Global food prices are soaring by double digits amid the coronavirus pandemic, according to Bloomberg News. Bloomberg Agriculture Subindex, a measure of key farm goods futures contracts, is up almost 20% since June. It may in part be driven by speculators in the commodities markets. These rapid price rises are hitting the people in Pakistan and the rest of the world hard. In spite of these hikes, Pakistan remains among the least expensive places for food, according recent studies. It is important for Pakistan's federal and provincial governments to rise up to the challenge and relieve the pain inflicted on the average Pakistani consumer.
|Global Agricultural Futures Contracts. Source: Bloomberg|
Global Food Prices:
Global food prices are increasing at least partly due to several nations buying basic food commodities to boost their strategic reserves in the midst of the pandemic. A Bloomberg News report says that "agricultural commodity buyers from Cairo to Islamabad have been on a shopping spree since the Covid-19 pandemic upended supply chains". It may in part be driven by speculators in the commodities markets. Here's an excerpt of the Bloomberg story:
"Agricultural prices have been on the rise as countries stepped up purchases, adding to demand from China and a drought in the Black Sea region. That has helped push the Bloomberg Agriculture Subindex, which measures key farm goods futures contracts, up almost 20% since June. Sugar prices have gained a boost as China replenished stockpiles, said Geovane Consul, chief executive officer of a Brazilian sugar and ethanol joint venture between U.S. agribusiness giant Bunge Ltd. and British oil major BP Plc."
|Pakistan Household Expenditure on Food. Source: HIES|
Supply Constraint in Pakistan:
The Pakistan Government estimates final wheat production ended up at 25.5 million tons, slightly above the five-year average of 25.38 million tons, according to Grain Central. While that represented a 1.2 million tons increase on the 24.3 million tons harvested in 2019, it was well short of the government’s target of 27 million tons, forcing Pakistan to import wheat at higher global prices.
Demand for fruits and vegetables is also rising at about 9.5% a year, according to Mordor Intelligence. The supply is falling short of demand, putting pressure on prices.
|Global Food Price Comparison. Source: Bayut|
The food prices have risen 14% for urban and 16.8% for rural areas of Pakistan in the last 12 months, according to Pakistan Bureau of Statistics. In spite of this inflationary trend, the grocery prices in Pakistan remain among the lowest in the world. A comparison by Dubai-based Bayut shows that groceries in Pakistan cost 72.9% less than in the United States. Other least-expensive countries for groceries include Tunisia ( 67% less), Ukraine ( 66.7% less), Egypt (65.6% less) and Kosovo (65.6% less).
Globally, Switzerland sells the most expensive groceries, with prices 79.1% higher than in the U.S. Norway is the second most expensive place to buy groceries, with prices 37.4% more expensive than in the U.S., and Iceland is third most expensive, where food items are 36.6% pricier, according to Bayut.
|Cost of Dining Out. Source: Commodity.com|
Global food price hikes have hit average Pakistani hard in spite of the fact that grocery prices in Pakistan remain the lowest the world. Bloomberg Agriculture Subindex, a measure of key farm goods futures contracts, is up almost 20% since June. It may in part be driven by speculators in the commodities markets. World food commodity prices are increasing at least partly due to several nations buying basic food commodities to boost their strategic reserves in the midst of the pandemic. It is important for Pakistan's federal and provincial governments to intervene in the markets to relieve the average Pakistani consumer's pain.
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