Food prices in the US are expected to continue to rise in 2022 due to the war in Ukraine, the Association For Convenience & Fuel Retailing (NACS) has said, citing a report in the US-based newspaper The Washington Post.
The association said that food products that use cooking oils, aluminium packaging, or commodity grains such as wheat, will have a higher price tag and limited availability.
Additionally, Russia is a major producer of fertiliser and other agricultural chemicals, and the conflict could impact American agriculture.
Increase In Food Prices
Patrick Penfield, professor of practice in supply chain management at Syracuse University’s Whitman School of Management, said, "We knew the first two quarters of 2022 were going to be rough coming out of COVID-19, with the addition of some weather events.
"But the thinking was that this would subside by the third quarter and inflationary pressures would go down. But that’s all off the table now."
Penfield predicts that food prices, which were already increasing, will rise further in the next month, and reach double-digit inflation by the end of the year.
Since 25 February, wheat futures were up 29%, while corn increased by 15% and soybean futures by 6%.
The pressing issues are energy prices and fertiliser prices, according to Penfield, who warned that "farmers are going to see increased costs across the board."
'Return To Price Stability'
Federal Reserve chairman Jerome Powell said the Fed will set its policies based on "actual progress" in resolving supply issues that cause the rise in food prices instead of models and forecasts.
The Federal Reserve is also open to increasing interest rates faster so the economy can have a "soft landing," reports Axios, an American news website.
The Fed will "will take the necessary steps to ensure a return to price stability," Powell said.
He also said rates could surpass the "neutral" rate, which is around 2.4%, and anything above that tends to restrict economic activity.
"It continues to seem likely that hoped-for supply-side healing will come over time as the world ultimately settles into some new normal, but the timing and scope of that relief are highly uncertain," said Powell.
In response to Powell’s more aggressive tone on stemming inflation, US stock futures and government bond yields gained.
S&P 500 and Dow Jones Industrial Average futures advanced 0.4% and 0.5%, respectively, this week.
The yield on the 10-year US Treasury note jumped to 2.359%, from 2.315%.