Strategy Note /

Commodity food prices scorch higher in April

  • Food prices are at a seven-year peak, up 33% since May 2020, with April seeing the fastest yoy rise for a decade

  • High household spend on and high imports of food in Bangladesh, Egypt, Jordan, Lebanon, Nigeria, Pakistan, Philippines

  • This implies a higher risk to inflation, fiscal spend (where governments subsidise), trade balance and social stability

Commodity food prices scorch higher in April
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
6 May 2021
Published byTellimer Research

The latest UN FAO World Food Price index (published on 6 May) exhibited the fastest year-on-year increase for a decade, of 31%. Food prices have risen c33% since May 2020, hitting a seven-year peak. The next update is due on 3 June.

Food prices at 7-year peak, up 33% since May 2020 trough, fastest year on year rise for a decade in April

Policy makers, when determining interest rates, tend to focus on core inflation and treat some of the variation in food items as cyclical. However, for governments that subsidise food items, this food price spike creates fiscal stress and for countries reliant on food imports it drives a deterioration in the trade balance. Furthermore, for the mass, poorer segment of the population, food inflation is generally an acute concern – the 'Arab Spring' coincided with a c40% increase seen in 2010-11 – and this translates into risk for governments facing re-election or attempting to implement structural reforms that challenge vested interests.

Countries with both a high portion of household expenditure on food and a significant net import bill for food include Bangladesh, Pakistan and the Philippines in Asia, Egypt and Nigeria in Africa, and almost all of the Middle East (particularly, Jordan and Lebanon).

Food accounts for a large portion of household expenditure in countries such as Argentina, Ghana, Ivory Coast, Kazakhstan, Kenya, Morocco and Ukraine but, at the macroeconomic level, this is offset by net exports of food. That, of course, does not mitigate the risk of social unrest from the poorer segments of these countries if the bump in export revenues does not trickle down.

Emerging market consumption exposure to food prices

Emerging market trade exposure to food prices