Economic Development

Can global coordination stabilise food price volatility?

May 18, 2023


Global coordination is required to reduce food price volatility

May 18, 2023

Oliver Sawbridge

Manager, Policy and Insights

Oliver Sawbridge is a policy and insights manager at Economist Impact in its new globalisation practice, and is particularly responsible for research and analysis on international trade. As the global economy is being transformed by multiple forces including geopolitics, technological progress and climate change, the new globalisation practice works with clients to navigate these structural shifts.

His insights provide context and meaning in an accessible way. They are informed by numerous years of policy experience, most recently at the Department for International Trade, where he delivered aspects of Britain’s free-trade agreement programme. Before this he was a policy and legislative researcher at the House of Commons.

Mr Sawbridge holds a master’s degree in international relations from the University of Auckland. His areas of expertise include geopolitics, trade and supply chains.

Food prices are continuing to drop in 2023 but this trend is not being seen across all food groups. What role could global coordination play in reducing price volatility?

The Food and Agriculture Organisation’s (FAO) Food Price Index,a monthly measure of food price changes, averaged 127.2 points in April 2023. This is down 31.2 points (19.7%) from April 2022 [1].

While food prices are dropping, this drop is not seen across all food groups. The price of meat increased from February to March 2023 by 0.9 points (0.8%). While sugar also increased 1.8 points (1.5%) from February to March 2023 [2]. Yet, the price of meat is still lower than it was 12 months ago. But the price of sugar is at its highest level since 2016.

Although prices have dropped in the last year, the International Food Policy Research Institute (IFPRI) opined that food prices may increase in 2023. Food prices are now back to their pre-Ukraine war, end of 2021 levels, but they still remain well above the preceding years [3]. This trend may already have started as the FAO’s Food Price Index shows a small increase (0.6%) in the price of food from March to April 2023.

A major cause of this is that the war in Ukraine is continuing to disrupt global food supply. Ukraine’s wheat sowing area may decline by 30 to 40 per cent in 2023 [4]. And, the harvest is unlikely to exceed 15 million tonnes of wheat—compared with  the 32.2 million tonnes in 2021.

Linked to the war in Ukraine, fertiliser prices are also restricting food production. While fertiliser prices have dropped recently, they still remain elevated compared with previous years [5]. Higher fertiliser prices are depressing farm profitability, and therefore farmers are restricting its use, which significantly impacts crop yields.

A major risk to food prices is that countries attempt to deal with global risks, such as food insecurity, locally. For example, in an effort to protect their farmers, Slovakia has now joined both Poland and Hungary in restricting the imports of Ukrainian grain and other food products [6]. Yet, such local solutions tend to only create more volatility in market prices, leading to pricing issues for consumers.

Along with the war in Ukraine, global warming will remain a major issue for food prices worldwide. Pascal Leroy, Roquette's senior vice president, stated that 2023 will be a challenging year for the food industry. Specifically looking at Europe, he commented that the war in Ukraine and drought in Europe will continue to affect food prices and availability [7]. Outside of Europe, droughts and other adverse climate conditions are impacting food production worldwide. In Argentina, for example, a lack of rainfall coupled with high temperatures significantly lowered the expected yields of maize and soybeans [8].

As the risks to food supply remain high, so  do the global stocks of staple food groups, which remain below recent years. They have fallen from a high of 147 days in 2019/20 to 125 days in 2022/23 [9]. Therefore, if there was another supply shock, price instability would once again be a major issue. As the risks remain global, the response must remain global.

Export restrictions are causing global headaches. Examples range from Potash export restrictions from Belarus where EU sanctions–while not targeting fertilisers directly—are impacting sourcing from Belarus [10]. Russia is also restricting exports of fertilisers, further affecting prices and availability [11]. Another example is wheat export restrictions from India [12]. All measures are attempting, in some way, to ensure the domestic availability of foodstuffs. But all are impacting the global supply and therefore causing more volatility in prices and insecurity in supply.

A global effort needs to be made to confront global risks. Localised decision-making around food supply and agricultural policy is perilous as it creates more volatility and uncertainty, at a time when food insecurity is already heightened. A global effort must be the way forward, particularly at a time of critical global issues such as the war in Ukraine and global warming.


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