Global food prices ease from record levels offering respite, says UN

A United Nations index of world food costs slipped 2.3% last month.

Global food prices dropped from near a record amid prospects for fresh supplies and fears about a recession, potentially offering some respite to strained households.

A United Nations index of world food costs slipped 2.3% last month. While it will take time to filter through to supermarkets, it could be good news for consumers who are also being squeezed by high prices of everything from energy to motor fuel to clothing.

Food prices had already climbed during the pandemic, and spiked even higher after the start of the war in Ukraine stifled grain exports from the country known as the breadbasket of Europe. But agricultural prices have eased lately as Northern Hemisphere harvests start and worries about an economic slowdown weigh on commodities.

Last month’s decline in the UN’s food gauge was the third straight retreat, the Food and Agriculture Organisation said on Friday. However, the index is still up 15% this year and the recent drop hasn’t been as sharp as the slide seen in crop futures, indicating that consumers are still feeling the pinch. 

While grains, vegetable oils and sugar drove June’s drop in the UN food index, dairy prices rose and meat costs hit a fresh record due to tight chicken supplies amid the war in Ukraine and bird-flu outbreaks in some countries, the FAO said.

“In the rest of the year I believe that prices will come down slightly, but not by a significant enough margin to make an impact on retail prices,” FAO economist Upali Galketi Aratchilage said in an interview. Food prices could ease if a recession weakens fuel demand, he said. On the supply side, wheat availability should rise with harvests underway in the US and Europe. Still, any drop in crop prices may offer limited relief for now. The UN index tracks export prices for raw goods and excludes retail mark-ups.

Food prices still remain very high and, along with expensive fuel, are contributing to a cost-of-living crisis that’s led to worker strikes in some countries. A more sustained downturn in food prices will be needed to bring relief to strained consumers, Arif Husain, chief economist at the UN’s World Food Programme, said this week.

“At the consumer level, if retail is still where it is and food inflation is still where it is, it doesn’t help too much,” he said. There was also some good news form wholesale energy markets, as wholesale gas prices in Europe fell by 7% on Friday. However, prices of gas for delivery next autumn and winter remain at record levels, suggesting no let up in the squeeze for households in paying for their heating and lighting bills. 

For instance, the price of European gas for delivery in December was trading at €171.60 per kilowatt hour, up sharply from €24.60 for December 2021, and before the Russia invaded Ukraine.       

Meanwhile, providing some hope for motorists and businesses, crude oil prices fell over the past week. The price of a barrel of Brent crude rose on Friday but nonetheless ended the week 8% lower at $106.80.  Reuters reported that Brent has already marked the first monthly decline since November. 

Bloomberg and Irish Examiner