Thoughts on food inflation

The World Bank recently stated in a report that there is still a high level of domestic food price inflation worldwide. The increase in global food prices has been  attributed by some media sources to the ongoing Russian-Ukraine conflict (see for example, this CNN article) since both countries are significant producers and exporters of wheat, which can affect the prices of bread, pasta, and other food items worldwide.

However, if you take a more detailed analysis of the data, it suggests that other factors besides the underlying commodity prices could be contributing to the rise in food costs around the globe.

For starters, wheat prices (as represented by CBOT futures) have settled back to pre-invasion levels as the market redistributed the available supplies and an agreement was reached to maintain the flow of wheat through the Black Sea. Wheat futures are currently traded at almost 20% lower than their pre-invasion levels.