Global food prices are starting to come down after the novel coronavirus pandemic coupled with Russia's invasion of Ukraine caused a rapid food price hike, sending shock waves across the world.
According to the Food and Agriculture Organization (FAO), the global food price index registered its steepest monthly fall in July since October 2008.
The July data reflect the fourth consecutive monthly decline, which some analysts view as the start of the end of the global food crisis.
However, the food price index remained 13 per cent above its value in the corresponding month last year. This means that the world is not out of the woods just yet as prices have not normalised to pre-pandemic levels.
But the price reductions haven't reached Jamaican consumers as yet. In fact, Jamaican consumer prices increased at a rate of 0.8 per cent in June, led by a 1.7 per cent increase in the food category.
It's an indication that the price reductions being witnessed at the global level may not be passing through to the local market as quickly as many would hope.
Former president of the Jamaica Manufacturing and Exporters Association (JMEA) and president and CEO of Seprod Group Richard Pandohie told the Jamaica Observer that, "Over the last three to four months there's certainly been a softening in prices of commodities on the global market. We've seen the Russian-Ukraine deal, with wheat finally being exported this week from the Black Sea port, so that has already had an impact on wheat prices and we're all hopeful that nothing untoward will happen and this will continue. In the case of Seprod, we expect to be getting lower wheat prices by September when the next set of shipment comes in and then that should be reflected immediately in the prices to consumers."
And it's not just wheat, Pandohie stressed that other grain and commodity prices have also been more favourable.
"Other major commodities, such as vegetable oil, we have definitely seen a decline compared to the extremely high price about four months ago. They are still significantly above last year, but the good news is that the prices are softening." In addition, he said "the consumers are under pressure and this is potential good news in terms of lowering our prices. I am one of those who believe that we are at peak food inflation right now and I expect to see the food prices start coming off. By the end of September/October we should start seeing prices pass through the trade to the consumers and this will reflect in lower food inflation going forward."
He admitted that producers have traditionally been slow to lower prices but cautioned against that practice in this case, arguing that lower prices are necessary to improve consumer demand.
"Consumers should expect and definitely demand by September to see these reflected in their grocery shopping. The same way we all reacted and move prices up, we should also react with the same level of urgency to move prices down, and we want to do that because consumers are struggling. As a result, they are not purchasing the way they used to, so the demand is falling and that is not a good thing for any business. So we want the price to come down so we can pass it on to the consumers and keep the economy churning that way," he explained.
"Ship costs are pretty much stable. Definitely out of China they've fallen from like US$17,000 for a 40-ft container to like US$12,500 now. So the prices are going the right way in terms of going down right now," he added.
When contacted by the Sunday Finance, the Consumer Affairs Commission (CAC) admitted that, "The World Bank Pink Sheets show that HRW Wheat prices dropped by 27 per cent between May and July 2022. The products likely to be impacted are flour and bread. However, the average price of bread jumped by 8 per cent (US$33) from April to May 2022 and has remained relatively constant since then. Regarding flour prices, the average price has not decreased but has increased incrementally each month, resulting in a 6 per cent (US$9.74) increase between May and July 2022."
In the meantime, the price reductions being seen on the FAO food price index may not last very long.
Agricultural commodities strategist at JPMorgan Chase, Tracey Allen, told CNN that the outlook for food prices is still really delicate.
Furthermore, the drop in prices is a result of investor confidence, following an agreement by Russia and Ukraine to restart wheat exports.
In the same vein, oil prices, which is also a factor in the ultimate price of food, has also been on the downward trend.
The price of oil surged in early March following Russia's February 24 invasion of Ukraine. At that time prices went as high as US$120 a barrel, prices are now at US$89 per barrel â€“ a 25 per cent drop since June.
Lower oil prices have been supported by an OPEC+ agreement to increase the global supply of oil by 648,000 barrels a day in July and then again in August to ease demand in the global oil market.
Russia is one of the major oil-producing nations in the world, while Ukraine is one of the largest wheat and fertiliser producers globally.
The war has therefore impacted the global market for these commodities, which made investors nervous and sceptical.
With regards to oil prices, Pandohie told the Sunday Finance, "The reality is that our oil price is really determined by Petrojam's ex-refinery prices. Despite what we've seen in the global price falloff, that hasn't translated yet to our market. We're having these $0.25 reduction every week, which is nothing compared to the increases that went on. So the distribution cost and utility cost is still very high, but we're hoping that at some point in time the people doing the pricing at Petrojam will put a $2.00 instead of $0.25, maybe they are just missing a decimal point."