Food is more expensive than ever. Food prices are at record levels, with the UN Food and Agriculture Indices rising 12.6% in March compared to February and 33.6% from 2021, an all-time high. This is unprecedented food inflation. Suffice it to say that wheat prices have risen more than 60% this year.
And of course, as fears of a global food inflation crisis mount, countries around the world have been taking protectionist measures.
protectionism on the rise. War and inflation have led 23 countries to resort to food protectionism. This phenomenon is creating chaos in world food markets caused by the war in Ukraine, with governments clamping down on exports of basic products, including cereals, cooking oil and pulses. The brutal increase in prices and, in some cases, the threat of social unrest have led to limit sales abroad or to establish restrictions, such as taxes or quotas.
These steps have only further increased the food import bill for countries that depend on international markets for food, affecting the world’s poorest.
What foods are missing? Malaysia has just announced a ban on chicken exports. India has moved to curb shipments of wheat and sugar, Indonesia has capped sales of palm oil, and some other nations have issued grain quotas. This year, Russia also banned exports of sugar, grain and oil, while Kazakhstan banned exports of wheat and flour.
China, the world’s second largest economy, has also introduced similar policies. The country, which previously prohibited the export of phosphate fertilizers, is already increasing its food reserves, especially cereals. With the beginning of the war, Argentina decided to stop exports of soybean oil and soybean pulp. Ukraine banned exports of wheat, corn, sunflower oil and fertilizers. Hungary stopped grain exports. Algeria put the padlock on oil, sugar and wheat. And Egypt to legumes, peanuts, peas and beans.
Who does all this affect? The hardest hit will be the poorest countries, which are the most vulnerable to rising food prices and shortages. But beware, the richest economies are not immune. For example, nearly 10 million Britons cut back on food consumption in April amid a cost-of-living crisis. US restaurants are reducing their portion sizes, while France is giving away meal vouchers to some households.
A UN gauge of global food prices is up more than 70% since mid-2020 and breaks records after Ukraine’s invasion choked off crop exports and rattled the supply chain. But more protectionism could push up costs further, further hurting consumers’ purchasing power and creating headaches for central banks trying to curb inflation while maintaining growth.
sky high prices. Some of the basic products have become much more expensive. Benchmark wheat futures are up about half this year, palm oil is up almost 40%, while dairy products are up 14%. Export restrictions are not just bad news for importing countries.
Beata Javorcik, chief economist at the European Bank for Reconstruction and Development, warned a few weeks ago that protectionism would only artificially boost prices, which are already at record levels, fueling global food insecurity: “This is going to increase poverty rates And in extreme situations, it can induce authoritarian regimes to become more oppressive.”
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