World food prices at decade highs; here’s why

Commodity prices have been rising over the recent past and a similar trend is being seen in international food prices too.

According to October month data from the Food Organization Global, there has been a 3 per cent price rise in the global food index. This third straight month of food price rise has pitched the index at a decade high. The last time food prices had come this close was in July 2011.

The rise comes on the back of strong demand ― household consumption has been rising. These are festival times, holiday times in the global market; so buying has been strong. Apart from that, the HoReCa (Hotel / Restaurant / Catering) segment also is opening up.

Adverse weather has been reported in major food grain producing countries; this too has supported prices. As a result, for many commodities, the New Year is expected to kick in with opening stocks at multi-year lows.

Markets are also keeping a watch on the soaring fertiliser prices, and supply chain congestion which continues unabated. Port congestion continues to remain high, and container rates have not come down much. The markets are also reacting to the high cost of energy, and reduced harvest in major producing countries like Russia, Canada, and US. All these are supporting prices.

Within the index, a couple of factors draw attention ― one, wheat prices are trading at a seven-year high, and two, edible oil prices ― palm oil prices hit record highs in the previous month.

So, looking at the index numbers, cereals have gained by up by 3.2 percent, vegetable oil index has been a major gainer at nearly 10 percent in the previous month alone, and wheat is trading at around nine-year highs ― wheat gained 5 percent in the previous month and 25 percent in the last three months.

So, there are some concerns now, especially for cereals and grains.

Watch the accompanying video of CNBC-TV18’s Manisha Gupta for more details.