Food production is disrupted due to climate change, food prices are increasing
Food production and prices are being disrupted by adverse weather around the world. Heatwaves, droughts, floods, or snowstorms are a series of events that reduce crop production and increase prices.
War and various infectious diseases are also behind it. This reality has been seen around the world after Russia and Ukraine war and the spread of swine flu in China.
But more than war or disease, climate change has had a lasting impact on rising food prices. Climate change has harmed crops around the world, such as Brazilian oranges, cocoa in West Africa, olives in Southern Europe, and coffee in Vietnam. Permanently changing weather patterns are reducing crop yields and supply increasing prices.
Frederic Newman, chief Asia economist at HSBC, said climate change is having a material impact on global food prices. We are seeing these unusual occurrences happening one after another. These certainly add to the effects of climate change.
Newman argues that the repetition of such events has lasting effects on the food supply system. Food price rises are temporary but continue to be a source of inflation.
A study by the European Central Bank and the Potsdam Institute for Climate Impact Research found that global food inflation could increase by 3.2 percent each year in the next decade due to rising temperatures.
This means that by 2035 annual headline inflation will rise to 1.18 percent. The study used data from 121 countries between 1996-2021 to estimate future inflation patterns. The Global South was found to be the most affected.
So the question arises how the monetary policy will deal with this challenge. Many countries’ central banks exclude food and fuel prices from so-called core inflation due to market volatility.
There is a debate about whether food prices should consider the inflation caused by climate change. Because the effect of increase in food prices is deeply felt by common people.
According to David Barmes, a policy fellow at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, the rise in food prices will be temporary.
Frederic Neumann predicted that central banks would be forced to respond to frequent food supply disruptions. As a result interest rate fluctuations will increase and interest rates will remain high over time.
Raghuram Rajan, ex-governor of the Reserve Bank of India (RBI) from 2013-2016, said that central banks in developing countries have always needed to pay more attention to food prices.
He also said, ‘Developing countries have to take food prices into consideration more. Because it’s not just a big chunk of the budget, it’s a universal phenomenon that’s becoming progressively more volatile.’
