Food for thought: The link between extreme weather and inflating prices

Food supply disruption and higher food inflation is something that is likely to continue


Joshua Pond, responsible investment analyst, Rowan Dartington

Across the globe last year we witnessed record high temperatures that also created huge disruption to farming globally. Global warming has in recent years caused droughts, flooding, heatwaves on an unprecedented scale in addition to new pests that are now able to migrate due to the changing climate.

A combination of these events has had a significant impact on crop yields. Some may argue that these events are part and parcel of nature and will drive prices higher from time to time. But what is becoming increasingly apparent is that what were historically rare and geographically isolated extreme weather events are now becoming more frequent and global in nature.

The below chart from the Copernicus Climate Change Service shows the ranking of annual mean temperature for 2022 by country – many countries in Western Europe witnessed some of the warmest weather on record in 2022 and the right-hand chart shows the global average surface temperature rising over time demonstrating that this was not a one in a hundred-year anomaly but a trend towards more frequent extreme weather.

Food supply disruption and higher food inflation is something that is likely to continue as we see more extreme weather in the years and decades ahead, it is estimated that if global warming reaches 1.5° C around 8% of the world’s farmland will become unsuitable for agriculture. This will coincide with a rising global population predicted to peak at circa 10 billion towards the end of this century.

Source: Copernicus Climate Change Service March 2023

Closer to home here in the UK we are increasingly witnessing the wider social implications of increased food supply disruption, rising prices and social inequalities. In recent years we have seen the increasing use of food banks in the UK.

The increase in food bank use is of course a result of a range of complex factors beyond that of just the increasing cost of food, factors such as poor paying jobs, to policy failure from central and local government and many others factors also play a key part. But the increasing cost of food in UK supermarkets has in recent months been stated as the reason for many now making use of food banks.

Food price increases were in part created by colder than usual weather conditions in the South of Europe and Northern Africa, which has disrupted the harvest for some fruit and vegetables. In addition, Morocco prevented the export of much of the produce it had managed to harvest in order to control food price inflation in its home market currently at circa 20%.

People also trade down when the price of healthier foods increases, eating for example cheaper more readily available processed food that can over an extended period of time mean increased health implications. Food price increases hit those on the lower end of the socio-economic spectrum the hardest, compounding social and health inequalities we see throughout society.

The interconnected nature of our planet means that the extreme weather we increasingly see globally is likely to have an ever-greater impact on food price inflation here in the UK; central banks may already be looking at a new culprit stoking inflation now and in the decades ahead – but it is not something they will be able to deal with.

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