October 28, 2022: Global News Roundup
Persistently high food and fuel prices contribute to mounting global unrest
This post was originally published on IPEwithSBB.org.
The Global News Roundup collects news stories from entirely international (non-US) media sources on variety of pressing global political and economic issues and events.
Regular and affordable access to basic necessities like food and fuel is a necessary condition for social, political, and economic stability. World news this week firmly underscored this fundamental point. “Domestic food price inflation remains high around the world. Information between May to September 2022 shows high inflation in almost all low-income and middle-income countries; 88.9% of low-income countries, 91.1% of lower-middle-income countries, and 96% of upper-middle-income countries have seen inflation levels above 5%, with many experiencing double-digit inflation,” reported the World Bank in a recent food security update. As I reported a couple of weeks ago, cereal grain prices are ticking back up again, having risen a full percent on average globally during just the first two weeks of October, with average wheat, maize, and rice prices up 18%, 27%, and 10% since October 2021. The Bank also reports that fertilizer prices are rising again, with continued knock-on effects expected in food markets.
In response to protests in the Santa Cruz region, the Bolivian government on Wednesday temporary halted exports of certain foods, including several soy products, beef, sugar, and cooking oil. In Sri Lanka, thousands of people protested outside of the capital in Colombo on Thursday: “The cost of living is soaring, food inflation is topping 90 percent, and people are really, really struggling.”
In Haiti, where even during better times large portions of the population struggled with access to food and drinking water and fuel, the situation has “dangerously deteriorated”. Half of the population of Haiti currently faces “acute huger”, reaching “catastrophic” levels in parts of the capital city Port-au-Prince. In September, “heavily armed gangs” took control of the country’s main fuel terminal in protest of the government’s decision to cut fuel subsidies. The lack of fuel is compromising clean water supplies, raising concerns about cholera outbreaks, as well as leading hospitals and clinics to close. Violence is rampant. Just last week, Haitian Foreign Minister Jean Victor Geneus spoke before the UN Security Council, pleading for international assistance: “I have the sensitive mission of bringing to the Security Council the distress call from the entire people, which is suffering, and to say loudly and clearly that the people of Haiti are not living, they are surviving.”
But the rising cost of living is quickly becoming unbearable in wealthier countries, too, for example, with recent unrest over energy prices in France, Germany, and the UK. The BBC reported last week that energy protests are ongoing in at least 90 countries around the world on every continent except Antarctica, including at least 600 fuel protests in middle-income Indonesia and 200 in high-income Italy this year alone. For its part, Ecuador saw 1,000 fuel protests just during the month of June (the animated map of fuel protests is definitely worth checking out).
The role of US monetary policy in aggravating price inflation has been front and center in a lot of recent reports on the food and fuel crises. The US dollar has been rapidly appreciating since the central bank started raising interest rates last March, putting additional upward pressure on food import costs (many traders and exporters demand payment in dollars, and dollars get more expensive as US interest rates rise). As India’s Economic Times reported, “Food importers from Africa to Asia are scrambling for dollars to pay their bills as a surge in the US currency drives prices even higher for countries already facing a historic global food crisis.” The World Food Programme reported that in Lebanon, where “the local currency’s sharp decline is paralyzing people’s purchasing power”, “the Lebanese Lira reaches a new record low each day propelling food price increases”. In Pakistan, recent depreciation of the local currency against the dollar, combined with the local “dollar crunch”, has resulted in fewer food imports (because most exporters want to be paid in dollars), creating shortages tomatoes, onions, and potatoes (recall also that Pakistani agricultural production was set back this year by massive floods). Similar problems with the dollar have been reported in recent months in St. Vincent, Egypt, and Ghana, among many other developing countries that rely on imported food. In its recent analysis of food trading in Sub-Saharan Africa, the IMF found that “a 1 percent depreciation in real effective exchange rates increases the price of highly imported staples by an average 0.3 percent”. While also pointing to the Ukraine war and the covid pandemic, even the BBC pointed to the central role of the dollar: “The US dollar is at an all-time high against other major currencies; the pound, the euro, China's yuan and the Japanese yen. The oil used to make petrol is paid for in US dollars. So a weak local currency against the dollar makes fuel even more expensive.”
Things I’m keeping an eye on:
1. International diplomacy: It was really nice to see some successful international diplomacy in the news this week. Following two years of war, Ethiopia-Tigray negotiations began in South Africa. Armenia and Azerbaijan may be headed soon into Russian-brokered diplomatic negotiations. And, Israel and Lebanon, which have formally been at war since 1948, signed a “historic maritime border deal” brokered by the US. In related news, a group of Democratic members of the US Congress wrote to President Biden to encourage diplomatic talks with Russia over Ukraine, but ultimately withdrew their letter the next day.
2. Germany reaching out to China about economic cooperation. Given the US’s recent moves to undermine Chinese semiconductor production and extensive European dependence on the Chinese market (see last week’s post), as well as growing tensions in the EU about whether to stand with the US on the China issue, I’m curious about what happens as the prospect of conflict over Taiwan places presure on traditional trans-Atlantic alliances.
3. Food production: Recent news on global food production has been mixed, with some serious constraints on production, but also some bumper harvests. In Indonesia, one of the world’s largest palm oil producers, prices are on the rise again owing to reduced output on the back of heavy rain and flooding (roughly 20% increase for November deliveries); a re-imposition of export taxes by the government seems likely. Pointing to the danger of food production problems for producers as well as consumers, wild weather has “wiped out” the Australian potato crop: “It has been predicted the damage to potato crops is in the high millions, leaving farmers struggling to make ends meet.” In the US, harvest data was a mixed bag for corn and soy, as recent weather patterns created uneven effects on crop yields across the Midwest. A bumper coffee crop in Brazil is holding prices near a 13-month low, which is good for global consumers but potentially difficult for producers. Between January and September 2022, Brazil exported 180 million tonnes of food to the world, including 3.5 billion kilos of chicken protein, pointing to the country’s critically important (and growing) role as a global food powerhouse. And, this week, sheep took over the streets of Madrid as they migrated south to find warmer (and greener) pastures. The image below from Madrid is delightful:
