From the onion in India, through the pig in China to the rice in Nigeria: Prices of basic food products in the world are rising at a pace that makes it harder for citizens to comply. Ultimately, the increase in food prices marks the question of central banks policy, which are already facing increasing inflationary pressure.
But, apart from the role of central banks and policymakers, what else can be done to prevent rising food prices and maintain the stability of the most precious and needed commodities for humans?
Food prices keep going up due to global Inflation, and the war in Ukraine
Prices of food products are rising rapidly in the world’s largest developing economies and have already led to inflation, after months of dormant pressures. Some of the main reasons for the increase in food costs include:
- The coronavirus pandemic
- The zero interest rate policy adopted by most central banks
- The Russia-Ukraine war
- Rising oil prices
Two of Asia’s largest developing economies are facing price increases for basic products – which are an important component of the resident menu – pork in China and onion in India. Turkey and Nigeria also have supply problems that raise prices. What’s more, the prices of wheat, corn, and soybean soared since the start of the war. Wheat, in particular, exploded around 85% from $7 to $13 as Russia and Ukraine are among the largest wheat exports worldwide.
Meanwhile, while the rise in prices is hurting the poor, central banks have not yet been convinced that expansionary policies need to be stopped because they are focused on economic growth and the background is the global slowdown. Even though Jerome Powel, the Fed chairman, has recently increased US interest rates for the first time in three years, the ‘fight’ to stop rising food prices is still minor and not significant.
But the threat of a shock at prices is real. Economists warn that the combination of the Russia-Ukraine war and the rising inflation could lead to another increase in food price: weather-related shocks, rising oil prices, and a sharp depreciation of the dollar are more factors that can lead to the increasing volatility in food and commodity prices. They say emerging countries and front markets are in the greatest danger, as food spending is a big chunk of consumer spending.
How to stop the increase in food prices?
Generally, any disruption in the food supply chain has a direct impact on the increase in the prices of food. The question of how to stop the increase in food prices and maintain, at all times, stable prices for food and essential groceries is also a moral question. Should we treat these commodities as a tool or a weapon against other countries?
The fact that prices of food have been extremely volatile over the last four years ultimately affects consumers and producers. So, what can be done to ensure prices of food remain stable at any given moment?
- Food trade policies – If there’s one concrete conclusion to be made from the Covid 19 pandemic and the Russia-Ukraine war is the change in global rules on food trade. Governments must agree to exclude food price volatility from any sort of trade wars, and conflicts between countries.
- Investing in local agriculture production – Clearly, some countries around the world lack the technology and resources to produce large-scale agriculture. Developed and developing countries should raise investments in agriculture production.
- Expansion of social protection programs – Developing countries, with the help of developed countries, must expand social protection systems to help the poorest and those who do not have access to the market to cope with any food crisis and unexpected scenarios.
- A shift to green energy – One of the key reasons for the surge in food prices is the rising prices of fuel and petroleum-related products. And even though there are still major disadvantages of solar energy to keep in mind, the world must push toward a shift to green energy to keep food prices at reasonable costs.
The bottom line is that food is not a game. Government, policymakers, food producers, and consumers must do whatever possible to maintain stable costs of food. It is certainly one of the most critical problems of mankind, largely because food is the most needed basic right for any person and should be treated as a global commodity rather than a possession of one country.