Squeals of horror over price caps – but how are we going to fix our broken food system? | Food & drink industry
News that the Treasury is asking UK supermarkets to limit price rises on essential foods was met with predictable screams of dismay this week. Supermarkets were reportedly “furious”, while a host of intellectuals, from the former head of the Institute for Financial Studies to the former chairman of M&S, could be seen to be vocal about the evils of price controls.
But this whistling distracts attention from two unpleasant facts. First, the increase in food prices during the summer and beyond will likely be significant and will increase further. Nearly 40 percent increase in food prices since 2020 -Due to the devastating combination of the Iran war and the record-breaking El Niño predicted to negatively impact global food production. Secondly, Britain’s food system is painfully exposed to such shocks. The long-held assumption that a global food system can be relied upon to meet the nation’s needs at an affordable price is no longer valid.
Approximately one third Fertilizer is traded through the Strait of Hormuz. The food supply of nearly half the world’s population depends on artificial fertilizerRegardless of how quickly the strait opens, the shock to global food systems will hit next year.
The Strait of Hormuz is not the only chokepoint in the global food system. In a prescient study in 2017, foreign policy think tank Chatham House said the world food system had suffered a painful 14:critical intersections“From the Strait of Hormuz to the Strait of Malacca, between the Malay peninsula and Sumatra, to the Black Sea ports connecting Ukrainian and Russian farmers to the world. The Panama Canal is another; a multi-year drought in Central America has restricted transit through the freshwater-fed canal that carries 16% of the world’s grain trade.” Pushing global prices up.
The theory shaping the UK’s approach is that it shouldn’t matter. Disruptions in harvest and transportation in one part of the world will be compensated by access to the product from another place. As long as global markets remain open, everything will be fine. This has generally been true globally, with malnutrition decreasing over the last few decades. The variety and quality of food available in the UK has increased dramatically.
However, world hunger has been increasing since 2014. With Covid-19 significantly accelerating this trend. And in the face of the entire system’s increasing dependence on a few “breadbasket” locations, the belief that open markets can always compensate for disruptions 60% of global food production occurs in just five countries. It also ignores the possibility of simultaneous shock; This is precisely because the climate crisis leaves weather systems more unstable. It’s starting to become more likely.
This is the danger now. The closure of the Strait of Hormuz is potentially compounded by the return of El Niño to the south Pacific. Occurring every three to five years, El Niño is a broad northward movement of warm ocean water that alters weather patterns around the world. These impacts may vary but will generally include much warmer, drier weather in East Asia and Southern Africa, but much wetter, cooler weather in South and Central America, spreading into the southern United States. More severe droughts on one side of the world and more severe storms on the other naturally affect food production. Historically, Stronger El Niño events are associated with an increase in global food prices of approximately 9%with significant differences: a major El Niño event in 2015-16 Pushed 50 million people into food insecurity in southern and central Africa.
Forecasters in Europe and North America are increasingly sounding the alarm about a major record-breaking El Niño event for this year and next. Meteorologists said:GodzillaAn event that will disrupt weather patterns and harvests from the Pacific coast to eastern Asia. If this happens, the full effects of this, such as fertilizer shock, will be felt in the long term, in the fall and into next year’s harvests.
Britain’s domestic food system is not immune. uk import Approximately 60% of the manureand 50% of fossil gas. As a result, rising global fertilizer prices and energy costs are already a “The cost of the agricultural crisis” and then the climate crisis begins to make its presence felt. Britain has suffered three of the five worst harvests on record in the last decade. Farmers’ losses are starting to increase. Last year saw the harvest value of wheat, barley, oats and oilseed rape fall by more than a fifth of its long-term average. Costing farmers £828 million in lost income. For all ten years Loss of income from these poor harvests has now reached £2.3bn.
Extreme weather now affects the vast majority of British farms; 86% of farmers reported that they were affected by excessive rainfall and 78% by drought. in the last five years. Climate change is the accelerating drumbeat behind the crisis in British agriculture.
Faced with these risks, a market-driven system is unlikely to function as expected. Decrease in consumables causes prices to rise or shortages. Profitability emerges when large companies with market power in the supply system achieve record profits. Economists Isabella Weber and Evan Wasner He explained how the combination of external shocks and market power can lead to rampant inflationThis means a sharp turn in the cost of living crisis. As prices of basic goods rise, households cut spending elsewhere in the economy, squeezing demand, suppressing growth and pushing economies into recession.
Our entire food system needs overhaul. Privately, the government accepts this. He was brutally released summary of still secret Defra document It reported on national security risks from “ecosystem collapse”: “Without significant increases in UK food system and supply chain resilience, the UK is unlikely to maintain food security if ecosystem collapse triggers geopolitical competition for food… The countries best placed to adapt are those that invest in ecosystem protection and restoration, and resilient and productive food systems.”
Global price shocks alone will not force change, as an Oxford University study of previous shocks found. Government action is needed. Tariff reductions in hazelnuts and begging supermarkets are unlikely to yield results. Like other countries, the UK needs to rebuild strategic food reserves abandoned in the mid-1990s. Tighter government control and regulation of staple foods is needed, including well-designed price regulations. introduced worldwide. It also needs to focus on longer-term investments in its farming, supporting farmers in a more volatile environment with recommendations such as the following. Basic income for farmersand incentives to create more resilient, sustainable food production. The greatest danger is that, in an increasingly unforgiving world, we will be painfully exposed to events over which we have no control.
