Asia to See Peak in Food Prices in 2H22, despite Global Food Costs Falling in June

Economists expect that Asia nations will see the peak in food prices during the July to September quarter, despite worldwide prices having fallen for the third straight month in June.

United Nations Food and Agriculture Organization’s (FAO) food price index, which measures monthly changes in the global prices of a basket of food commodities, decreased by 2.3% in June from a month earlier, according to data released monday. However, prices are still hovering near historic highs in March.

Vegetable oils, cereals, and sugar all saw price drops, but overall is still 23.1% higher than a year ago. 

The FAO index for June was at 154.2 points, which is slightly below the 159.7 point reading seen in March after Russia’s invasion of Ukraine.

In an interview with CNBC, Sonal Varma, head economist for India and Asia (ex-Japan) at the Japanese Nomura bank, stated that changes in food prices in Asia tend to lag behind global movements due to subsidies and price restrictions put in place by governments. Therefore, countries like Singapore, South Korea, the Philippines, and India will likely see the highest increases in food prices in the second half of this year.

The Philippines, South Korea, and Singapore all rely heavily on food imports, with about 2% of the Philippines’ gross domestic product attributable to net food imports.

Meanwhile, although India is self-sufficient in wheat and rice, the country’s ongoing heatwave, a delayed monsoon, and rising prices of other food products are driving up prices.

Instead of export limits, which skew food prices, Varma said governments should provide “targeted fiscal support” to low-income people.

“Lower-income households typically spend a big chunk of their consumption on food, so it’s more important to protect them,” she said.