Reasons for the highest food price increase in the world

Feb 9, 2023 | International News, News

Annual price increases for food purchased in stores rose by 11.4 per cent in September 2022, the fastest pace since 1981 according to Statistics Canada.

The Food and Agriculture Organization of the United Nations (FAO) claims this is the highest food price increase in the world since July 2011. The main reasons for this are climate change, politics, inflation and pandemic disruption.

Days of extreme heat and heat waves are increasing in almost all land areas, and destructive storms are becoming more intense and frequent in many regions, according to the United Nations.

One example of this is Brazil, which is the world’s largest exporter of coffee, sugar, soy, and beef, according to the International Monetary Fund.

The droughts Brazil faced in 2021 were the worst in 91 years, the Electricity Sector Monitoring Committee said, and a huge decrease in grain cultivation was caused by the lack of rain.

Ivan Nechet, a Ukrainian grain inspector whose family has spent their lives growing wheat, corn, and sunflowers, said that his country also experienced weather changes.

“We had floods in 2021,” he said. “The water washed all the grains out of the ground in my parents’ field, and we suffered great losses. We can’t predict the weather because in 2020 we had a drought,.”

Ivan Nechet a Ukrainian Grain Inspector.

Ivan Nechet, a Ukrainian grain inspector. Photo credit: Daryna Vieniertseva

Rising temperatures, longer growing seasons, changing precipitation patterns, and increased frequency and intensity of extreme events due to climate change will bring challenges to Canada’s agricultural sector, according to the Canadian government.

According to the Global Supply Chain Pressures index, pandemic supply chain disruptions still have an impact on prices.

Gunter Ortwig, a restaurant chef from Germany, said that his restaurant had to increase prices to continue its existence.

“The pandemic period was hard; we lost lots of customers and to survive with all of these price increases, we also raised the prices for the whole menu,” Ortwig said.

He said businesses had losses not only because of fewer customers, but also because of workers who couldn’t work due to COVID-19 or tried to find other jobs.

“We lost many workers during the pandemic and consequently lost money to teach the new ones. I think all spheres had the same problem, so prices rose in general,” the restaurant chef said.

Another reason for price increases is that companies that have decided times of crisis are a good time to raise the cost of their services, Ortwig said.

“Many companies speculate on the topic of war to increase prices because they think that it is a good reason and they want to increase their income,” he said. “I read that the government is going to look into whether companies had reasons to raise their prices or if they only care about profit.”

According to the Federation of German Consumer Organizations (Verbraucherzentrale Bundesverband, or VZBV), some food price increases are neither justified nor understandable. The VZBV added the German government plans to check whether companies are using the situation to improve their earnings.

Annual inflation in the euro area of 19 countries reached a record high of 10.6 per cent in October, according to the European statistics office Eurostat.

The average inflation rate in Canada in 2022 was 6.8 per cent (two times higher than in 2021), according to the consumer price index published by Statistics Canada.

Tetyana Davidova, a Ukrainian woman who moved to Canada eight months ago and works at a Toronto supermarket, said she noticed the price changes.

“As I see it, prices are changing once every two months for most items plus one dollar,” she said.

“In the supermarket we have lots of groceries from Europe, and I found my favourite Roshen (Ukrainian confectionery) chocolate bar, it costs 99 cents, but now the price is two times higher. In Ukraine, it costs seven hryvnas (25 cents); I miss such prices,” Davidova said.

Comparison of food prices in Canada, Germany, and Ukraine.

Comparison of food prices in Canada, Germany, and Ukraine. Photo credit: Daryna Vieniertseva

There are different predictions for food inflation in 2023. The World Bank expects global food prices to decrease by five per cent this year. However, the U.S. Department of Agriculture said an all-food increase of four per cent was likely, except for beef, pork, and fresh fruit.

The comparison between grocery prices in Germany, Canada, and Ukraine showed that Canada remains the most expensive.

A kilogram of whole chicken costs $8.35 in Canada, five euros ($7.30) in Germany, and 160 hryvnas ($5.80) in Ukraine. Tomatoes cost 3.18 euros ($4.64) per kilogram in Germany and $6.60 in Canada. In Ukraine, a loaf of bread costs 20 hryvnas (70 cents) and in Canada, it costs $4.29. A kilogram of apples costs 1.35 euros ($2) in Germany and $5.50 in Canada.