FAO economist: food prices spiked after 2020 shocks, hitting poorest countries hardest

Maximo Torreiro, chief economist at the Food and Agriculture Organization, said a ‘‘perfect storm’’ of the COVID-19 pandemic, the war in Ukraine and climate shocks drove global food prices sharply higher, with food inflation peaking at 13.6% in January 2023 and some low-income countries experiencing rises of up to about 30%.

At a United Nations press briefing, Torreiro said the combination of large fiscal stimulus during the pandemic, disruptions to exports and inputs from the war in Ukraine, and more frequent droughts, floods and heat waves in major producing regions exposed fragility in global agricultural systems. “The episodes described in this publication … illustrate how fragile global agri-food systems remain in the face of component disruptions,” he said.

The FAO economist said households responded to rising prices and falling real wages by shifting to cheaper, less nutritious foods, reducing meal frequency and prioritizing food for some members of the household. He cited data showing that a 10% increase in food prices was associated with a 3.5% increase in moderate or severe food insecurity and a 1.8% increase in severe food insecurity, and that among children under 5 a 10% food-price rise corresponded with a 2.7%–4.3% increase in wasting and a 4.8%–6.1% increase in severe wasting.

Torreiro described several drivers. He said governments’ fiscal stimulus and relief measures during the pandemic — totaling the equivalent of roughly 16% of global GDP in some cases — put upward pressure on demand and inflation. He also said the war in Ukraine reduced exports of wheat, sunflower oil and fertilizers, disrupted trade routes and pushed up fuel and input costs. Climate extremes, he added, have reduced production in some major producing regions.

On fertilizer markets, Torreiro said Russia had been a major exporter of nitrogen and early restrictions raised fertilizer prices, but that ‘‘over time this has been resolved’’ through shifted trade flows and new sources. He warned, however, that the market remains concentrated and any renewed restrictions to fertilizer mobility would push up input and commodity prices again. He used rice as an example: higher fertilizer costs reduced rice production in a subsequent season, contributing to price rises.

Reporters asked about coordination with the Nutrition for Growth (N4G) initiative and the Red Sea shipping disruptions. Torreiro said FAO participates in the UN Nutrition Group and coordinates with N4G partners, and that some large headline pledges include reallocated resources. On shipping, he said disruptions in major transport routes or increases in insurance and logistical costs — as occurred during the war in Ukraine and in past Panama Canal congestion — raise commodity and food prices but noted a distinction between raw commodity price spikes and sustained increases in retail food prices, which also reflect energy, transport and labor cost components.

Torreiro summarized five policy lessons in the report: well-designed, targeted and time-bound social protection to protect vulnerable households; avoiding broad trade restrictions; stronger coordination of monetary and fiscal policy; improved market transparency via systems such as the Agricultural Market Information System (AMIS); and investment in institutional preparedness and governance to respond more quickly to crises.

The briefing did not present new binding international commitments or specific legislation; Torreiro framed the findings as analysis from the FAO report on the state of food security and nutrition and emphasized that policy responses differ by country context. He said fertilizer-export shares and the exact contribution of specific shipping disruptions to global price levels were not specified in the answers and remain subject to further analysis. The FAO report discussed at the briefing is scheduled for release later this month.