The world has been witnessing historic highs in food prices in recent years. According to the United Nations Food Price Index, in 2021, the cost of vegetable oil rose 34%, sugar 20%, meat 17%, and cereals 13%. Due to the increasing energy and food prices, inflation in the United States has soared to 8.5%, a 40-year high. On the other side of the world, in Turkey, inflation has hit 73%, the highest in 23 years, and the price of 2.2 lbs of green plum – once a cheap delicacy for working-class citizens – sits at a staggering 750 Turkish Lira ($47-$51 USD).
The reason behind these rises can be attributed to the food supply chain: the processes involved in producing, distributing, and retailing food. When it comes to the supply chain, the math is straightforward: the higher the food production costs, the higher the food prices. The supply chain costs, from sowing the seeds to delivering the food to customers, have been soaring, which has contributed to a rise in food costs.
But, why are supply chain costs actually going up and causing food prices to surge? Will this bring about a global food crisis? And will food prices go back down anytime soon?
An Unprecedented Pandemic
The lockdowns and other restrictions that countries have imposed in response to COVID-19 have disrupted supply chains and created, among other things, a labour shortage. Many workers have faced unusual circumstances during the pandemic, such as getting infected with the virus, being laid off, or remaining trapped in lockdown in their home countries.
This has hampered and caused delays in food production, especially after lockdowns were lifted and demand for food began to gradually rebound to pre-pandemic levels. “There are pandemic-related reasons that cause full production in various parts of the world to be lower than would otherwise be the case,” said economics professor Shang-Jin Wei.
For instance, the immigrant workers responsible for harvesting palm oil in Malaysia were unable to come back to the country due to pandemic travel restrictions, leading to a shortage of harvesters and, ultimately, a poor harvest season last year.
The labour shortage across different sectors of the supply chain system has driven up workers’ wages, meaning that workers are now paid more to fill the labour gap and maintain the food supply. The wage increase, in return, has brought about spikes in food prices.
A Changing Climate
Food costs are also rising because of the extreme weather conditions felt around the world. Canada was hit hard by devastating heat, drought, floods, and wildfires last year. With temperatures reaching 40°C, the heatwave last year damaged around 50% of British Columbia’s berry crop. The drought also brought down canola yields and drove its production to its lowest level since 2007. Accordingly, Canada’s Food Price Report for 2022 predicts that climate change, along with other factors like COVID-19, will lead to a 5-7% jump in food prices.
Moreover, with the deforestation of Amazon rainforests reaching a staggering record since President Jair Bolsonaro took office in 2019, Brazil is experiencing the worst drought in almost a century. The drought has been damaging the crops the meat industry uses for cattle feeding. Last year, some meat companies had to import cereal from other countries to feed livestock, something they may do again this year due to the dry weather. Consequently, meat prices in Brazil increased 8.45% in 2021.
The Impact of Conflict
Last but not least, the Russia-Ukraine war has significantly disrupted the food supply chain. Russia has blocked the seaports of Ukraine, a major wheat, sunflower oil, corn, and barley producer. This has halted the shipping of many of Ukraine’s exports and, hence, altered food costs. “The loss of Ukraine right now, in the sense that no grain is moving out of their ports, has pushed up prices to 25% over price levels, which were already high and rising,” stated Joe Glauber, a top economist at the International Food Policy Research Institute.
However, rather than stepping up to address this shortage, some countries have imposed restrictions on their food exports. Indonesia and India have banned their palm oil and wheat exports, respectively, to maintain the food security of their own citizens. These measures will not only reduce the food supply across the world but will also push up food prices further. Soybean oil, for example, has already risen to 4.5% in light of Indonesia’s palm oil ban.
Furthermore, with the US imposing a complete ban on Russian energy imports and Europe pledging to reduce reliance on Russian energy, oil and natural gas prices are hitting record highs. This has raised the costs of transporting food and buying commodities like fertilizers, a key component of growing plants. The nutrients that fertilizers contain are made with natural gas. And as natural gas prices have skyrocketed because of the war and oil and gas companies’ refusal to increase supply at a time of high profit margins, fertilizer prices have increased almost 30%.
A Global Food Crisis?
As prices keep rising, “the anxiety about access to food at a reasonable price globally is hitting the roof,” warned Kristalina Georgieva, the managing director of the International Monetary Fund. High food prices have already been weakening people’s purchasing power in developing countries. Protests have erupted in South America, West Africa, Southeast Asia, and the Middle East, with thousands of people calling on their governments to find solutions to the rising food costs. “I want any official— the president, the prime minister, the speaker of parliament— to try to live for one day with the salary of a poor worker. Let’s see how they will do it,” said Lebanese citizen Mohamed al-Muqdad at a demonstration.
Moreover, the high prices risk heightening the food crisis in countries that are already food-insecure and need aid, including Somalia, Yemen, and Afghanistan. The number of people suffering from severe food insecurity has already increased from 135 million prior to the pandemic to 276 million today, with more than half a million enduring famine.
While there is still food to be delivered to those in need, the soaring prices “[mean] that with the same money we can deliver much less assistance,” said Luca Russo, the United Nations Food and Agriculture Organization’s food crises analyst. Without a drop in food prices, therefore, the food insecurity crisis will deepen, posing a grave threat to millions of lives, especially children.
Will Food Prices Go Back Down?
Even if Russia lifts the blockade on Ukrainian ports, food prices will not necessarily fall. After all, Russian shelling has caused massive destruction to Ukraine’s agricultural sector and rendered large areas of its farmland unsafe for food production. Furthermore, the worldwide weather events that have ruined a lot of crops were not abrupt. They actually have been “long predicted by climate scientists and are now becoming a very obvious reality,” said Sean Smukler, chair of agriculture and environment at the University of British Columbia.
Clearly then, the complicated problems that have been affecting the food supply chain do not seem to be going away anytime soon, and food prices, as a result, are expected to remain high.
Yet, it is important that countries take a lesson from the increase in food prices by better reacting to the climate crisis and reducing greenhouse gas emissions. The international community should also devote extra efforts to ending the Russia-Ukraine conflict and restoring agricultural activity in Ukraine to avoid aggravating food insecurity and endangering many people’s lives. It is also time to invest more in agriculture in developing countries and lessen their heavy dependence on countries like Russia and Ukraine for food. These are crucial actions to be taken, not necessarily to reduce food prices, but to stop them from rising even further.
Edited by Majeed Malhas
