FAO: Food prices record high due to Ukraine war disruptions

What is the News?

Food and Agriculture Organization’s(FAO) World food price Index averaged 159.3 points in March 2022 breaking an earlier record of 137.6 points scaled 11 years ago in February 2011.

What is the World Food Price Index?

Released by: Food and Agriculture Organization(FAO) since 1996.

Aim: To help in monitoring the developments in the global agricultural commodity markets.

Purpose: The index is a measure of the monthly change in international prices of a basket of food commodities.

Commodities: It consists of the average of five commodity group price indices. Such as cereal, vegetables, dairy, meat and sugar. Also, these five indices is given weightage based on the average export shares.

Base Year: 2014-16.

Why is the World Food Price index at an all-time high?

The World Food Price Index has shown huge volatility in the last two years due to the Covid-19 pandemic and now the Russia-Ukraine war.

The index had crashed to a four-year low in 2020 due to demand destruction triggered by pandemic-induced lockdowns across countries. 

But as demand returned with governments lifting economic activity and movement restrictions, supply chain disruptions came to the fore. These disruptions worsened after the port closures in the Black Sea and Azov Sea, plus Russian banks being cut off from the international payments system.

What about India and Food prices?

India is at a comfortable level of wheat and rice stocks – way above the required minimum buffer norms. Hence, this should provide some insulation against soaring international food prices.

Further, high global prices have enabled India’s agricultural exports to grow by 19.9% and reach a historic high of $50.21 billion in 2021-22.

But the downside to this is that farmers are also paying much more for diesel, fertilizers and crop protection chemicals whose prices have also gone up alongside international commodity prices. 

Source: This post is based on the article “FAO: Food prices record high due to Ukraine war disruptions” published in Indian Express on 11th April 2022.