Global Food Prices Soar Most Since Arab Spring

Global food prices rose again in May, the UN said Thursday.

It was the 12th consecutive monthly increase (figure below).

That’s not ideal because… well, because people have to eat and, as it turns out, the vast majority of humanity is price sensitive.

I’ve taken to documenting each monthly update on the Food and Agriculture Organization’s gauge. The implications of surging food prices are obviously far-reaching.

The pandemic didn’t just exacerbate inequality within nations, it also aggravated disparities between them, with emerging markets and frontier economies seen vulnerable no matter how robust the global recovery turns out to be. For example, the OECD this week warned that funding crises and vaccine access are serious risks. “It’s very disturbing that not enough vaccines are reaching emerging and low-income economies,” Laurence Boone said.

“This is exposing these economies to a fundamental threat because they have less policy capacity to support activity than advanced economies,” she added, on the way to warning that “a renewed virus-driven weakening of growth would be harder to cushion, resulting in further increases in acute poverty and potentially sovereign funding issues if financial markets were to become concerned.”

That’s the backdrop against which food prices have embarked on an inexorable ascent. The last time the FAO’s gauge was near current levels, the Fed was busy deflecting criticism centered on the notion that US monetary largesse was contributing to unrest in nations where a spike in food costs can lead to societal breakdown.

“Drought in key Brazilian growing regions is crippling crops from corn to coffee, and vegetable oil production growth has slowed in Southeast Asia,” Bloomberg said Thursday, in their own coverage of the latest read on the FAO index. “The surge has stirred memories of 2008 and 2011, when price spikes led to food riots in more than 30 nations.”

As the first figure (above) shows, May’s increase was particularly steep. In fact, it was the largest MoM gain in more than a decade. The index is just 7.6% shy of the record hit in February of 2011.

As the UN noted, “the sharp increase in May reflected a surge in prices for oils, sugar and cereals along with firmer meat and dairy prices.”

If the trend continues, it’s likely the Fed will again be forced to “explain” that its policies aren’t the proximate cause of the problem.

In 2011, Ben Bernanke denied the Fed was responsible for surging food prices, but the narrative was rampant.

Previously, I highlighted a few quotes from contemporaneous media coverage to drive home the point. I’ll do so again here for anyone who’s new to the discussion.

“It’s an ugly American custom to take credit, or assign blame, for every major event in the world, but if there’s any American political figure who has played a significant role in the Mideast conflagrations, maybe it’s… Ben Bernanke,” The Atlantic wrote, in 2011.

“There are many world leaders who rail against the US central bank’s bond buying spree,” The Guardian chimed in. “Without quantitative easing, they argue, their populations could still afford to buy staple foods without busting their already stretched budgets.”

“How the Fed triggered the Arab Spring uprisings in two easy graphs,” The Telegraph promised, at the top of a 2011 piece.

It’s not difficult to imagine a scenario characterized by similar blame-casting, especially if emerging markets and poor nations become frustrated with disparities in access to vaccines.

As I’ve mentioned previously, there’s more than a little irony embedded in this conjuncture. Ultra-loose monetary policy in the US is seen as necessary in part because the Fed is enabling fiscal policies aimed at averting further societal breakdown like that witnessed in 2020. It’s possible that policy bent ends up exacerbating inequality outside of the developed world by pushing up the price of food and other necessities.

Call it one more example of “collateral damage” deemed acceptable to protect American interests.

Read more: Feast, Famine And The Fed