GCC food plans remain secure, but inflation and freight rates linger

GCC features among the world’s top food secure regions. The strategy and consulting business unit of PricewaterhouseCoopers supports this citing Global Food Security Index.

The Index assesses the availability, affordability, quality, and safety of food supplies to rank food security.

Consumer data show GCC’s food security plans remain reassuring for citizens and expatriates. Most public and private agreements are long term and with several trade partners globally. Their trading baskets are well-spread.

Nonetheless, GCC food security planners remain uneasy. Mainly, because the region remains vulnerable to freight rates, logistics disruptions, geopolitical upheavals, price swings of commodities and finished goods in the countries that export them.

For instance, long-term freight rates have jumped 150.6 per cent year-on-year as costs have risen 55pc in 2022, according to Xeneta Shipping Index Public Indices for the contract market. Oslo-based Xeneta provides ocean and airfreight rates benchmarking and market analytics.

GCC countries import around 85pc of their food needs. Rice imports dominate consumption, around 93pc of cereals, and around 62pc of meat and 56pc of vegetables. During a disruption in supply chains, such as Covid-19 pandemic two years ago and the Russia-Ukraine War since February, this reliance on food imports leaves countries vulnerable to shortages.

Ukraine is the world’s seventh-largest wheat producer. Commodity analysts expect it to move up to fifth position in 2022-22. Last year, Ukraine exported wheat worth $5.1 billion mainly to Egypt, Indonesia, Turkey, Pakistan, and Bangladesh. The impact of the war on its export is debilitating as it produces around 42pc of the world’s sunflower oil, 16pc maize and 9pc wheat.

The good news amid this distressing war reality is the belligerents on July 22 signed an agreement to allow the free movement of more than 20 million tonnes of grain lying in warehouses in Ukraine’s Black Sea ports.

In its July report the World Bank said agricultural, cereal, and export price indices were stable over the last two weeks. Agricultural index closed at the same level as two weeks ago, the export index went up by two per cent while the cereal index went down by one per cent.

Maize prices closed one per cent higher than two weeks ago, wheat prices two per cent lower, and rice prices five per cent lower.

However, it flagged domestic food prices as inflation remains high around the world. High inflation continues in almost all low-income and middle-income countries, and the share of high-income countries with high inflation too has increased sharply.

World Bank food price inflation data, for the period March and June 2022, show high inflation in almost all low-income and middle-income countries — 93.8pc of low-income countries, 89.1pc of lower-middle-income countries, and 89pc of upper-middle-income countries have seen inflation levels above five per cent, many have registered double-digit inflation.

The share of high-income countries with high inflation has also increased sharply, with around 78.6pc noting high food price inflation. Countries most impacted by inflation are in Africa, North America, Latin America, South Asia, Europe, and Central Asia.

In real terms, food price inflation exceeded overall inflation (measured as year-on-year change in the overall CPI) in 78.7pc of the 160 countries for which food CPI and overall CPI indexes are both available.

The International Monetary Fund’s latest report to depicts gloomy picture this year following fresh risks. The global output contracted in the second quarter of 2022. The report pegs it to downturns in China and Russia, while US consumer spending undershot expectations. “Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide — especially in the United States and major European economies — triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting Covid-19 outbreaks and lockdowns; and further negative spill overs from the war in Ukraine”.

Policymakers’ top priority should be to rein inflation as increasing prices of consumer goods continue to stress peoples’ budgets and compromise living standards, the IMF report advises.

[Sudeep Sonawane, an India-based journalist, has worked in five countries in the Middle East and Asia. Email: [[email protected]]