Have you ever noticed that whenever oil costs go up, food prices go higher too? Not only fuel but also whenever there is a change in climate or trade deals, the cost of food will also change. But why does this happen, and how do such factors affect food prices. How about pausing that sizzling hot deluxe game for just a minute and discover the effects of oil and climate change, among other factors, on food prices?
For starters, it is worth noting that the demand for food is always constant, whether we change the brands, shops, or food items. However, the price changes are affected by other supply factors, which can be short or long-term. These are usually determined by other global or domestic factors. Such aspects include oil, trade deals, and climate change. We are going to look at how each of these can affect food prices.
How Does Climate Change Affect Food Prices?
Climate change influences extreme weather and causes catastrophes such as devastating drought patterns, floods, or raging heat waves. These, in turn, reduces the produce from farms. Crops will not grow when there is a lack of enough water supply caused by droughts. On the other hand, floods can wash away the harvest. All of these climate changes can cause a shortage of food supply, which can then result in food prices going up.
Then again, do not forget that we do not only eat agricultural food products. So, this means that we should not entirely link the rise of food prices to weather changes. Other aspects such as changes in transportation, marketing, packaging, and even competition can lead to food prices going up.
How Can Oil Affect Food Prices?
When oil prices go up, not only does it increases the cost of transportation, but food prices as well. Changes in energy prices have a big impact on the food industry in various ways.
The common reason is that when an increase in oil prices leads to higher prices for diesel and gasoline, then it will cost more to transport food from the farm to the final consumers. Whether using a pickup, train, or ship transports the food products, the price of fuel will always affect the cost of transportation. Thus, higher transportation expenses will lead to higher food prices.
Other than delivery expenses, remember that farmers power their tractors and other farming machinery using petroleum fuel. Additionally, fossil fuels are used to make fertilizers. If the cost of fertilizers increases, so will the agricultural production and output prices rise up. Therefore, an increase in energy prices can trim down the farmers’ profits, retailers, and food processors, which will then raise consumer food prices.
Trade Deals Relationship with Food Prices
It is also worth noting that many countries do not produce their own agricultural food products. Some countries import food products like bananas, cocoa, coffee, tea, which they do not grow domestically. But, how do trade deals influence food prices? For starters, supplies from abroad can be affected by certain factors, such as delays due to trade policy changes or even a pandemic.
Also, the rise and fall in currency exchange rates can drive up food commodity prices. We should also recognize that most countries import raw commodities like wheat. And the prices of these materials are affected by other macroeconomic factors, with the main one being oil price. Hence, any changes in global trade deals can influence food prices.
In conclusion, the next time you think about what caused food prices to go up, do not directly link it to oil prices. Instead, remember that climate change, trade deals, among other domestic and global factors, can cause inflation.