Dangerous Duo: COVID-19 and Food Price Inflation Unwinding Progress on Global Poverty

(22 December 2020) Eliminating global poverty can sound like an impossibility for some perfect world akin to a wish for world peace, but millions globally face this as a matter of daily survival. Now, COVID-19 and market conditions that are driving food price inflation have spilled over as direct threats to food security and decades of progress to reduce poverty. The FAO Global Food Price Index reached a 6-year high during the September-November period, propelled by increasing prices of critical food commodities including cereals and oils.

• In November 2020, the FAO Global Food Price Index increased 6.5 percent y-o-y. Prices for cereals and oils jumped 19.9 percent and 30.8 percent, respectively.
• According to the FAO, grain prices were affected by the downward revision of harvest estimates in Argentina, the United States, and Ukraine amidst simultaneous rising demand from China. Palm oil prices were particularly affected by a sharp contraction in world inventories.
• The FAO estimates that 45 food deficit countries, 34 of which are African, now require external food assistance. 
• Assuming the World Bank's expectations are anywhere near correct and the COVID-19 pandemic will push an additional 88 million to 115 million people globally into extreme poverty this year, rising food prices will only exacerbate food security risks, likely beyond those at most peril now among low-income grain importing countries such as Egypt, Iran, Algeria, and Tunisia.