Japanese media: Soaring food prices will shake the world order

On January 1, the Nihon Keizai Shimbun published a report entitled "Soaring Food Prices Will Destabilize the World Order," the full text of which is excerpted as follows:

World food prices are soaring. Due to successive abnormal weather conditions and the COVID-19 pandemic, the supply of cereals and other countries has become unstable, and the progress of decarbonization has exacerbated the rise in production costs. The international food price index is at a 10-year high, which may lead to political instability and widening the gap between rich and poor. In 2022, coping with food-led inflation will become an important issue for the world.

The Food Price Index calculated by the Food and Agriculture Organization of the United Nations (100 from 2014 to 2016) was 134.4 in November 2021, up 27% from the same month of the previous year and the highest since June 2011. The reason for this is the increase in the price of grains and granulated sugar. From the perspective of international futures prices, rapeseed, which is a raw material for edible oil, is up 70% from the end of 2020, crude sugar (granulated sugar) is up 21%, and wheat is up 22%.

Crop prices have risen significantly due to global climate anomalies and chaotic food supply. Brazil, a major agricultural country, suffered an unprecedented drought in 90 years, and maize production was sluggish. Canada, the world's largest canola exporter, is expected to see a nearly 30 percent drop in production from 2021 to 2022 due to the summer heat wave. Malaysia, the main producer of palm oil, has been caught in a shortage of workers due to the impact of the COVID-19 pandemic.

Food demand is in a structural growth trend. China's growing economy is in high demand for feed, coupled with rapid decarbonisation policies, and the consumption of biofuels that replace fossil fuels is expanding. About 40 percent of U.S. soybean oil and 50 percent of Brazilian sugarcane (crude sugar raw materials) are already used for biofuels, and plans to upgrade oil mills are growing. Speculative money expecting an increase in fuel consumption also flowed into the cereal market.

Decarbonization also raises the cost of cereal production through rising fertilizer prices. Fertilizers are made using ammonia, and synthetic ammonia uses natural gas. The soaring price of natural gas in place of coal has also affected ammonia and fertilizer. The market risk assessment agency predicts that the cost of fertilizer in the United States will increase by more than 10% compared with the previous year in 2021. Recently, ammonia has also been used as a clean fuel and is expected to increase in prices in the medium to long term.

Rising cereal prices will have an impact on the world's political economy, especially on emerging countries. As the United States scaled back its quantitative easing, the Turkish currency continued to depreciate, and the prices of imported products soared, even the price of bread rose. According to Reuters, in a municipal store in Istanbul, Turkey's largest city, there are people lining up to buy relatively cheap bread. Brazil's consumer price index recorded its highest rate of increase in 18 years in the year ending November 2021.

In order to curb the rise in prices, India began to restrict speculative trading. The Securities and Exchange Commission of India announced on December 20, 2021, that domestic exchanges would stop trading in futures such as soybeans and palm oil for a period of one year.

Serbia in Eastern Europe also set a 60-day price limit on some foods such as sugar and wheat flour from the end of November 2021, setting a price ceiling in mid-November 2021, and those who violated the rules will be fined.

"After the high price of grain 10 years ago, production expanded rapidly, and we can cope with the increase in demand," said Akio Shibata of the Institute of Resources and Food Issues. Now, against the backdrop of decarbonisation, food prices seem to continue to rise, and if there is chaos in emerging countries, it will further constrain supply. "Countries such as Russia have already seen moves to restrict wheat exports.

The high price of food is one of the reasons for the "Arab Spring" that began in the Middle East in 2010. Now, countries like Ethiopia and Sudan, which face civil war and political instability, are seeing food prices rise sharply. Young people make up high proportions of the population in these countries, and there are fears that the dire employment situation and soaring food prices will directly trigger popular discontent.

Source: Reference News Network