The world is facing a new wave of food price increases, driven by conflicts in Iran and Ukraine and the effects of El Niño, which are causing both higher costs and lower crop yields, according to the chief economist of the United Nations Food and Agriculture Organization.
While food prices were a major factor in the rise of global inflation in 2022, they have been relatively stable this year, even helping to ease some of the inflation caused by soaring energy costs. However, this calm might not last much longer. Factors such as rising crude oil prices, a decline in fertilizer supply from the Gulf region, diesel shortages in certain areas, and extreme weather conditions are likely to push costs up, eventually affecting consumer prices.
Maximo Torero, the chief economist, shared his predictions with Reuters, stating that he expects food prices to start rising by the end of this year and continuing into the next. “There’s usually a delay of three to six months from when commodity prices rise to when food prices follow suit,” he explained.
Although commodity prices like wheat and corn have seen some increases recently, the overall good harvests so far have kept prices stable. However, Torero noted that disruptions in the Strait of Hormuz impact agricultural inputs, affecting everything from processing to transportation. Meanwhile, the ongoing conflict in Ukraine is harming Russia’s oil and gas exports, which are crucial for food production.
These global commodity price shifts create challenges everywhere, affecting richer countries just as they do poorer ones. “You can see this situation in Europe, the US, Brazil, and Asia,” Torero indicated, adding that slim profit margins are making it hard for farmers to decide what to plant.
In the US, where most agricultural inputs are available, farmers are still facing significant financial pressures. Without federal support, those growing nine major crops could lose up to $32 billion by 2027, according to the American Farm Bureau Federation. Every crop analyzed is expected to stay below the break-even point by then.
The initial months of the Iran conflict have already led to reduced planting of wheat and corn globally, with some US farmers switching to soybeans, which need less fertilizer. In Australia, a leading crop exporter, winter crop production is projected to drop by 21% due to rising fuel and fertilizer prices and uncertainty over key supplies.
Additionally, this year’s El Niño weather phenomenon is expected to be particularly strong, altering rainfall patterns and potentially raising commodity prices. In India, the monsoon has been delayed, and below-average rainfall is expected this month, which could negatively impact rice production and drive up global prices.
