By Chrysostomos Tsoufis

Analysts’ concerns about the course of food prices were unfortunately justified. For the third month in a row, the United Nations food index rose, and having once again exceeded 120 points, it has been at a high since November 2023. Perhaps this was what the Christine Lagarde, who has announced an interest rate cut, stressed that the path to reducing inflation will still have many obstacles.

The largest increase, 7.1 points, was recorded by cereals as their export prices increased worldwide. Wheat is the main culprit as concerns grow of a bad year for this year’s crop in parts of Europe, North America and the Black Sea. The damage to the infrastructure in Ukraine, which does not allow for its storage or timely transportation, also contributes to the rise in wheat prices.

A big increase in corn prices as well. In Argentina the Spiroplasma disease caused great damage to the spars while in Brazil the production is reduced due to bad weather conditions.

Smaller increases in rice due to increased demand in Brazil and Indonesia.

2.3 points was the increase in May in the dairy index and now it is 4.3 points higher than last year. We also noticed it in the Greek market where e.g. yogurt inflation was at 3.4%.

There are fears that milk production in Western Europe will fall to historic lows, while production in Oceania is seasonally lower. But at the same time, the demand at the beginning of the tourist season is increasing, as was the demand from Southeast Africa.

In meats, the index remained almost unchanged (marginal reduction of 0.2 points). Pork and lamb prices rose as demand grew faster than supply.
On the other hand, the prices of beef and poultry fell as the supply is satisfactory while the demand is not strong.

Vegetable oil prices may have fallen by 3.1 points, but they remain 7.7% higher than in the corresponding period last year. And the decrease is clearly due to the large decline in palm oil prices which more than offset the increases in sunflower oil, soybean oil and canola mainly due to fears of limited quantities in the coming season.

The only purely positive news comes from the sugar front, which fell for the third month in a row and is now 25.5% lower than last May. Very good production in Brazil and low oil prices worked in favor of consumers.

All this as May was the hottest May in history and more and more analysts and market players are monitoring price fluctuations and talking about the phenomenon of Heatflation, i.e. their increase due to the heat.

In Iraq, for example, people protest on social media as it observes sharp price increases mainly with tomato while in Morocco, the government limited exports due to low production. In Egypt, the heat sent onion prices skyrocketing.

And we are only at the beginning of summer….