Jun 14, 2021 (Nikkei) - The impact of the soaring prices of agricultural staples from wheat to vegetable oils to sugar over the past few months is now hitting consumers and businesses in Asia.
Food manufacturers are offloading higher prices to households, which is weighing on consumption and potentially subduing any economic recovery from the COVID-19 pandemic in some countries. Some exporters and farmers are, however, benefiting from the favorable market conditions.
The benchmark food price index published by the United Nations' Food and Agriculture Organization (FAO) -- which tracks the prices of meat, dairy, cereals, vegetables oils and sugar -- rose for the 12th consecutive month in May to 127.1, hitting the highest level in nearly 10 years. May's figure was 40% higher than a year ago.
A combination of several factors drove the price surge. Demand in China, one of the world's biggest food importers, has been strong as the country has recovered from the pandemic at a faster rate than most of the rest of the world.
Higher marine shipping costs stemming from a shortage of containers and supply chain disruptions is another factor. The FAO also blamed supply-side issues such as harvest delays and reduced sugar cane yields in Brazil.
Moreover, commodities prices have been boosted by investment money flowing into the market as investors diversify risks amid high liquidity in the financial markets.
Against such a backdrop, Asian food manufacturers are hiking their prices to offset the higher costs of raw materials. Major food importers such as Japan, South Korea and China are seeing the impact.
Japanese flour miller Nisshin Seifun Group will raise the prices for wheat flour products for households by 2% to 4% in July. The company said it could not absorb the higher raw material prices as well as rising logistics and packaging costs. Food manufacturer Ajinomoto will also raise its mayonnaise prices by 1% to 10% next month, citing higher edible oil prices over the past few months.
