After the wholesale price of food saw a slump during the coronavirus pandemic, the global FAO Food Price Index showed a steep increase in November. Food around the world was 5 percent pricier than the 2014-2016 average, on which the index baseline of 100 points is calculated. The November figure is the highest since December 2014.
According to the FAO, falling palm oil inventories had caused the product’s price to rally, driving up the Vegetable Oil Price Index by 14.5 percent, which in turn contributed majorly to the overall rise in the food price index. Dry weather and production disruptions due to COVID-19 coupled with high demand from India’s Diwali festival as well as from China led to the depletion of palm oil inventory.
Speculation about whether the disruptions of the coronavirus crisis would drive up food prices have been abound, but due to the COVID-related economic downturn, supply chain disruptions and falling out-of-house demand, they started to decrease from the beginning of 2020, reaching a low in May. According to the U.N., falling mineral oil prices also factored into the initial deterioration of food prices as many alternative fuels are made out of food stocks. As the crisis wore on and countries reopened at least partially, global demand and prices picked up again in the summer. As the example of palm oil inventories show, COVID-related disruptions (or those in which COVID-19 is a factor) do have the power to let prices trend upwards in the current market environment.
This chart shows the UN Global Food Price Index.
