Soaring Consumer Food Prices

Here are four facts why the food prices increase during the pandemic, according to this article (verbatim):

Fact #1: Food price inflation started increasing before the pandemic.

Fact #2: Early lockdown measures and supply chain disruptions induced a spike in consumer food prices.

Fact #3: Soaring shipping and transport costs.

Fact #4: Global food producer prices have rallied reaching multi-year highs.

Excerpt:

"Outlook

Based on the four facts presented, it is plausible that consumer food price inflation will pick up again in the remainder of 2021 and 2022. Indeed, the recent sharp increase in international food prices has already slowly started to feed into domestic consumer prices in some regions as retailers, unable to absorb the rising costs, are passing on the increases to consumers. More is likely to come, however, since international food prices are expected to increase by about 25 percent in 2021 from 2020, stabilizing in 2021. A pass-through of 20 percent (13 percent in the first year and 7 percent in the second) would, thus, imply an increase in consumer food price inflation of about 3.2 percentage points and 1.75 percentage points on average in 2021 and 2022, respectively. An additional 1 percentage point to the 2021 global consumer food inflation could be added by the higher freight rates."  

Note: For my PhD thesis, I estimated the pass-through of PPI to CPI. Glad to see that the estimate was quite close. Time to re-visit exchange rate pass-through.

Source: IMF Blog