In February 2025, global food prices rose. What explains this
13 March 10:56
The basic level of world food prices rose in February due to higher prices for sugar, dairy products and vegetable oil. This is stated in a new report by the Food and Agriculture Organization of the United Nations (FAO), "Komersant Ukrainian" reports.
The FAO Food Price Index, which tracks monthly changes in international food prices traded around the world, averaged 127.1 points in February, up 1.6 percent from the previous month and 8.2 percent higher than the level of February 2024.
Grains. The average value of the Grain Price Index was 112.6 points (0.8 points or 0.7% higher than in January, but 1.2 points (1.1%) lower than in February 2024).
Export prices for wheat increased due to a reduction in supply on the Russian domestic market (which led to a restriction of exports) and concerns about unfavorable weather conditions for crop development in some parts of Europe and the United States. There was an increase in prices for corn (due to seasonal supply constraints in Brazil, deteriorating crop conditions in Argentina, and strong export demand from the US), barley, and sorghum.
Vegetable oils. The average value of the Vegetable Oil Price Index amounted to 156.0 points (3.0 points or 2.0% higher than in January, and 35.1 points (29.1%) higher than in February last year), due to an increase in prices for palm, rapeseed, soybean and sunflower oil.
Palm oil rose in price due to the seasonal decline in production in Southeast Asia and the expectation of increased demand from biodiesel producers in Indonesia. The continued high prices for sunflower and rapeseed oils were driven by fears of a possible reduction in supplies in the coming months.
Meat. The average value of the Meat Price Index was 118.0 points (0.1 points or 0.1% lower than in January, but 5.4 points (4.8%) higher than in February 2024).
Global poultry prices fell due to market saturation with significant export supply from Brazil. Pork prices declined amid falling prices in the EU and excessive stocks created by trade restrictions on German pork. Beef prices increased, driven by higher prices for Australian products amid persistently high demand on global markets (primarily from the United States).
Dairy products. The average value of the Dairy Price Index amounted to 148.7 points (5.7 points or 4.0% higher than in January, and 28.0 points (23.2%) higher than in February 2024).
For the third month in a row, global cheese prices increased (up 4.7% compared to January) due to strong import demand, when the recovery in production in Europe coincided with a seasonal decline in Oceania. Prices for whole milk powder increased by 4.4% due to sustained high demand. The price of butter increased by 2.6% due to a seasonal decline in milk production in Oceania, with strong demand in domestic and global markets.
Sugar. The average value of the Sugar Price Index amounted to 118.5 points (7.3 points or 6.6% higher than in January, but 22.2 points (15.8%) lower than in February last year).
The increase in world sugar prices after three months of decline is due to fears of a decrease in global supply in the 2024/2025 season, in particular due to the expected reduction in production in India, concerns about the combination of seasonal changes in production and the effects of the recent drought on the next harvest in Brazil, as well as the recent strengthening of the Brazilian real against the US dollar, which is unfavorable for exports.
What about food prices in Ukraine?
Annual inflation accelerated to 13.4% in February, while food and non-alcoholic beverages rose by 1.2% over the month as a whole. This is according to the State Statistics Service.
MP Danylo Hetmantsev notes that eggs (plus 3.5%), sunflower oil (plus 3.4%), and pasta (plus 1.9%) have grown in price at the highest rate over the past month. Sugar fell in price over the month (minus 0.4%).
The National Bank predicts a temporary acceleration of inflation
According to the NBU’s Quarterly Inflation Report for January 2025, the acceleration of inflation in the coming months will reflect a limited supply of food due to last year’s poor harvests, as well as higher production costs, including energy and labor costs. However, this trend will not last. Inflation is expected to peak in the second quarter and begin to decline in the middle of the year. The NBU forecasts that inflation will slow to 8.4% by the end of 2025.
The slowdown in inflation will be facilitated by the NBU’s interest rate policy measures, the stability of the foreign exchange market, the expansion of food supply with the arrival of a new harvest, the narrowing of the fiscal deficit, and moderate external price pressure.
