"Food Inflation in Developed Countries Returns to Pre-Ukraine War Levels"

A survey by the Organisation for Economic Co-operation and Development (OECD) revealed that food inflation in major advanced countries has fallen to levels before Russia's invasion of Ukraine.

Major foreign media outlets reported on the 7th (local time), citing the latest OECD data, that the food Consumer Price Index (CPI) inflation rate in 38 advanced countries recorded 5.3% year-on-year, slowing down from 6.2% in the previous month. This is also significantly lower compared to 16.2% in November 2022.

Following the outbreak of the Ukraine war in February 2022, soaring energy prices and direct hits to supply chains caused food prices to surge. More severe-than-expected drought damage also contributed to pushing prices higher. According to the United Nations World Food Programme (WFP), approximately 333 million people worldwide experienced severe food insecurity last year.

Carlos Mera of Rabobank said, "Food inflation soared, experiencing the worst situation," adding, "Agricultural inflation peaked after the Ukraine war and has significantly declined over the past two years, which is also a factor in the slowdown of inflation in the retail sector."

Thomas Willadek of asset management firm T. Rowe Price also stated, "Supply chains have fully normalized, gas prices have fallen to historically normal levels, and Ukrainian grain exports through the Black Sea region have resumed," suggesting that "the global trend of inflation slowdown will continue."

The OECD is expected to mention the lowest level of food inflation since October 2021 in the inflation update released on the same day.

Separate figures released last week by the United Nations Food and Agriculture Organization (FAO) also confirmed that food prices, including cereals, sugar, and meat, have fallen from their 2022 peaks. The FAO Food Price Index, which had been declining for seven consecutive months, slightly rose to 118.3 in March compared to the previous month. However, it fell by 9.9 points year-on-year.

Major foreign media noted, "The trend of easing food inflation is spreading among industrialized countries," pointing out that "the recent OECD figures have dropped by nearly half from the peak."

By country, the US food price inflation rate in February was 2.2%, the lowest since May 2021. It was 11.4% in August 2022, right after the Ukraine war began. The UK’s food and non-alcoholic beverage price inflation also dropped from 19.2% in March 2023 to the 5% range last February. In the Eurozone, it recorded 2.7% in March, falling below 3% for the first time since November 2021.

However, some countries still experience high food inflation. Major foreign media cited not only seasonal factors but also sharp price increases in soybeans, sunflower, and rapeseed as reasons for the FAO index surge in March. Due to India’s rice export ban, food inflation is rising in countries that import rice as a staple, such as the Philippines and Bangladesh. In Turkey, food prices in March jumped more than 70% year-on-year due to the depreciation of the lira and other factors.

Major foreign media reported that despite recent declines in agricultural prices, food consumer prices continue to rise, attributing this primarily to the relatively low share of agricultural commodities. For example, wheat accounts for about 10% of the price of bread purchased by consumers. Other costs such as production, marketing, packaging, distribution, and profit margins also add up. They also pointed out that there is a time lag before commodity price changes are reflected in consumer prices, meaning the recent drop in agricultural prices will be reflected on food shelves next year.