The main factors that led to the increase in food prices

 Qatar National Bank (QNB) confirmed - in a report - that the world is currently going through a severe stagflationary recession, with inflation rates reaching their highest levels in decades and slowing economic growth in most major advanced economies.

The report considered that the significant rise in food prices is an important factor in increasing headline inflation rates in many countries, including most major advanced economies.

He stressed that central banks usually ignore changes in food and energy prices, because they are volatile and tend to be driven by factors on the supply side, and thus central banks have no control over them.

“Central banks can no longer ignore this given the magnitude of the current impact of food prices on inflation, so central banks are now tightening monetary policy in response to higher overall inflation, including higher food and energy prices, rather than their usual focus on inflation,” the report added. basic".

The weekly report of the Qatar National Bank indicated that Spain and Germany are currently experiencing food price inflation of more than 10%, compared to an inflation rate of just under 4% in Japan.

The report focused on the four main factors that led to the current rise in food prices in various countries:

• High oil and gas prices.
• Weather Effects.
• Labor shortage and wage growth.
• The war in Ukraine.

The effect of oil on food prices:

The report pointed out that oil and gas prices contribute to the rise in food prices in various ways. Fertilizer production consumes energy intensively, and as a result, fertilizer prices have risen significantly, and food cultivation requires the use of fertilizers to replace the nutrients used in the soil, and therefore fertilizer prices directly affect on food prices.

Fuel and energy prices also contribute to food price inflation through their impact on the cost of food, its processing and transportation.

"If oil and gas prices remain elevated, as we expect, they will continue to increase upward pressure on food prices," the report added.

Weather Effects:

Addressing the weather factor, the report noted that bad weather, including droughts in the United States and Brazil, led to lower yields and higher prices for wheat and soybeans.

Similarly, heavy rains in China and unusually hot weather in India affected the wheat yield and prices.

The report stated that the weather is difficult to predict, but it is widely recognized that climate change is causing more frequent and extreme weather conditions, and this will continue to put upward pressure on average food prices.

Migrant labor flows:

Regarding the third factor, the report indicated that migrant labor flows have not yet returned to pre-pandemic levels. 

The agricultural sector in particular depends on immigrant labor heavily, which contributes to labor shortages in many advanced economies, which in turn increases costs through higher wages and lower productivity.

However, the report expected that migrant flows would recover as the pandemic continued to recede, and that upward pressure from labor shortages would abate.

The war in Ukraine:

Regarding the last factor, the report noted that the war in Ukraine had deteriorated expectations regarding some of the above factors, particularly with regard to the rise in oil and gas prices. In addition, Russia and Ukraine account for 28% of the world's wheat exports and 55% of the world's sunflower oil exports.

The report notes that the war has caused widespread destruction of crops in Ukraine, as well as disrupting or completely preventing exports through the Black Sea ports.

Even with an immediate ceasefire - the report says - the current turmoil will greatly affect this year's harvest, and will continue to have a negative impact next year. Therefore, the war is leading to significant and continuing upward pressure on food prices.