Rising food prices heighten inflation angst

UN agency: World’s food-import bill likely to hit a record high this year

Food prices have climbed closer to a record high, giving consumers and governments worldwide an even bigger inflation headache.

A United Nations gauge of global food prices rose 1.2% last month, threatening to make it more expensive for households to put food on the table. It’s more evidence of inflation soaring in the world’s largest economies and may make it even harder for the poorest nations to import food, worsening a hunger crisis.

Prices have jumped for multiple reasons: bad weather hurt harvests, higher shipping rates, worker shortages and an energy crunch hit supply chains, and fertilizer costs have surged, too. While it typically takes a while for commodity costs to trickle down to supermarkets, the rally is evoking memories of spikes in 2008 and 2011 that contributed to global food crises.

“This is obviously bad news for consumers,” said Abdolreza Abbassian, a senior economist at the UN’s Food and Agriculture Organization.

November’s push higher was driven mainly by grains and dairy, while prices of vegetable oils and meat declined, the FAO said in a report Thursday.

Higher food prices are pressuring budgets already strained by COVID-19 and high energy costs. It’s likely that shoppers will feel the effects of inflation for months as economies re-open in the wake of the pandemic.

That’s creating a policy dilemma for central banks over how fast to dial back stimulus measures. This week, Federal Reserve Chair Jerome Powell said its next meeting should discuss whether to wrap up bond purchases a few months sooner, and retired the word “transitory” to describe high inflation.

While food prices are unlikely to collapse any time soon, tighter monetary policy and concerns about the spread of the omicron variant will probably slow the rally as “the market is anticipates a slowdown in demand,” Abbassian said.

The long-term outlook remains uncertain as high fertilizer costs and the potential for bad weather to hurt crops may restrict food supplies, he said.

The FAO last month said the world’s food-import bill should climb to a record this year.

NATHAN LAINE/BLOOMBERG Traders set out produce at their stalls at the Aligre market in Paris in October. The long-term outlook for food prices remains uncertain as high costs and potential for bad weather hitting crops may restrict supplies.