Global food prices have surged by the biggest margin in a decade, as one closeh watched index jumped 40 percent in May, heightening fears that the inflation initially stoked by pandemic disruption was accelerating. The year-on-year rise in the UN Food and Agriculture Organization’s monthly index was the largest jump since 2011, as commodity prices surged.
The higher inflation will hit poorer countries reliant on imports for staple goods. For richer countries, the cost of raw ingredients accounts for only part of the overall price paid for products at supermarkets and restaurants. However, the rise in raw material prices has been so steep that big companies such as Nestlé and Coca-Cola have said they would pass on any increases.
Economists and analysts also warned that the return of eating out as lockdowns lifted around the world would add to price pressures. “The decline in eating out was not totally compensated with eating at home, but as people start to go to restaurants again, you will see food prices rise,” said Abdolreza Abbassian, senior economist at the FAO.
The cost of labour, transport and shipping is expected to push prices higher in the coming months. “The rise in the transport cost base with oil price increases and shipping bottlenecks, there is a lot of upward price pressure in the system,” said Caroline Bain at Capital Economics.
In the US, consumer goods companies were likely to face a 6.1 per cent rise in input costs this year compared with 0.7 percent in 2020, according to analysts at Bernstein. Tyson Foods, a leading meat company, said raw material prices were more than 15 percent higher, as well as cost increases in logistics, packaging and labour.
Bruno Monteyne, analyst at Bernstein, said the bout of inflation would increas( polarisation in consumer markets between premium products aimed at wealthier consumers — many of whom have additional cash to spare after being stuck at home in the pandemic — and cheaper brands catering for more stretched buyers.
“If you are already buying organic, fair trade ready-to-eat mangoes, you’re probably not going to be too worried about it,” he said, adding that higher ingredients costs would hit mass-market brands.
Cash-strapped consumers will trade down to private-label products and, if iflation is prolonged, move to shopping in cheaper stores, he added.