Local currency depreciations against the US dollar, spurred on by US monetary policy, and soaring global commodity price inflation - driven by a confluence of conflict, drought, exorbitant fertilizer costs, and other Covid-related supply shocks - will further strain some countries' ability to purchase staple foods, adding additional fuel to global food insecurity.
Pakistan and Egypt are examples of countries that could be caught in this predicament. Both are large importers of key globally-traded agricultural commodities, often traded in US dollars, and both countries have experienced significant currency depreciation as supply constraints have intensified.
Since January, the Pakistani rupee (PKR) and the Egyptian pound (EGP) have depreciated 17.8%, and 15.8%, respectively, against the US dollar. These declines, when coupled with surging prices for dietary staples, like corn, wheat, and edible oils and key inputs, like fertilizer, have had a compounding effect on the price of food staples.
For example, last year, Pakistan, the world’s No. 2 importer of palm oil in 2021, imported 3.48 million tonnes of palm oil at an average price of USD$982 per tonne, approximately PKR 159,000 per tonne, using average 2021 exchange rates. But without even factoring in the 27.9% increase in palm oil prices since the beginning of this year, the cost of importing the same amount of palm oil is up 21.6% to PKR 194,000. Combined, these factors have brought a 43% increase in palm oil prices for consumers in Pakistan in 2022.
Similarly, in 2021, Egypt imported just over 366 million bushels of corn at a price of approximately USD$6.20 per bushel. In January, the most recent monthly data available, the price paid in US dollars was closer to USD$7.40 per bushel. The USD$6.20 per bushel paid in 2021 is approximately EGP 97.5 in the local currency, using 2021’s average exchange rate. Since the start of this year, assuming no change in the price of the underlying commodity, the price per bushel has shot up 18.8% to EGP 115.9.
In its Hunger Hotspots report, released today, the Food and Agriculture Organization of the United Nations and the World Food Programme warned that acute food insecurity is likely to deteriorate further in 20 countries through September.
With support from The Rockefeller Foundation, Gro Intelligence has launched the Food Security Tracker for Africa, the first publicly available interactive tool on key agricultural commodities for 49 African countries. The tool aims to create data transparency for countries where this has previously been lacking, in light of the unprecedented challenges connected to the current global food crisis.
Click here to download Gro’s Strategic Insight, Fuel for the Fire: The Russia-Ukraine War and Vegetable Oil Prices, to learn more about what’s driving global vegetable oil prices.