The Right Food Price Hotspots to Worry About

(1 March 2020) The recent rise in global food prices poses a direct threat to many countries and millions of households around the world.  In its recent article on the subject Bloomberg named five such "hotspots" — Russia, India, Brazil, Turkey,  and Nigeria. According to Bloomberg, the acceleration of food price inflation in these countries has the potential not only to exacerbate food insecurity for families but to transfer to social protests.

Looking deeper at the most recent data on food inflation in the five hotspots, and investigating the domestic patterns of supply and consumption of one of the most important food commodity groups, grains, we analyze how vulnerable Bloomberg's hotspots really are to food inflation.

• First of all, Nigeria. Food inflation there topped 20% year-over-year at the end of 2020. Because of the high dependency on imported food, and the almost 60% share of the budget spent on food in the average household, this country is ranked among the top 10 in Knoema's Grain Price Vulnerability Index. The decline in oil exports, depreciation of Naira, and growing unemployment fueled record-high incidents of political and social unrest in 2020.
• Turkey, Brazil, India, and especially Russia can hardly be counted among hotspots. Food inflation in Brazil, India, and Russia increased to approximately 10% year-over-year in recent months — a level that is not unusual for these countries and is rarely associated with social protests among the population. In Turkey, food inflation topped 20% in Nov–Dec 2020 (again, far from a record high in this country). But the share of expenditures spent on food in the average household budget is only 21% — only a third compared to the share spent in Nigeria, leaving room for the population to adapt to higher food prices through the shift in the commodity basket.
• According to Knoema's Grains Price Vulnerability Index, which shows how vulnerable a given country is to the acceleration of grain prices, India, Russia, Brazil, and Turkey are among the less vulnerable countries. High self-sufficiency in food and agricultural products, a moderate share of expenditures on food in household consumption, and protection of domestic markets through local currency devaluation in 2020 create conditions for further import substitution, rather than for growing protest activity in these countries.