This week, a primary agricultural price index continued its upward trend, hitting new highs and possibly signaling an impending increase in grocery prices.
Bloomberg’s Agricultural Spot Index closed at 386.47 on Friday, April 23, resuming its trend following a brief fall at the start of April, which came after months of steady rise.
The index was up 17% since the beginning of this year and roughly 70% from the same time last year.
At its highest level in eight years, Bloomberg analysts said the index is “flashing warning signals for global shopping budgets.”
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, increased by 0.6 percent from February to March before seasonal adjustment and up 2.6 percent from March 2020.
The CPI for all food increased 0.2 percent from February to March 2021, and food prices were 3.5 percent higher than in March 2020.
The level of food price inflation varies depending on whether the food was purchased for consumption away from home or at home.
The food-away-from-home (restaurant purchases) CPI increased 0.1 percent in March 2021 and was 3.7 percent higher than in March 2020.
The food-at-home (grocery store or supermarket food purchases) CPI increased 0.2 percent from February 2021 to March 2021 and was 3.3 percent higher than March 2020.
In 2021, food-at-home prices are expected to increase between 1.0 and 2.0%, and food-away-from-home prices are expected to increase between 2.5 and 3.5%.
Last year, consumers were already dealing with higher food prices due to supply chain disruptions triggered by the Chinese Communist Party (CCP) Virus or COVID-19 lockdowns and fears of the virus spreading. The continuing rise of food prices began early last summer and is mainly unabated up to now.
According to the United Nations, dropping mineral oil prices contributed to the initial decline in food prices, as demand for many alternative fuels produced from food stocks fell. Global demand and prices picked up again in the summer as the recession wore on and countries reopened, at least partially. CCP Virus-related disruptions have the power to allow prices to trend upwards in the current market setting, as the example of palm oil inventories demonstrate.
According to the FAO, falling palm oil inventories had caused the product’s price to rally, driving up the Vegetable Oil Price Index by almost 5% in December after a jump up of 14.5% in November.
The FAO Food Price Index (FFPI) measures the monthly change in international prices of a basket of food commodities.
According to the United Nations Conference on Trade and Development, global shipping fell last year for the first time since 2009. “The maritime trade outlook is bleak in the short term. The organization cautioned that “predicting the pandemic’s longer-term effects, as well as the timing and size of the industry’s recovery, is fraught with uncertainty.”
Food and oil prices are also increasing as a result of pandemic-related output stumbling blocks. Climate change has led to more severe storms and shifting weather patterns, affecting planting timelines and crop yields. That price of oil and gasoline is another factor driving up food prices. Even though millions of people are still not taking business trips or commuting to work, gasoline demand rebounded faster than oil producers could raise supply, causing prices to rise.
Founder of SupermarketGuru.com Phil Lempert warned that shoppers should not expect relief any time soon. “I think food prices are going to continue to increase for probably a good year, year and a half,” he predicted. “Our costs are going to go up for food production.”
“If you think about food prices in the last year, they have gone up substantially,” said Geri Henchy, director of nutrition policy at Food Research & Action Center. “The impact for low-income people is they have limited budgets, which makes it that much harder to buy enough food, and it makes it that much harder to buy healthy food. It is a disaster.”
Food aid organizations, which buy everything from canned vegetables to peanut butter for distribution, are also affected by the food prices. Government nutrition and food assistance programs have not had time to update their models to reflect what recipients receive in aid due to the rapid increase in prices.