We should worry about food prices more than gas prices, BlackRock’s Fink warns.

BlackRock founder Larry Fink warned that the oil and mineral price spikes following Russia’s invasion of Ukraine have distracted investors from the longer-term and more dangerous impact of food inflation.

“The only thing I worry about is that we don’t talk enough about food,” he told the Financial Times. “It’s not just about inflation. This is where the geopolitical concerns come from.”

Prices for energy, gasoline and agricultural inputs soared earlier this year as Western countries imposed sanctions on Russia after the invasion. The cost of grain and edible oil has also been hit hard because Ukraine is a major exporter.

Oil began to fall this week to pre-invasion levels as traders brace for a sharp drop in consumption. But food price inflation remains stubbornly high. U.S. CPI data for June shows chicken parts and flour prices rose almost 20 percent year-on-year, while margarine prices jumped 34 percent.

“We talk a lot about gas prices because it affects Americans, but the bigger issue is food,” Fink said. “There has been huge destruction of arable land in Ukraine… Worldwide, the cost of fertilizer has increased by almost 100 percent, and these additional costs are reducing the amount of fertilizer used in agriculture. This harms the quality of crops around the world.”

Larry Fink

Larry Fink: “It’s not just about inflation. It also raises geopolitical concerns.” © Bloomberg

Even as lower oil prices have begun to affect gas station prices for motorists, consumer goods companies continue to face high production costs. Any drop in fertilizer prices is likely to come too late to boost this year’s food crop.

The World Bank a post-invasion forecast that global food prices would rise 20 percent this year, well ahead of raw materials.

The impact is particularly heavy in Africa, which routinely imports grain from Ukraine and also produces its own food. Fertilizer prices there have risen by 300 percent and the continent is facing a 2 million metric ton shortfall, according to the African Development Bank. He approved $1.5 billion program to help farmers fill the gap, but warns that total production could fall by 20 percent this year.

Janet Yellen, U.S. Treasury Secretary, said on Friday the world is going through “an extremely difficult time for global food security” and called on the G20 group of leading countries to end hoarding and export restrictions on food and provide more financial assistance to nations and countries. people fighting food insecurity.

Bill Gates, a philanthropist and co-founder of Microsoft, expressed similar concerns this week, saying that cuts in supplies of wheat, vegetable oils and other food items caused by the war in Ukraine “raise food prices, leading to increased malnutrition and instability.” in low-income countries.” In a blog post, he noted that “much more investment” is needed to increase agricultural productivity in Africa.

While some consumer goods manufacturers and food retailers are hoping food price inflation will start to ease, others are bracing for the worst.

Snack maker Mondelez is facing such high inflation and “availability issues” for edible oils and cereals that “we are looking into flexible formulary to make sure we can replace some ingredients and components that are in short supply with something more affordable.” — Luca Zaramella. , the chief financial officer said last month.

General Mills is forecasting a “significant rise in manufacturing cost inflation” to 14% for the fiscal year that began in June. CEO Jeff Harmening said last month that home baking maker Cheerios, as well as Pillsbury and Betty Crocker, expects to see “a decline in consumer spending power.”