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Inflation: Food prices soar in March at its fastest rate in 14 years due to the war in Ukraine | Economy

Food prices reached a new record in March, the third in a row, boosted by the war in Ukraine. The index prepared monthly by the Food and Agriculture Organization of the United Nations (FAO), which collects developments around the world, closed the month with an increase of 33.6% compared to March 2021, its highest rate in 14 years, and stands at 159 points, the highest level in the historical series, which began in 1990. The armed conflict is wreaking havoc on the supply chains that originate in the area, especially in products such as cereals and sunflower oil, and has disrupted the functioning of parts of world trade flows.

The record rise in the prices of the most basic foodstuffs indicates that the inflationary spiral that threatens the recovery of the world economy will continue to worsen. Only between February and March, the rise in the index was 13%, according to the FAO. It is “a giant leap”, according to the UN agency. Last month’s increase was the seventh in a row. There hasn’t been as many uninterrupted increases since 2008.

Both Ukraine and Russia are major exporters of grain and sunflower oil. From that area, known as the granary of Europe, comes 30% of the total wheat consumed in the world. Although Russia has continued to sell wheat, sanctions have complicated payments and logistics, while Ukrainian ports have been closed since the beginning of the invasion on February 24 and it is also unclear whether the country’s farmers will be able to go ahead with future crops, so the supply may be in jeopardy for months. The conflict, moreover, is causing an extraordinary rise in energy, and raising production costs, which also contributes indirectly to the rise in food prices.

FAO (Europe Press)

The FAO index reflects that vegetable oils, cereals and meat have been the main responsible for this historical rise: they increased by an average of 17.1% compared to February, the highest level since 1990. “The rise is driven in largely due to conflict-related disruptions to exports from Ukraine and, to a lesser extent, from the Russian Federation,” the agency explains. Specifically, world wheat prices rose by 19.7% in March, while coarse grains became more expensive by 20.4%, with a new record for the prices of corn (19.1%), barley (27 .1%) and sorghum (17.3%).

The rise in food prices already began months before the war broke out, in part due to the warming caused by the rapid recovery after two years of a harsh pandemic and also due to the decrease in the production of some crops due to bad weather. . These rises are accelerating since February. Between mid-2020 and today, global prices have increased by 75%, above the levels recorded in 2008 and 2011, years that ended up leading to major food crises.

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The increases are generalized in the basket of basic foods, such as milk (seven consecutive months on the rise). “Dairy product prices continued their upward trend, supported in particular by growing shortages on world markets as milk production in Western Europe and Oceania was insufficient to meet global demand,” according to the FAO. Also meat, whose index is at historical highs, due to the lower supply.

The war and supply problems are affecting countries like Spain, not only because of the general rise in prices, but also because of the scarcity of some products. In the Spanish case, the one that has the most impact is sunflower oil, on which it is highly dependent. Manufacturers that use it, especially for processed and preserved products, are looking for alternatives in other vegetable oils. But these are also becoming more expensive, such as palm, soybean and rapeseed.

The increase in prices puts Western economies in check, but its effects are especially devastating in poor countries, where the shopping basket absorbs almost the entire budget of families and any rise in prices directly affects their most basic food, such as bread. Recently, the World Food Program warned that the rise in prices in the Middle East and North Africa, highly dependent on imports, is pushing the population to the limit. According to the FAO, about 50 countries depend significantly on Ukraine and Russia to cover more than 30% of their wheat imports.

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