Food prices are absolutely outrageous now, but they appear only to be moving higher as the year progresses. According to a new Food and Agriculture Organization of the United Nations (FAO) report, global food import costs are estimated to jump in 2021 to a record due to increasing commodity and shipping costs.
FAO's "Food Outlook" report, published Thursday, estimates the global food import bill, including shipping-related costs this year, will be around $1.72 trillion, a 12% rise from its previous high of $1.53 trillion in 2020.
For readers who are not familiar with the Food Outlook report, it's a bi-annual report that offers a detailed assessment of market supply and demand trends for cereals, vegetable oils, sugar, meat, dairy, and fish. It also dives into the futures markets and logical costs of transporting food.
Last week, the FAO released its monthly food price index, hitting a 10-year high in May, reflecting sharp gains for cereals, vegetable oils, and sugar.
"The FAO said a separate index of food import values, including freight costs that have also soared, reached a record in March this year, surpassing levels seen during previous food price spikes in 2006-2008 and 2010-2012," Reuters said.
China's imports of agricultural demand have surged since the virus pandemic as Beijing's attempts to rebuild its pig industry decimated from disease a few years back.
FAO concludes: "Rising food imports as a share of all imports can be an early warning indicator for potential crises in some areas."
Back in December, SocGen's market skeptic Albert Edwards shared his thoughts about why he started to panic about soaring food prices. And since that was before food prices began to rocket amid broken supply chains, trillions in fiscal stimulus, and exploding commodity costs, we can only imagine the situation is much worse today for emerging market economies.
DB's Jim Reid reminds us that emerging markets are more vulnerable to this trend since their consumers spend a far greater share of their income on food than those in the developed world.
FAO's Food Outlook report is more evidence that Fed officials' "transitory" narrative is just malarkey.