UN: Food costs rising at fastest rate in a decade

On an annual basis, food prices rose by 39.7% in May - the largest increase since October 2010.

Global food prices rose at their fastest monthly rate in a decade, according to the United Nations.

The UN uses a broad index of global food costs, which has risen for 12 consecutive months.

Suppliers have been affected by disruptions in production, labour and transport during the pandemic.

Concerns are growing about broader inflation and how higher supermarket and grocery bills will affect the global economic recovery.

The UN Food and Agriculture Organization's (FAO) Food Price Index tracks the prices of a range of foods around the world, including cereals, oilseeds, dairy products, meat and sugar.

On a year-on-year basis, food prices rose by 39.7% in May - the largest increase since October 2010 - according to the index.

All five components of the index increased, driven by the rising costs of vegetable oils, cereals and sugar.

This pushed the index to its highest overall level since September 2011.

The increased costs are the result of heated demand in some countries and delays due to low production.

Market and supply disruptions due to traffic constraints have created local shortages and higher prices.

Experts had warned that high demand and low output will lead to higher inflation as economies come out of lockdown.

However, some industries could see a strong recovery. The FAO is forecasting record global cereal production this year, which could help decompress prices.

What is inflation

Inflation is the rate at which the prices of goods and services rise.

In addition to prices for goods and services, it affects interest rates and therefore loans and mortgages and is used to set many prices, such as train tickets.

It is one of the keys to economic prosperity because it affects what consumers can buy with their money. If there is inflation, money doesn't go very far.

However, low inflation usually encourages people to buy goods earlier and makes it easier for companies to raise wages. Both of these things boost economic growth.

The central banks of most countries have an inflation target of between 2% and 2.5%.

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