People around the world suffered from what was described as severe inflation in 2021, due to rising food prices, amid hopes of alleviating the "inflation crisis" as the new year began. However, economists are not very optimistic. Food prices have noticeably increased this year, which is coming to an end, due to the pandemic that affected the global economy and disrupted production in many vital sectors, resulting in countries facing what is known as the "supply chain crisis."
According to CNN, the crisis has worsened amid rising demand for goods, increased shipping costs, expensive fertilizers, and adverse weather conditions, all of which have led to a spike in prices of corn, cocoa, sugar, and many other items. In light of this situation, it is highly likely that food prices will remain high throughout the coming year, even if inflation decreases in several areas of the economy.
Michael McDougall, an agricultural commodities expert at Rabobank, believes that prices will remain elevated in the upcoming year. The Food and Agriculture Organization (FAO) index reached its highest level in a decade this year, amidst fears of worsening humanitarian crises in many countries around the world.
Supply of goods globally has been affected by shortages of labor and containers required for transporting goods, in addition to increased demand, particularly in China, where the pandemic first emerged in late 2019. The situation has worsened due to successive natural disasters ranging from hurricanes to floods, which have impacted crops and exacerbated the food crisis.
Figures indicate that agricultural commodity prices rose by 28% over the past year, with current prices being 40% higher compared to pre-pandemic levels. An American financial analyst explains that before the pandemic, people only bought what they needed from agricultural goods, but then came the coronavirus, and traders regretted not stocking up. Thus, any drop in prices will be met with a significant increase in demand, and when demand rises, prices are expected to follow suit.
