The famous saying ‘don’t let the trees block the view of the forest’ seems to be coming true with inflation and this has been warned by one of the great voices of those that the markets listen to carefully. , founder and CEO of BlackRock, has warned that too much is being talked about oil and gasoline prices while paying no attention to the pressing risk of prohibitively priced food.
According to Fink, the dramatic rises in the prices of oil and other commodities following the Russian invasion of Ukraine have distracted investors from the more dangerous and lasting impact of food inflation. “The only thing that worries me and what is not talked about enough is food,” he said in a statement to the Financial Times. “It’s not just an inflation concern. There are also geopolitical concerns that stem from this.” The visible face of BlackRock.
Prices for energy, gasoline and oil-derived farm inputs soared earlier this year as Western nations imposed sanctions on Russia after the invasion. , since Ukraine is a large exporter of .
However, recently a change of slope has begun to take place. Oil has started to fall this week to pre-invasion levels as traders brace for a sharp decline in consumption (). Instead, food price inflation remains stubbornly high. They show that the price of chicken pieces and flour are each up about 20% year-on-year, and margarine is up 34%. Eggs follow closely, with a rise above 33% year-on-year.
“We talk a lot about gas prices because that’s what affects Americans, but the biggest problem is food,” Fink insisted. “There has been tremendous destruction of farmland in Ukraine… Globally, and that extra cost is reducing the amount of fertilizer used in agriculture. That is hurting the quality of the crop around the world,” he explains. the ‘first sword’ of BlackRock.
Although lower oil prices have started to affect the price of gas stations for motorists, consumer goods companies continue to see the high costs of inputs. Any decline in fertilizer prices is likely to come too late to boost this year’s food crops. The World Bank already predicted, after the invasion of Ukraine, that world food prices would increase by 20% this year, well above raw materials.
The impact is especially severe in Africa, which often imports grain from Ukraine as well as produces its own food. Fertilizer prices are up 300%, and the continent faces a shortage of 2 million metric tons, according to the African Development Bank. It has approved a $1.5 billion program to help farmers fill the gap, but warns that total production could fall 20% this year.
Danske Bank: “As a result of adverse weather conditions, fertilizer shortages and war-related sanctions and logistics disruptions in Ukraine, food prices have reached new all-time highs”
In Europe the situation is also worrying. “The increase in food price inflation in the euro area has been faster than usual and has exceeded the increase implied by increases in commodity prices, due to a combination of greater fixing capacity of prices, general increases in the costs of inputs and depreciation of the euro”, point out the economists of Danske Bank in a bulletin at the beginning of the month.
“As a consequence of adverse weather conditions, fertilizer shortages, and war-related sanctions and logistics disruptions in Ukraine and Russia, global food prices have reached new all-time highs. In the near term, we expect inflation to Eurozone food prices continue to rise over the summer and remain at levels above 8% for at least the rest of this year, as rising input costs continue to exert upward pressure,” added.
While some consumer product manufacturers and food retailers are hopeful that food price inflation will start to subside, others are bracing for the worst. Snack maker Mondelez is seeing so much inflation and “availability issues” from edible oils and grains that “we are looking at a flexible formulation to make sure we can substitute some ingredients and components that are in short supply with something that is more available,” the month said. past Luca Zaramella, financial director.
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