How global food security crisis impacts soft commodities

Heads of global agencies are calling for urgent action to address the global food security crisis, as the number of acute food insecure people rose to 345 million in 82 countries as of June. Tedd George, Chief Narrative Officer at Kleos Advisory, joins CNBC Africa to discuss how this impacts the soft commodities market.

Mon, 18 Jul 2022 14:29:43 GMT

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The global food security crisis has led to soaring prices of essential commodities despite a slight decrease from the crisis earlier this year, impacting livelihoods and exacerbating inflation challenges.
Central banks are implementing tightening measures to combat inflation, but countries in West Africa, reliant on imported food, face significant economic strains as global commodity prices surge.
Initiatives such as the living income differential for cocoa farmers aim to improve farmer livelihoods and sustainability in soft commodity production, highlighting the need for incentivizing sustainable practices in agriculture.

The global food security crisis has reached a critical point with the number of acute food insecure people rising to 345 million in 82 countries as of June this year. Ted George, Chief Narrative Officer at Kleos Advisory, shed light on how this crisis is impacting the soft commodity market, especially in Africa. While the price crisis that followed Russia's invasion of Ukraine earlier this year has somewhat receded, prices of essential commodities like wheat, maize, and sunflower oil still remain significantly high. These prices had skyrocketed by up to 100% due to disrupted supply chains and increasing demand, creating uncertainties in the market. The inflation challenge, driven by rising input prices and fuel costs, further exacerbates the situation. Central banks globally are responding with tightening measures, but the impacts are felt across various commodity-producing regions, especially in West Africa. The region is particularly vulnerable due to its reliance on imported food at record-high prices. Countries like Nigeria, a major agricultural producer, have been urged to address the crisis and enhance farmer livelihoods to boost production. The living income differential approach for commodities like cocoa, where companies pay farmers a premium for sustainable production, presents a step towards improving the economic well-being of farmers. However, the challenge lies in determining the sustainability criteria for receiving this premium and ensuring its feasibility in the long run. Looking ahead, the African Continental Free Trade Area (AfCFTA) offers a glimmer of hope for export diversification and enhancing cross-border food value chains. With the potential to improve marketing infrastructure and streamline trade processes, the AfCFTA can pave the way for expanded food markets and increased food security in the region.