Expert Comment: Why might climate change impact on food prices?

Categories: Research, Salford Business School

As the cost-of-living continues to hit consumers hard, the change in the climate is partially responsible for the increase in food prices. Dr Gordon Fletcher, Associate Dean for Research and Innovation at the University of Salford Business School, explains.

Dr Gordon Fletcher portrait

As the UK springs forward into lighter evenings, the first shoots of nettles along footpaths and fat lambs in fields are all reminders of a new seasonal cycle. But over the Easter break period, the UK and Europe was also dealing with the effects of Storm Nelson that brought fatalities, building damage and snowfalls: a timely reminder that climate change is now disrupting regular and expected weather patterns with ever more extreme events.

The bad news is that extreme weather events not only bring immediate disruption and destruction but also have longer terms impacts that make shopping more expensive, creates food shortages on the supermarket shelves as well as raising inflation. There are very real economic consequences that are the result of unexpected heatwaves, storms and cold snaps. 

These affects are interlinked and, because of the long, fragile and complex supply chains now associated with even the most basic fruit and vegetables, the situation operates on a global scale. This means that while the UK may be enjoying, for example, a spell of unseasonably warm weather elsewhere the tomato crop may be withering on the vine, never to leave Morocco. This is a significant problem when over 80% of the UK's tomatoes are imported and 90% of those come from just three countries.

Similarly, a failing potato crop in Lincolnshire hit by unseasonable wet weather creates extra pressure on import markets that will also force up prices. This is despite the UK being a net exporter. Not being able to recruit seasonal workers to pick the crop can also prevent more local produce reaching supermarket shelves. The same type of scenarios play out for every ingredient and is compounded in items such as ready meals and other more processed foods. 

It is this bundle of food prices that contributes to the calculation of inflation in the UK. Consumer inflation is based on the consumer price index (CPI) which is itself based on around 700 items, of which 10% are food and drink based. If food prices decline - as they did last month - then this contributes to a decreasing rate of inflation. But with long supply chains the fuel factor calculated in the CPI also comes into play. More costs to deliver food from farm to factory and onto the supermarket will drive up other costs. These are lessons well-understood by farmers through the 3Fs: feed, fertiliser and fuel. Increases in the costs of these items - which also contribute, in part, to the CPI have to be paid for somehow and this means increases in the cost of food.

Farmers also face two other Fs, finance and food. Interest rates tend to rise with higher inflation and this makes it more difficult for farmers to find finance for loans. And higher costs for short-term loans to buy feed and fertiliser also needs to be passed along the food supply chain. Increased food prices in the supermarket also impact farmers by pushing up wages and making the cost of their own household rise. A vicious circle that can be found directly expressed in the price we pay for eggs and milk.

There are partial solutions. Sustainable and organic farming can remove some of the input costs associated with producing food. However, this can make the produce more susceptible to variations in the weather. Consuming seasonally can also help to reduce pressures on the supply chain. For example, this month the UK should be looking forward to beetroot, cabbage and potatoes followed by rhubarb. Using renewable energy sources such as solar and wind can remove some of the uncertainties around fossil fuels but require investment - and potentially loans - for new equipment including batteries.

But there is no easy fix. As consumers we have been become accustomed to shopping for fruit and vegetables by the lower price point irrespective of the journey they have taken. The long-term solution is based on urgently addressing the factors that shape climate change now.

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