March 10, 2023

Big Mac Index – Top 10 Global Food Index you should know 

March 10, 2023

Big Mac Index
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Big Mac Index – Top 10 Global Food Index you should know  

 From McDonald’s iconic Big Mac to West Africa’s most popular dish – jollof rice, economists use many interesting Food Indexes to analyze the global economy.   

The logic is simple – if the price of a Big Mac, the world’s most popular burger, has increased in a region, that speaks to high inflation. If sales are up, it could mean higher consumer spending and disposable income – all indicators of a good economy.  

Today, we look at the global food index and share valuable information for all traders.   

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Big Mac Index – Top 10 Global Food Index you should know 

The state of global food staples  

The global economy is facing a dual combination of high inflation and high-interest rates. Interestingly despite what many of us might experience at the grocery stores, global food prices are down. The FAO Food Price Index dropped for an eleventh consecutive month to 129.8 points in February 2023. This is down 18.7% from a peak in March 2022.   

Vegetable oil prices were down 3.2% to the lowest level since the beginning of 2021. This is driven by lower world prices across palm, soy, sunflower seed, and canola oils. In addition, dairy prices dropped 2.7%, due to falling prices across all dairy products, with the steepest declines reportedly in butter and skim milk powder.   

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In addition, the costs for cereals and meat were down 0.1%, while sugar prices surged 6.9%, reaching the highest level since February 2017, reports the Food and Agriculture Organization of the United Nations.  

Top 10 Global Food Index  

There are various types of food indexes that have been created to measure different aspects of the food industry.  

These indices can be useful for comparing the relative purchasing power, industry concentration, and quality of life across different countries.   

Global Food Index – 10 you should know:  

  1. The Big Mac Index – This is an informal economic indicator that compares the prices of a Big Mac hamburger in different countries around the world.  
  1. The Pizza Index: Similar to the Big Mac Index, this index measures the price of pizza across different countries to compare purchasing power.   
  1. The Starbucks Index: This index compares the prices of a tall latte in different countries to measure the cost of living and currency valuation.   
  1. The KFC Index: This index compares the prices of a KFC bucket meal in different countries to measure purchasing power and inflation rates.   
  1. The Beer Index: This index measures the price of a pint of beer in different countries to compare purchasing power and currency valuation.   
  1. Jollof Index: – Similar concept to the Big Mac Index but it uses the price of Jollof rice to compare the cost of living in West African countries (I.e., Nigeria).   
  1. The Food Insecurity Experience Scale (FIES): This index measures the level of food insecurity in a household by assessing the frequency and severity of experiences related to food access, availability, and utilization.   
  1. The Global Food Security Index: This index measures the affordability, availability, and quality of food across different countries to assess their overall food security status.   
  1. Shisa Nyama Index: The Shisa Nyama Index is based on the price of a typical meal (I.e BBQ meat) at a local barbecue joint or restaurant in South Africa.   
  1. Cocoa Index: This index measures the degree of concentration in the chocolate industry by calculating the Herfindahl-Hirschman Index (HHI) for each country.   

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Big Mac Index – World’s most popular burger   

The Big Mac Index is an informal economic indicator that compares the prices of a Big Mac hamburger sold by the fast-food chain McDonald’s in different countries around the world. The index was first introduced by The Economist magazine in 1986 as a lighthearted way of comparing purchasing power parity between countries. Since then, the Big Mac has become the world’s most popular burger and an effective way to gauge the economy.  

The basic principle is that a Big Mac is a standardised product that is sold in many countries, and its price reflects the cost of ingredients, labor, rent, and other factors that influence the cost of living. By comparing the price of a Big Mac in different countries, one can get an estimate of how overvalued or undervalued a currency is relative to the US Dollar.    

The Big Mac Index is not a perfect economic measure as many factors can affect the price of a Big Mac, such as local taxes, trade barriers, and cultural preferences. Nevertheless, it is a simple and widely recognized way of comparing the purchasing power of different currencies.    

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Jollof index – Popular African dish    

The Jollof index is a similar concept to the Big Mac Index, but it uses the price of Jollof rice, a staple in many African nations, to compare the cost of living in different countries. Jollof rice is a popular West African dish made with rice, tomato paste, and spices. It is widely consumed across the region and the dish can vary tremendously depending on the country.  

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The Jollof index was first introduced by the Financial Times in 2017 to compare the cost of living in West African countries. Since Jollof rice is a staple food in the region its price reflects the cost of living and inflation – high prices for Jollof means low purchasing power for consumers.   

Like the Big Mac Index, the Jollof index is not a perfect measure of the cost of living, as many factors can affect the price of Jollof rice, such as local ingredients, cooking methods, and environmental factors (. However, it is a fun and useful way of comparing the relative costs of living across different countries in West Africa.   

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Shisa Nyama index – South Africans love BBQ/Braai   

The Shisa Nyama Index (aka Braai index) is another informal economic indicator used in South Africa to track inflation and assess the state of the economy. Shisa Nyama is a Zulu phrase that means “burn meat,” and refers to the tradition of barbecuing meat, usually beef or chicken, over an open flame. South Africa loves BBQ, called “Braai”, so much that the country has an international Braai Day.  

 

The Shisa Nyama Index is based on the price of a typical meal at a local barbecue joint or restaurant, which usually includes meat, pap (a type of cornmeal porridge), and vegetables. The index was first introduced in 2012 by the market research firm, Ask Afrika, as a way of tracking changes in the cost of living in South Africa.   

The index is based on the assumption that since BBQ is a popular and affordable meal in South Africa, its price reflects the state of the economy. Changes in food price such as the current rise in the price of potatoes in South Africa affects the purchasing power of consumers.   

While the index is not as widely recognized as the Big Mac Index or the Jollof Index, it is a useful and unique way of tracking inflation and assessing the state of the economy in South Africa.   

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