The Food Price Index (FPI) of the UN’s Food and Agriculture Agency (FAO) declined for nine consecutive months in 2022, ending the year with a 2.6-point drop in December to 132.4 points.
Yet prices soared so rapidly in the first three months of the year, mainly because of Russia’s invasion of Ukraine, that the average for 2022 was a record high of 143.7 points, 18 points higher than the 2021 average of 125.7.
The good news is that global food prices ended 2022 roughly where they finished 2021. The FPI in December 2021 was 133.7. The bad news is that they remain elevated by historic standards, contributing to an unfolding hunger crisis in Africa and elsewhere at a time of high global inflation.
Still, the trend is obviously welcome. The decline of global food prices from the peaks scaled in March last year mirrors the fall in oil prices over the same period.
Both have been key drivers of the global inflationary pressures that have triggered a relentless tightening of monetary policy by central banks worldwide, including South Africa’s. And cooling fuel prices can also bring food prices down further as they are a key cost in the agri-industry pipeline.
Global Food Prices to Remain Elevated Amid War, Costly Energy, La Niña
In South Africa, fuel prices have also been in retreat, not least because global price moves translate into monthly changes at the pump, depending on the rand’s performance against the dollar. South Africa’s petrol price at the pump fell on 4 January by more than R2 a litre, and almost R2.70 for diesel, a reflection of faltering global prices and mild rand gains in December.
But food prices maintained their rise in 2022, partly because of lag effects, partly because of domestic factors such as the cost pressures on local producers.
Food inflation in the year to November accelerated to 12.8% from 12.3% from the previous month, raising the burden on poor and working-class households in an economy with an unemployment rate that is well over 40% based on its widest definition.
This remains a potential source of social unrest in a country that has plenty of embers to fan such flames. The December read will be published by Statistics South Africa with the Consumer Price Index data on 18 January and will be a number to watch.
At least global food prices are moving in the right direction against a backdrop of global economic hardship and rising hunger. Hopefully, South African food prices will also moderate soon.
The current La Niña-inspired rains generally bode well for the maize and other summer grain crops, but too much rain can also stunt the production of grain.
