavy reliance on food
imports will have a major impact on the purchasing power of the poorest
households. Many of these countries are still experiencing income and job
losses due to the pandemic related economic disruptions and their
after-effects. The poorest will be the hardest hit and their need to pay
for necessities like food means that they will not have any money left to
pay for other necessities of life, some even may experience
semi-starvation to starvation.

According to the World Bank, after decreasing steadily over the previous
two decades, poverty rates have been growing worldwide since 2020. It
further adds that the pandemic has led to an additional 97 million
extremely poor people compared to pre-pandemic projections. Higher food
prices, therefore, could drive many to seek food aid. According to the
World Food Programme over the last two years the number of severely food
insecure people has doubled and their number now stands at 276 million.

The increase in food prices led UNCEF on last week to issue an emergency
"child alert". It further added that the leading cause of preventable
death in children, known as "severe wasting" has increased "by more than
40 per cent" since 2016. According to UNICEF/WHO/World Bank statistics,
India leads the world in children affected by severe wasting, with over
5.7 million children under the age of five suffering from severe
malnutrition.

While economies are slowly starting to recover from the pandemic induced
economic slow down, economic uncertainties continue due to, in many
instances, continuing border closures, armed conflicts in the Middle-East
and in many parts of Africa and disrupted trade flows. A looming debt
crisis among low income countries and an increasingly strong US dollar are
also hindering the ability to import sufficient food to meet the domestic
demand. To further compound the problem many of these developing countries
can not obtain finance on the international financial market to import
food.

Now the breakout of the Russia-Ukraine conflict and the imposition of very
heavy US economic sanctions on Russia are causing sharp price rises in
food and energy commodities. In fact, by sanctioning Russia, the US has
effectively sanctioned the whole world. The US by imposing ban on Russian
export of wheat, fertiliser and the whole range other commodities and at
the same time asking the rest of the world that it can not import these
products from Russia is not only disrupting the free flow goods and
services but hampering the post pandemic economic recovery, in particular,
of developing countries (more precisely the Global South) who are facing
the brunt of rising food prices. The countries of the Global South are
acutely aware that they will be the most vulnerable to the ill effects of
US sanctions levelled against Russia and that is reflected in their lack
of support for the US moves against Russia at the UN.

The food crisis is not relegated to developing countries alone. Soaring
costs of living are also being experienced in developed countries due to
rise in food prices. Energy prices soared in the European Union in the
wake of sanction imposed on Russia pushing inflation to 7.5 per cent in
April, the highest rate in the history of the Union. Now there are growing
fears of economic hardship for European population. Prices for gas and
food are rising while incomes remain stagnant or decline, with much worse
trends envisaged for the near term as the sanctions take full effects.

Real GDP growth in the EU will be 2.7 per cent this year down from a 4
per cent forecast three months ago. Growth is also expected to further
slow down to 2.3 per cent next year. Consumer confidence in the UK has
plunged in recent times as rising prices of goods from food to other
necessities including energy bit into the spending power. Higher prices
for food in developed economies could dent consumer spending and,
consequently GDP growth.

Russia and Ukraine are two of the World's largest agricultural producers
and account for nearly 30 per cent of world's wheat exports and 18 per
cent of corn. In 2020-21, Russia was the single largest and Ukraine was
the 5th largest exporters of wheat in the world. But the conflict in
Ukraine and US sanctions on Russia, in particular, are upending the
shipments of cereals, possibly production also.

During the same year US was the 4th and Canada the 7th largest
exporters of wheat but both countries experienced drought last year which
led to about 25 percent shortfall in wheat production in these two
countries and the same is happening this year. Wheat futures traded in
Chicago, the global benchmark, recently rose to a record high. According
to the Food and Agriculture Organisation (FAO), more than 50 per cent of
all human calories come from just three crops: rice, wheat and corn.

Russia also plays a very key role as a producer of fertilisers and the
main raw material (natural gas) for their production. Now US sanctions
are causing fertiliser prices to rise to record levels, so much so that
fertiliser prices surged by 20 per cent in March than what they were in
January this year. Such price increases will lead to reduced use of
fertiliser negatively impacting on crop yields, thus causing further
reduced availability of agricultural commodities on international markets.

Now to further compound the problem of commodity supplies, last week
India, the 8th largest exporter of wheat 2020-21 in the world declared a
ban on wheat exports to stem domestic price rises, a move likely to
further reduce global supply of wheat. Last month Indonesia had introduced
a wide-reaching palm oil export ban in an effort to lower soaring prices
of cooking oil at home. Palm oil is by far the most consumed and traded
edible oil in the world. Indonesia is the world's largest palm oil
producer, providing the world with about one-third of its supply. The
Indonesian move had an immediate impact on global vegetable oil prices,
sending palm oil futures in the second largest supplier, Malaysia, up by
very close to 10 per cent. India is the world's largest importer of palm
oil and relies on Indonesia for half of its palm oil imports. But on last
Thursday Indonesia decided to lift the palm oil export ban form Monday,
the 23rd May as the supply situation improved. Since early this year, at
least 23 countries have imposed restrictions on food exports. Such
restriction will have a cascading effects leading to rising food prices.

There are a number factors that are driving up the current global food
crisis. While the recent Russia-Ukraine conflict has been singled out as
the most immediate factor but it is US sanctions on Russia that are
further causing rises in food and energy prices. There are also lots of
other different conflicts like in the Middle-East, North Africa and
various other parts of Africa and many of them have been largely caused by
the US military interventions such as the famine in Yemen which has been
continuing for a long time.