Food groups

Global food prices ended the year at the highest in half a decade, propelled by swine shortages and rising vegetable-oil demand across the world.

The 13% annual gain in the United Nations’ food index marks a turnaround from recent years, when grocery bills were kept in check by surpluses of grains and meat. Now, unprecedented pig-disease outbreaks have rattled pork producers across Asia and palm oil prices surged, adding to a rally across oilseeds.

The higher bills for consumers have stoked inflation in economies from Asia to Africa to South America in recent months, and the supply crunch for some commodities may extend into this year. The African swine fever situation in China “is still severe and complex,” and a race to boost herds risks worsening the crisis, a government official said this past week.

Plus, a drawdown in Malaysian palm oil inventories probably continued in December.

Here’s a breakdown of some of the factors fueling higher food prices:

Meat markup

The UN’s gauge of meat prices jumped 18% last year, the most since 2010. China’s hog herd, the world’s largest, has been cut in half as the nation grapples to contain African swine fever, and many neighboring nations have also been rattled by the disease.

That led to a boom in demand for imports from suppliers like Europe, a region also fighting to stop the virus spreading. European Union pork sales to China swelled 63% in the first 10 months of 2019.

Vegetable oils sizzle

Rising biodiesel demand and supply concerns lifted vegetable-oil prices from their mid-year doldrums. Prices for palm, the most-consumed cooking oil, were a standout as Malaysian futures capped the largest annual gain in a decade.

China’s shrinking hog herd also spurred soybean processors to crush less for livestock feed, reducing local soy-oil supply. Other oilseeds from rapeseed to sunflowers were also lifted by tightening markets.

Milk’s pickup

Dairy prices advanced for the first time since 2016, as milk output steadied across some key shippers. Drought and hot weather plagued producers in Australia, Argentina and Europe, according to the U.S. government. Plus, some U.S. farms shut down after years of floundering prices. Import demand for cheese is also on the rise, fueling gains for dairy prices last month.

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