The wealthy nations of the world will spend $1.2 trillion this year on food imports that include meat, fish, coffee and spices, while poorer nations tighten their belts and focus on staple foods such as grains, said the UN Food and Agriculture Organization. “The decline in food import volumes is a concerning development,” said the report, “suggesting a decline in purchasing capacity.”
“These concerns are amplified by the fact that lower international prices for a number of primary food items have not, or at least not fully, translated into lower prices at the domestic retail level, suggesting that cost-of-living pressures could persist in 2023,” said the FAO’s biannual Food Report, released last week.
One factor in high local prices was the strong U.S. dollar, wrote FAO senior economist El Mamoun Amrouk. The dollar is the dominant currency used in commodity transactions and the dollar appreciated in value during the past couple of years, offsetting in part the recent decline in commodity prices at the international level.
World corn prices fell by 10.2 percent from April-September 2022 but by only 4.8 percent in local currency terms in new food-importing developing countries (NFIDC) because of the strong dollar. World rice prices fell by 3.9 percent but increased by nearly as much in NFIDCs. When wheat prices surged in 2020, the increase in local prices in NFIDCs was as much as 6 percentage points larger than on the world market.
“Changes in real exchange rates are only one component of food import costs, which also include elements such as transportation, insurance, financing and other retailing fees,” wrote Amrouk. “Further analysis is warranted to assess the extent to which these elements have contributed to recent domestic food inflation.”
NFIDCs are mostly in the Middle East, Africa and Southeast Asia, with a handful of countries in the Americas. One of the NFIDCs is Sudan, where armed conflict “has worsened an already dire food insecurity situation,” said the FAO on Monday. The FAO said it hoped to supply 1 million farm families with sorghum and okra seeds to plant in the next few weeks to improve the domestic food supply.
Data in late 2022 indicated that inflation rates were slowing in the developing world, said Amrouk. He said in the developing worlds, authorities should employ “well-targeted measures to support the poor, vulnerable and food-insecure segments of the population” while throttling inflation through tight monetary policy.
The FAO estimated so-called least developed countries would spend $53.3 billion on food imports, a decline of 1.5 percent from 2022. NIFDCs would spend $139.9 billion, or 4.9 percent less than in 2022; the largest declines would be in chiefly cereal grains and fats and oils.
The FAO’s Food Outlook report is available here.