Food Price Inflation on the Horizon as Wars and El Nino Bite
The world is facing another wave of food price inflation as wars in Iran and Ukraine, along with El Nino, create a perfect storm of higher costs and lower crop yields, according to the chief economist of the United Nations Food and Agriculture Organization.
Maximo Torero told Reuters that commodity prices will start to increase more now, and food prices will start increasing by the end of the year and next year for sure. The transmission from commodity to final food price is around three to six months.
The Strait of Hormuz is a problem that affects all inputs of agricultural commodities, including Brent oil used for pumping, packaging, processing, and transportation, and natural gas used for fertilizers. The damage inflicted by Ukraine on Russia's oil and gas infrastructure curtails the export market for diesel and natural gas, key inputs in food production.
In the US, farmers growing nine principal crops may lose $32 billion in 2027 due to tight margins putting stress in planting decisions. Global wheat and corn planting was already cut in the first three months of the Iran war, and some US producers have shifted to soybeans because they require lower fertilizer inputs.