Pressure on food commodity prices

While our television news chained reports and other images on the scarcity of sunflower oil on the shelves of supermarkets to the point of making the cooking of fries improbable, Agence France Presse (AFP) announced at the end of last week that Indonesia “has begun to suspend all its palm oil exports, of which the country is the world’s largest producer”. AFP specified that the Southeast Asian archipelago “has been facing for several months a shortage and a surge in the price of cooking oil based on palm oil on its domestic market and fears a rise social tensions. The price of this oil had risen by 10% on April 27 alone after a 63% increase over one year.

The country accounts for around 60% of the world’s palm oil production, a third of which is consumed on its domestic market. It exported 34.2 million tonnes in 2021, a large part of it as edible oil but also for the manufacture of a wide range of products including cosmetics. We also know that the production of diester for diesel engines offers this oil strong growth outlets. This also shows to what extent the production of agro-fuels can contribute to making certain food products unaffordable when speculators buy products that have become rare in market halls to resell them at exorbitant prices.

Hours of waiting for subsidized oil

In Indonesia, which has 270 million inhabitants, AFP indicates that “the supply of palm oil, the main oil used in the archipelago for cooking, has been problematic since the beginning of the year. The most modest consumers often had to wait for hours in long queues in front of the distribution centers of oil at subsidized prices in many cities (…) The dissatisfaction of the population with the rise in food prices contributed to a decline in the president’s popularity, according to recent polls, and sparked demonstrations in several cities,” AFP added. The agency also specifies that the countries most affected by this suspension of exports from Indonesia are India, China, Bangladesh and Pakistan, which must feed nearly 3 billion people.

German beer facing the price of malt and gas

Another AFP dispatch published late last week was headlined “Bitter beer for inflation-hit German brewers”. She told us that the price of malt has increased by 70% in recent months. But according to Ulrich Biene, owner of the Veltins brewery based in Grevenstein, “energy is the most important factor for the German beer industry and gas plays a significant role”. According to AFP, “the brewer has faced an increase of more than 400% in the cost of gas since the start of 2021, the recovery in demand after the epidemic and tensions with Russia having increased the prices “. A halt in deliveries of Russian gas, on which Germany depends to cover a large part of its energy needs, would probably mean “significant limits on the production of beer”, explains Ulrich Biene.

After the stoppage of Russian gas deliveries to Poland and Bulgaria following the refusal of these two countries to pay in rubles, we can imagine that there is great concern in Germany where 55% of the gas consumed came from Russia there is two months. This dependence would have fallen to 40% since, but it remains to be seen for how long. More generally, the World Bank’s exports indicate in their latest report that “prices will remain at historically high levels until the end of 2024”. In 2020 the average price of a ton of wheat purchased by importing countries was 232 dollars. It is around 400€ at the moment and could expect 450 dollars later this year.

Difficult to bear for poor consumers in developed countries, these increases in the price of energy such as fuel and gas, but also food products such as bread and pasta, risk leading to famines and food riots in nearly around thirty countries in Africa, the Maghreb and the Near East.

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Pressure on food commodity prices