Food Inflation

food inflation

Food inflation is amongst the rising problems these days. This problem is not for certain states or countries or people in fact, it is turning out to be a global problem. In many countries round the globe, majority population has lost the ability to afford two time basic meals. 

WHAT IS FOOD INFLATION?

Food inflation, as the name suggests, is the rise in prices of necessary food commodities more than the Consumer price index. In simple words, it is when food prices surge to more than a limit which an average consumer can afford. This is the prevailing situation nowadays. However, we should understand that this global food inflation has not occurred out of nowhere. Keep reading this article to have a grip on the most significant reasons for current food inflation.

DEMAND SUPPLY DISEQUILIBRIUM

Let us take back to 2020s. Covid-19 came as a global pandemic and shook the world to its core. The world went into complete isolation, and no country was bar a lockdown. According to statistics, FAO Food price Index rose by 55.2% between May 2020 and February 2022. The foremost reason for price hike was the disequilibrium between demand and supply as soon as the economies started resuming. Covid-19 had affected the production to a great extent. As soon as the resumption of economies occurred, the present supply was not enough to fulfill the prevailing demand. Thus, according to simple economics, the prices for these commodities increased.

INDIRECT FACTORS

There are factors that have indirectly contributed to global food inflation. One of them is the increase in freights costs due to Covid. The transportation costs contributed to the cost of imports, and thus played a very significant portion in food inflation. Moreover, Covid resulted in import/export restrictions which in result contributed to food inflation. Along with the prices of oil and gas, fertilizer prices have also increased in the past couple of months. It has resulted in increase in production costs, and thus contributing to food inflation.

RUSSIA VS UKRAINE

Russia Ukraine war has further worsened the situation of price hikes in food commodities. Both of these countries are major sources of agriculture, and main exporters of food commodities. The war between these two countries have not only affected their agriculture, but the world’s reliance on their production. This war has created a great disequilibrium between demand and supply, due to which, the food inflation might worsen up even more.

WHAT’S NEXT?

The aftermaths of food inflation have already started showing up. A lot of countries around the globe are suffering, and my of them are in line to suffer. A possible way for governments to avoid this situation is by providing relief. But since the pandemic has already taken the juice out of economy, most governments might not think of subsidies as a good option.

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