After the wholesale price of food initially slumped during the coronavirus pandemic, the global FAO Food Price Index has shown a steep increase since the fall. Most recently, food around the world was more than 27 percent pricier than the 2014-2016 average, on which the index baseline of 100 points is calculated. The May figure is the highest of any month in almost ten years.
Palm oil prices have been driving the increase in the index since the fourth quarter of 2020, but global cereal prices also showed a significant bump in the past months, together creating a level of food prices not seen in a decade. Dry weather and production disruptions due to COVID-19 coupled with high global demand led to the depletion of palm oil inventories, in turn driving up prices. As transportation picked up again, biodiesel demand led to an increased need for soy oil. Both developments caused prices for vegetable oils to exceed the 2014-2016 average by almost 75 percent in May.
For cereals, strong demand from China increased prices, especially for sorghum, barley and corn. Worsening crop prospects in Latin America have also contributed to the increase in maize prices.