Data from FAO, chart by Mish

Year-Over-Year Percent Change 

Data from FAO, chart by Mish

Giant Leap to New High

The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of food commodities. It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016.

The index makes a giant leap to another all-time high in March.

FFPI Details 

• The FAO Food Price Index (FFPI) averaged 159.3 points in March 2022, up 17.9 points (12.6 percent) from February, making a giant leap to a new highest level since its inception in 1990. The latest increase reflects new all-time highs for vegetable oils, cereals and meat sub-indices, while those of sugar and dairy products also rose significantly.
• The FAO Cereal Price Index averaged 170.1 points in March, up 24.9 points (17.1 percent) from February, marking its highest level on record since 1990. This month’s increase reflected a surge in world prices of wheat and coarse grains, largely driven by conflict-related export disruptions from Ukraine and, to a lesser extent, the Russian Federation. The expected loss of exports from the Black Sea region exacerbated the already tight global availability of wheat. 

• The FAO Vegetable Oil Price Index averaged 248.6 points in March, up 46.9 points (23.2 percent) from February and hitting a new record high. The sharp rise of the index was driven by higher sunflower, palm, soy and rapeseed oil prices. International sunflowerseed oil quotations increased substantially in March, fuelled by reduced export supplies amid the ongoing conflict in the Black Sea region. Soyoil prices were underpinned by concerns over reduced export availabilities in South America. Noticeably, volatile and higher crude oil values also lent support to international vegetable oil prices.

• The FAO Meat Price Index averaged 120.0 points in March, up 5.5 points (4.8 percent) from February, also reaching an all-time high. In March, pig meat prices registered the steepest monthly increase on record since 1995, underpinned by supply shortfalls of slaughter pigs in Western Europe and a surge in internal demand in light of the upcoming Easter holidays. International poultry meat prices firmed, fuelled by reduced supplies from leading exporting countries following avian flu outbreaks, further impacted by Ukraine’s inability to export poultry meat amid the ongoing conflict. Bovine meat prices also firmed as the tight supply of slaughter-ready cattle persisted in some key producing regions, while global demand remained solid.

• The FAO Dairy Price Index averaged 145.2 points in March, up 3.7 points (2.6 percent) from February, marking the seventh consecutive monthly increase and lifting the index 27.7 points (23.6 percent) above its value a year ago. The upward trend of dairy product prices persisted, mainly supported by the tightening of global markets due to inadequate milk output in Western Europe and Oceania to meet global demand.

• The FAO Sugar Price Index averaged 117.9 points in March, up 7.4 points (6.7 percent) from February, reversing most of the previous three months’ decline and reaching levels more than 20 percent above those registered in the corresponding month last year. The March rebound in international sugar price quotations was mainly prompted by the sharp increase in international crude oil prices, which raised expectations of a greater use of sugarcane for ethanol production in Brazil in the upcoming season. Additional support to world sugar prices was lent by the sustained strengthening of the Brazilian Real against the US Dollar, which tends to restrain producer selling due to lower returns in local currency. However, the good harvest progress and favourable production prospects in India, a major sugar exporter, contributed to easing the price hike and prevented larger monthly price increases.

New Record Highs

FAO Food Price Index, Cereal Price Index, Meat Price Index, and Vegetable Oil Price Index all hit record levels in March.

Ukraine or Russia in every commodity is hitting record highs. 

Ukraine Corn, Wheat Exports Will Plummet Further

Bloomberg reports Ukraine Corn, Wheat Exports Will Plummet Further, U.S. Says

• Ukraine’s corn exports will drop by another 4.5 million tons to 23 million tons and wheat exports by 1 million tons, according to the U.S. Department of Agriculture’s closely watched World Agricultural Supply and Demand Estimates, or WASDE. 
• Russia’s war in Ukraine is upending trade flows out of the critical Black Sea breadbasket region, prompting warnings of food shortages as crucial supplies of wheat, corn and cooking oils are at risk. Food prices are surging at the fastest clip ever and worsening world hunger. 
• Grain and oilseed futures have jumped to near record highs and also caused a spike in prices of farm necessities like fertilizer and fuel. Big growing regions like the U.S. and Brazil are under pressure to produce ample crops, though weather woes and inflation in both countries are clouding the season’s outlook. 
• With its ports shut, Ukraine is working to ramp up exports via rail, but the flows remain well below normal seaborne trade.

What Can the Fed Do About the Price of Food, Medicine, Gasoline, or Rent?

Expect higher prices still as the war in Ukraine will disrupt this year's planting season. 

On March 20, I asked What Can the Fed Do About the Price of Food, Medicine, Gasoline, or Rent? I concluded "The answer is nothing or next to nothing. Rates hikes will not impact inelastic items."

St. Louis Fed President James Bullard to the Rescue

Silly me, my above conclusion was not thinking outside the box. 

James Bullard, St. Louis Fed President, won my Hoot of the Day award, yesterday with the obvious answer, change the inputs.

Bullard proposes using the Dallas Fed Mean-Trimmed PCE inflation model, which is an amazingly low 3.6%.

Please consider my January 4, 2022 post Trimmed Mean Inflation Is the Ultimate Absurdity in Inflation Measures