Global food prices have risen to 10-year highs, according to the UN

Why are global food prices rising, and what does it mean for emerging markets?


Despite an increase in crop production and international trade following a pandemic-disrupted 2020, global food prices have risen to 10-year highs, increasing pressure on many emerging markets.

Following a two-month respite from month-on-month (m-o-m) declines, the UN’s World Food Price Index averaged 130 points in September, representing a rise of 1.2% m-o-m and 32.8% year-on-year. The index is now sitting at highs not seen since 2011.


While food prices are high across the board, cereal prices are seeing a notable spike.

Wheat prices, for instance, are currently up as much as 40% year-on-year. A key driver of this is the exapnded use of wheat for livestock feed, which in turn stems from higher coarse grain prices.

Maize prices are similarly up 38%, partly due to weaker crop prospects in Latin America, but are expected to drop with the start of harvest season in the US and Ukraine.


For billions of people globally, grains like wheat, maize, barley and rice provide the most accessible form of energy. Wheat alone covers 18% of total dietary calories in the world and 19% of proteins.

High prices will therefore exacerbate ongoing problems related to food security sparked by the pandemic: the UN World Food Programme estimated that by the end of 2020 there were 272m acutely food-insecure people in 79 countries, up from 149m at the end of 2019.


 Why are cereal prices increasing?

While cereal prices are rising, there are two senses in which this spike may seem counter-intuitive.

The first is that world cereal output is on course to hit an all-time high in 2021, with a total of 2.8bn tonnes.


The second is that many economies, including those of some major cereal producers, are beginning to reopen, with an eye on post-pandemic growth and recovery. This is boosting both demand and production.

In Morocco, for example, the government recently announced that it expects a 206 per cent increase in production levels relative to 2020/21 for its three main cereals, namely soft wheat, durum wheat and barley.

World trade is also experiencing an upturn. After a strong second quarter, the World Trade Organisation now predicts that 2021 will see a 10.8% growth in merchandise trade volumes.

However, as OBG has recently detailed in the context of the global microchip shortage, the effects of COVID-19 are still being felt in a number of industries that rely on highly globalised supply chains. Indeed, as the world moves from an emergency situation to a slow process of rebuilding, there is a sense in which the long-term disruptions caused by the pandemic are only just beginning to fully manifest themselves.


Strong international demand is outpacing export availabillity, and localised increases in production are insufficient to offset broader disruption to the supply chains that ensure cereals find their way to end consumers.

 Emerging countries most at risk

High cereal prices stand to impact most heavily the countries that combine elevated household spending on food with high dependence on imports, such as Egypt, Nigeria and Pakistan.

Nigeria, for example, is already experiencing widespread constraints on household purchasing power and food access, exacerbated by conflict in the country’s north-east. While this will be alleviated somewhat by the upcoming harvest season, internal displacement and high input costs – a further consequence of global supply chain disruption – are expected to limit the harvest’s potential.


In June the Famine Early Warning Systems Network warned that there was a chance of famine affecting certain areas of the north-east region.

In Costa Rica, meanwhile, the cost of cereal imports was 34.8% higher in the first five months of this year relative to the same period in 2020, although import volumes rose by just 5%.

Elsewhere, the MENA region is one of the world’s largest food importers, as well as its most water-stressed, making it harder to develop local production capacity. These two factors combine to make the region particularly vulnerable to food insecurity.

In addition, many economies in the region are heavily dependent on oil prices, which have seen a similarly turbulent couple of years.


In response, international agencies and national governments are taking steps to reduce dependence on cereal and other food imports in developing countries.

These efforts tend to focus on harnessing innovation to boost yields and resilience in national and regional supply chains, with a focus on adopting new technological solutions and practices that are adapted to local agro-ecological contexts.

In Guatemala, for example, the World Bank-funded 'Responding to COVID-19: Modern and Resilient Agri-Food Value Chains' project, launched earlier this year, is an agro-industrialisation strategy that aims to reduce food losses and increase climate uptake also in relation to resilient technologies.

Similarly, the World Bank's Resilient Productive Landscape project in Haiti mobilised emergency funds to help more than 16,000 farmers access seeds and fertilisers.


Other initiatives focus on boosting farmers' knowledge. For example, Climate Corporation, a subsidiary of German pharmaceutical giant Bayer, provides smallholder farmers in India with an app that provides specific information on crop protection.

Some countries are working on broad-based strategies to develop more independent and sustainable national food ecosystems.

Qatar is an interesting case study in this regard. The trade dispute between Qatar and some of its neighbours that began in 2017 prompted it to increase domestic production capacity. This positioned it to withstand many of the worst shocks of the pandemic, and a series of integrated strategies and programmes continue to guide long-term food security priorities and improve self-sufficiency in essential items.

At the same time, as OBG has reported, the pandemic has led to a widespread strengthening of regional logistics networks.

A leader in this regard has been the Gulf Cooperation Council (GCC), which implemented an integrated food security network, developed a strategic food reserve and invested in local agriculture. 

As with other post-pandemic challenges, addressing grain shortages in emerging markets will likely require a comprehensive combination of solutions.

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