Food Inflation: Five Years and Counting

Food inflation has been on the rise for the past five years around the world amid geopolitical conflict – not least Russia’s invasion of Ukraine -- and climate shocks.

With food prices soaring, several little-known agriculture exchange-traded funds have outperformed the S&P500 during the last twelve months, including VanEck Agribusiness (MOO), Invesco DB Agriculture (DBA) and iShares MSCI Agriculture (VEGI), as investors are pouring record money into such ETFs amid fears over global food crisis and as an inflation hedge.

Source: Google Finance

Prices are expected to fall slightly in 2023 before stabilizing in 2024, according to the World Bank, although most food prices will remain high by historical norms. 

The ten countries experiencing the strongest food inflation recently, according to the bank, are: Zimbabwe, Lebanon, Venezuela, Türkiye, Iran, Sri Lanka, Argentina, Moldova, Rwanda and Ghana. In particular, Turkey’s inflation problem is looking to run out of control.

The situation has prompted the United Nations to call for urgent action to protect the most vulnerable children in the countries hardest hit by the unprecedented food and nutrition crisis.

Of the G7 countries, Germany has seen the strongest food inflation, followed by the U.K. and Canada. France, the U.S., China and Italy follow while Japan brings up the rear.

“The global food crisis has been partially made worse by the growing number of food trade restrictions put in place by countries with a goal of increasing domestic supply and reducing prices,” the World Bank says.

Even before Russia’s invasion of Ukraine, food prices and global hunger were on the rise.

Climate shocks, loss of biodiversity and marine and coastal ecosystems, and the global water crisis have all contributed to an increasingly food-insecure world. The Covid-19 pandemic then further disrupted global supply chains, driving prices upward.

As a result, governments have been exploring ways to ensure food security for their populations, with some resorting to protectionism by stopping the export of certain crops. For example, India last year halted exports of wheat.

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