rising food prices outpace overall inflation

Price indices calculated by the World Bank (WB) for agricultural products in general and for grains in particular have decreased by 6% and 10%, respectively, since July 27 (date of publication of the previous WB review) (see chart). The decline in indices is largely due to a decline in prices for certain types of grains, mainly corn and wheat. As follows from UN FAO data published in early September, world prices for wheat fell by 3.8% in August due to active seasonal supplies; prices for corn, due to large global reserves, dropped to their lowest level since September 2020.

Against this background, the World Bank notes, food inflation remains quite high in both developing and developed countries. The rise in food prices exceeds the level of general inflation in most countries for which the World Bank has data. As the bank’s analysts remind, a significant contribution to food prices is made by producers’ high costs of fertilizers. Their growth, in turn, is influenced by a number of factors related to the consequences of the Russian military operation in Ukraine, from sanctions limiting the export of fertilizers from Russia to rising energy prices. According to FAO estimates, a 1% increase in fertilizer prices leads to a 0.2% increase in prices for agricultural products.

The World Bank in its reviews pays a lot of attention to grain exports from Ukraine – this is explained not only by the fact that the country still remains the third largest exporter of agricultural products to the EU, but also by the unclear prospects for the supply of its products after the grain deal is wound down. The September review actually confirms that even after the deal was scrapped, the pace of Ukrainian grain shipments did not slow down. In August, Ukraine supplied 1.2 million tons of wheat to foreign markets, which is 46% more than in the previous month (the deal was actually terminated in July), and 36% more than in August 2022 (then the Black Sea Initiative “acted). The main importers of Ukrainian grain in August were Romania (31% of exports), Spain (24%), Egypt (17%), Italy (6%) and Greece (5%). Let us note that Romania’s high share is explained by the fact that after the termination of the grain deal, the Danube remains one of the key export channels for Kyiv (for more details, see Kommersant on August 22).

Kristina Borovikova