The high inflation of recent years can be compared to the 1970s, although it was a very different economy. Central banks raised interest rates in both periods to contain the headline rate. In contrast to the past, food inflation has not eased this time around. This article will address the underlying reasons.
The food picture is complicated for much of the world, especially for vulnerable countries, by two particular factors: the fall in population income that the pandemic has produced and the confinement of the world's economies.
Food trade has become more complicated in terms of distribution networks, leading to higher food prices. This crisis has put the costs and benefits of food dependence on the free market into perspective.
How food is produced and distributed is in question since most countries have the capacity to produce food themselves and do not need to rely on long supply chains to feed their people.
The slowdown in economic activities impacted manufacturing production linked to the world market, and likewise food processing and distribution. The world is approaching a food consumption crisis. There are growing problems in the production and distribution of basic foods that are widespread.
The effect of the economic and production slowdown caused by COVID-19 has been a rise in food prices and in the prices of basic goods, which, however, is not reflected in consumer price indices, in general, due to the strong deflation of fuels and other raw materials.
With the economic rationale of free markets, free international food trade became more profitable and the notion of food security was abandoned. We now see the consequences on prices and the risks on the lack of supplies
