In October, global food prices continued climbing higher for the third straight month, hitting fresh decade highs, led by vegetable oils and cereals. Higher food costs contribute to more inflationary pressures for the working poor, central banks, and governments.
The UN's Food and Agriculture Organization's food price index, which tracks a basket of food commodities, averaged 133.2 in October, up 3.9 points (3%) from September and 31.8 points (31.3%) from October 2020. The index has risen three consecutive months and is now at a new decade high (could hit record highs in 2022).
World vegetable oil and cereal prices were the two biggest movers in the index. Edible oils jumped 9.6% on the month to set a record high. Cereal prices rose 3.2%, within the basket, wheat jumped 5%.
A combination of bad weather in the Americas, higher shipping costs, and labor shortages have disrupted global food supply chains. The latest energy crunch has sent fertilizer prices sky-high and will increase food prices in 2022.
"The issue with the inputs and fertilizers and its implications for next year's crop is a concern," said Abdolreza Abbassian, a senior economist at the UN's Food and Agriculture Organization.
"By now, the market has factored in most of the supply and demand issues. But the market has by no means factored in next year's prospects in production," said Abbassian.
He warned: "We cannot afford a bad year in 2022 for important crops." This has reignited memories of food price spikes a decade ago which caused unrest in emerging market economies. SocGen's Albert Edwards first warned that soaring food prices could contribute to socio-economic destabilization right before the virus pandemic began.
Already, we've reported food inflation and shortages have hit supermarkets, not just in emerging markets but also in the developed world. In the US, Mondelez CEO Dirk Van de Put told CNBC Tuesday that Oreo cookies, Ritz crackers, and Sour Patch Kids will be more expensive next year. There's been chatter that Nabisco, PepsiCo, and Coca-Cola will be raising prices, and Kraft Heinz has told consumers that they must get used to "higher prices."
Consumers are spending more on food than a year ago. Some have blamed President Biden for the inflation eating away their real wages as polling numbers for the president sink.
The Virginia governor's race was a wake-up call for Democrats that Biden's "Build Back Better" plan is not working. People are starting to get irritated as inflation appears not to be "transitory."