How global food security crisis impacts soft commodities

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.