In May, there was a significant decline in global food costs, marking the lowest level observed in the past two years. This development has reignited hopes that the persistent inflationary trend affecting supermarket prices may finally start to subside.
In May, the United Nations’ food-commodity price index experienced a decline of 2.6%. This decrease was primarily driven by lower prices in grains, vegetable oil, and dairy products, although it was partially offset by higher costs in sugar and meat. Since reaching its peak in March of the previous year due to Russia’s invasion of Ukraine, the index, which measures the prices of globally-traded agricultural commodities, has dropped by 22%.
Wheat prices are currently hovering close to their lowest levels in over two years due to an abundance of supplies from Russia, which is exerting downward pressure on the market. Additionally, European crops are in favorable condition, further contributing to the downward trend. However, the impact of falling commodity prices on consumers is being delayed as transportation, labor, and energy costs continue to remain high.
Despite the United Nations’ food index experiencing declines in 13 out of the past 14 months, the impact on consumers has been minimal, highlighting how the prices of everyday items are influenced by larger economic forces. Joseph Glauber, a senior fellow at the International Food Policy Research Institute, explains that high consumer food prices can also be highly localized and specific to individual countries.
“It’s really the macro-economy that is driving the food prices,” Glauber said. “We see a number of macroeconomic factors including exchange rates, including energy prices, including wage price inflation and that sort of thing. That affects food prices at the end of the day.”
