Climate change to inflate food prices by 2%

What is happening to the economics of food production? Well there have been some pretty startling studies out recently addressing this question, and to take us through it is the Associate Dean of Research and Innovation University of Salford’s business school, Gordon Fletcher...

Gordon - The interesting thing about this is that it's a relatively new sort of aspect to the science or the economics of agriculture. The recent paper in Nature really does outline a very clear measure and they talk about the notion of a climate event, an unexpected weather event, potentially contributing around a 0.17, 0.2% effect on food inflation. And that of course is inflation in the sense that it adds to the cost of the food of those items. The interesting thing of course is that that doesn't immediately go away when any sort of adverse weather goes away. It's something that sort of sits in the system and takes a long time for the system to kind of adjust, which starts to give you a measure of the scale of the challenge. Because even though a 0.2% change in food inflation doesn't sound significant, obviously multiple events that go against the expected accumulate and they kind of add to the effect. And you can look at a projection of potentially a 2% effect on food inflation in the next 10 years. Because effectively, even though it is complex, different environments, different temperatures, different latitudes have different effects on food production, It translates to a 2% increase.

Will - There seems to be a similar attitude towards this 2% increase in price, like there was towards the 1.5 degree increase in temperature. Like that's not that much. It's like yeah, but that's not the point.

Gordon - <laugh> Yeah and that's the thing, isn't it? Because 2% does not sound particularly dramatic. It does not sound like we should be too bothered. But in fact 2% is significant and 2% is the sort of thing that if you become complacent and you accept the fact that 2% is something that's the price you have to pay, that leads you down a route of really quite significant agricultural disaster. It makes all sorts of things unviable within the agricultural sort of sphere, but the repercussions are out across the supply chain and across consumers. It's massive.

Will - With that 2% in mind, we assume that to be kind of an average. Do we know if there are particular foods that are going to spike more than others?

Gordon - Well, this is where it comes back to the location if you like, of the weather event. So if you're in warmer climates, the effect can be potentially exaggerated. It can be worse if you're in mid-range latitude. So the forties, luckily into the fifties, the effect is slightly softened and smoothed out. But that of course doesn't really help because you have a global supply chain for food. So when you're talking about, for example, the scale of tomatoes that come from Morocco, that weather event in Morocco, which potentially affects tomatoes, really is felt in the UK.

Will - The headline of extreme climatic events implies that the majority of the damage and therefore rise in food prices will be because crops become unusable. But is there also an aspect that the supply chain is disrupted as well and that will boost prices increasingly as well.

Gordon - People like to talk about complex supply chains or they talk about supply chains that are very long because of the distance travelled, and that's obviously a factor, but then it's also that supply chains are fragile in general. They're optimised for profit, they're not optimised for resilience. So if there is a weather event that's adverse, then the fragile supply chain itself is also affected and that's only compounded if there's effects that relate to the cost of, for example, fuel that increases the cost of transporting any food items from a long distance.

Will - Yes, it seems to be this really unfortunate catch 22 in that, because of the fluctuating weather and climate, we will have to begin to work together worldwide to be able to grow food optimally in one place and then when they have a rough year, we switch to another place. But if you've got this supply chain that is, as you say, so fragile, that could all crumble.

Gordon - Yeah and that does imply a high level of cooperation. Having that level of cooperation isn't something that we generally see with the contemporary capitalist kind of nature of buying and selling because profit is the primary driver.

Will - We here in the UK are still very fortunate, despite everything going on. A 2% price rise is very rough for some of us, absolutely. But in areas of the world where they have a lot less access to income, it could be catastrophic.

Gordon - And I think the other thing that does come through is of course, that at different latitudes, people experience different weather events, different effects of increasingly adverse climate conditions.

Will - And I appreciate that the obvious answer is fight, climate change, but what economically speaking would be the most effective way of combating this rise in food prices?

Gordon - Well, there is a need to take action now, obviously around climate change, because that's obviously the thing that most long term will benefit everyone. But in the shorter term, one of the things that often gets pushed to the side, and particularly during election years and a sort of political debates, is discussion around the way that farmers are subsidised by the state. If you are encouraging people closer to this point of consumption to perhaps produce food that might not be necessarily viable from a global supply chain point of view, but from a point of view of food security is actually a better option, then you've got a really strong justification for subsidisation. There's also obviously the argument that we need to look at the diversity of food that we consume, the nature of the food we consume in terms of its ability to sort of withstand climate pressures. And again, obviously particularly fruit and vegetables have been kind of bred increasingly to be effectively efficient from a very sort of narrow point of view in terms of increasing profit, but they're not necessarily being selectively bred to be resistant to weather events. And that itself is another avenue for exploration. Of course, again, that requires and implies some degree of support at a governmental and national level that might not necessarily be there currently. But all of that resolves back to the fact that we need to look at how, how we consume and, and what we demand as consumers in terms of expecting to see in the basket at the end of the week. Those expectations are one of the things that drives current food production and those supply chains in certain directions. And that consumer behaviour needs to shift as well in order to perhaps become more resilient to what we see increasingly is these adverse weather events.