Food inflation flared globally, as the war curbed grain supplies from the Black Sea region.
Prices improved somewhat over the summer, after a UN-brokered deal was struck between Russian and Ukraine to resume seaborne shipments, but negotiations to extend the crop export agreement beyond mid-November are still in question.
The October 7 report by the UN Food and Agriculture Organization (FAO) said the drop was led by lower vegetable oil prices.
The FAO Food Price Index (complied by the UN’s Food and Agriculture Organization), a trade-weighted index that tracks international market prices of five major global food commodities, saw a decline of 1.1 percent from August.
Agricultural demand had eased after worries about an economic downturn, which may pose a threat to dairy sales and biofuel use.
Grain exports from Ukraine have since picked up after the war began, buffering world grain supplies that had been threatened by Russia’s invasion.
The food index fell to 136.3 points in September, versus a revised 137.9 for the previous month.
Although global food prices had fallen from it record-high of 159.7 in March, the September reading was still 5.5 percent higher year over year.
The vegetable oil price index saw the biggest drop, plummeting 6.6 percent in September, hitting its lowest level since February 2021, before the war.
The prices of palm, soy, sunflower, and rapeseed oils fell, as supplies increased and oil prices declined.
Ukraine and Russia were the world’s biggest exporters of sunflower oil before the crisis disrupted exports from the region.
Export have increased from the Black Sea region since then amid “subdued import demand,” said the UN.
Sugar, dairy, and meat prices all fell by less than a percentage point in September, which relieved some inflationary pressures.
The meat price index fell 0.5 percent, for the third consecutive monthly decline, while the sugar price index posted a 0.7 percent drop last month.
Brazil saw a boost in sugar and beef exports over the period.
The dairy price index dropped for the third consecutive month, falling 0.6 percent, as the U.S. dollar strengthened over the euro, combined with fears over the markets and a looming global recession.
“Limited market demand for medium-term deliveries due to apprehensions over market uncertainties stemming from tight milk production, high energy costs, and labor shortages, especially in Europe, coupled with bleak global economic growth prospects, also weighed on international dairy price quotations,” the FAO reported.
Ukraine Crisis and Grain Prices
Meanwhile, the FAO’s cereal price index rose 1.5 percent in September, as bad weather battered the American, European, and South American grain harvests.
“A lower global coarse grain production forecast makes up the bulk of this month’s overall cutback, as adverse weather continued to curb yield prospects in major producing countries,” FAO said.
The UN lowered its grain-output estimate for the season, despite being offset by weaker demand.
The forecast for global cereal production in 2022 fell to 2.768 billion tons from 2.774 billion tons in 2021.
This is 1.7 percent drop in grain output for 2021.
Global grain demand in 2022–23 is expected to exceed production by 2.784 million tons, which the FAO says will lead to a projected drop of 1.6 percent in global stocks compared to last year’s 848 million tons in stocks.
This represents a stocks-to-use ratio of 29.7 percent, down from 31.0 percent in 2021–22, but which is still relatively high.
Wheat prices saw the largest rise, at 2.2 percent, because of dry crop conditions in Argentina and the United States, amid heightened demand and exports from the European Union, and concern over access to Ukraine’s Black Sea ports after November, when the UN-brokered Black Sea Grain Initiative deal with Russia is set to expire.
Rice prices rose 2.2 percent, partly due to worries over the impact of the recent major flooding in Pakistan.
“Supply disruptions because of the Russian invasion of Ukraine, higher commodity and food prices, and higher global interest rates will accelerate inflation,” said Albert Park, chief economist for the Asian Development Bank, in a statement.
However, the latest decline will take some time affect through to grocery store prices, which are also affected by energy, transportation, and labor costs.