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Global food prices rose as much as 28% in 2021
Several countries have seen a sharp increase in food prices since the beginning of 2021. This has resulted in a wide-ranging surge in inflation, putting pressure on many developing economies. However, experts warn that the situation is not over yet.
During the first two months of the year, global food prices rose an average of 15%, with rising oil and energy prices adding to the rise. In December, prices fell slightly. But analysts believe that they are likely to remain high.
The UN Food and Agriculture Organization (FAO) forecasts that the world will produce 2,756 million tons of cereals in 2022. That's a 2% decline from October, and a 5.2% increase from a year ago.
Russia and Ukraine compete for the export market. As the Russian government imposes sanctions, the markets are deteriorating. They are also restricting the exports of several edible oils, including palm oil, causing food prices to rise.
Russia and Ukraine's war against each other has threatened global food security. This is particularly true for the Middle East and North Africa, where Yemen and Libya are among the most food-insecure countries in the world.
Global wheat prices declined in November. The FAO attributes the decrease to the resumption of sunflower oil shipments from Ukraine. The organization expects a "negligible drop" in world production of wheat, with Russia's record harvests.
Supply chain disruptions are tightening global crop supplies
Supply chain disruptions are tightening global crop supplies and putting a damper on the global economy. These supply chain issues are affecting a wide range of goods and services, from food to energy. However, it is hard to say that a single disruption is the culprit. Instead, it appears that a series of supply chain problems have contributed to the spike in prices, which in turn have prompted many businesses to cut back on operations and hiring.
In the United States, for example, the price of corn has jumped more than 140 percent over the last year. Soybeans have risen by more than 90 percent in the same period, thanks to a variety of factors including trade policies and aggressive Chinese purchases. The same goes for wheat, which is up more than 20 percent in the last 12 months.
It is also important to note that these supply chain issues are occurring at a time when the world is at an all-time high in terms of population and GDP. Developing countries are especially vulnerable to food insecurity because of their dependence on imported foods.
Another consideration is the geopolitical commotion that has accompanied Russia's recent invasion of Ukraine, which has impacted agricultural exports from the region. As a result, global wheat supplies are expected to drop by 1.5% in the next two years.
Supply chain disruptions are spurring Canadian farmers to sow more acres
The supply chain is no longer a smooth ride. With the arrival of the COVID-19 pandemic, the agricultural industry is looking at a lot more complexity in delivering food and fuel to the consumer. A number of industries are being affected, including transportation and transport services. Those who rely on rail freight to deliver fertilizer and other inputs face a challenge.
For example, a strike by the Canadian Pacific Railway could put a damper on the spring planting season. Delays in shipping computer chips and other items can stymie farmers' ability to operate production equipment. And while the weather has been kinder to producers this year, soils are still wet. So, it's no surprise that some farmers are planning well in advance.
In Canada, the agricultural sector is big business, employing about one in nine workers. With a $135 billion economic impact, the sector is a key driver of Canada's economy. Despite this, the industry is under siege. Farmers and ranchers are facing market volatility, tightening supplies and a labor shortage. But, with a little foresight, supply chain resilience is possible. Using the most sophisticate methods, manufacturers, processors and retailers can help minimize the disruptions and get the best return on their investment.
Similarly, manufacturers, distributors and retailers have had to be more imaginative about how they deliver products. While there have been several notable successes, there have also been a number of failures.