Monthly FAO food price index (FAOSTAT 2022) that includes dynamics of prices of grains, vegetable oils, dairy products and meat shows stable growth of food prices since May 2021. It reached its peak in March 2022.
Dr. Oleksandr Perekhozhuk, Senior scientist with Leibniz Institute of Agricultural Development in Transition Economies (IAMO) explains that there are many reasons for increase of food prices and their volatility. These reasons could be divided into political and economic.
“The political reasons attribute to the fact that wheat is one of the staple food in the world. It is essential for reduction of hunger and malnutrition in many countries. Political decisions affect the global wheat trade. They are often made by exporting countries, which impose export bans, embargoes, duties. The current blockage of Ukrainian seaports is one of such decisions. These political decisions limit competition and affect trade and trade relations as well as development of industry and wheat production in general”, – he explained.
The economic reasons are primary based on oligopolistic market structures of global wheat trade. Today, there is strong competition between importing countries. However, the competition between exporting countries is low. TOP-10 wheat exporters ship about 82% of the global wheat.
A. Perekhozhuk said that the results of different economic models and approaches used to study competition in global wheat trade had revealed the notable statistic evidences of price discrimination and market power of such exporting countries of the USA, Australia, Canada and Russia.
“Results of studies by Pall and other (2013, 2014), Gafarova and other (2015), Uhl and other (2016, 2018) revealed that Russian exporters of grain showed fair competition on the markets of such exporters as Egypt. At the same time, they discriminate the wheat prices and use their market power on the markets of such countries as Azerbaijan, Georgia and Turkey”, – he explained.
A. Perekhozhuk will provide more detailed information about the further food price formation in the new reality of global trade at the international conference Grain&Maritime Days in Istanbul 2022 (INTERCONTINENTAL ISTANBUL hotel) on May 25.
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