Azerbaijan Sees Food Price Hikes Despite Global Declines in Key Commodities

In a troubling trend, food prices in Azerbaijan continued their upward trajectory in July 2024, with a 2% month-on-month increase, even as global commodity markets experienced notable declines. This discrepancy highlights the complexity of the country’s food supply chain and raises concerns about future inflationary pressures, especially for essential goods such as cereals, oils, and sugar.

While global grain prices fell by 3.8% in July, driven primarily by a 7% drop in wheat prices, Azerbaijan's consumers saw the opposite effect, agro-expert Vahid Maharramov notes in the article. Prices for cereals and flour products rose, defying global trends. Analysts attribute this divergence to a range of factors, including supply chain inefficiencies, import dependencies, and the country's vulnerability to global market volatility.

In the dairy and meat sectors, Azerbaijan also faced moderate price hikes in July. Butter and vegetable oil prices increased by 0.5%, sugar by 0.1%, milk and dairy products by 0.1%, and meat by 0.4%. The increases, although modest, add pressure to household budgets at a time when other nations are seeing relative price stability or declines in these categories.

The United Nations Food and Agriculture Organization (FAO) issued a report in July forecasting reductions in global production of both vegetable oil and sugar. The report pointed to potential price escalations as global supply constraints tighten, particularly affecting countries like Azerbaijan, which imports over 90% of its vegetable oil and sugar. These impending shortages, combined with Azerbaijan's reliance on imports, suggest that the country may face further price hikes in the coming months, exacerbating the cost of living for ordinary citizens.

Further complicating the issue is the stark disparity between global and domestic prices for key food items. Research indicates that milk prices in Azerbaijan are twice as high as global averages, sugar prices are 2.4 times higher, and sunflower oil prices are a staggering 3.4 times above international market rates. These discrepancies underscore the challenges facing Azerbaijan’s domestic market, where high import costs and local pricing strategies are contributing to disproportionately inflated prices compared to global benchmarks.