“Let them eat cake” was Queen Marie Antoinette’s response to riots over bread prices before the French Revolution in 1789. But it wasn’t long before she and Emperor Louis XVI were guillotined in response. And so the rising cost of bread is becoming a very sensitive issue around the world as key ingredients such as wheat (up 19% in a year), butter, eggs, sunflower oil and sugar rocket in price:
- European bread prices have risen 19% in the past year, US prices have risen 15%
- Last month saw food prices rise 14% in the UK and 16% in the EU
- Energy prices are up around 40%, and interest rates have more than doubled
Last week’s UK food price inflation data highlights the problem as the chart shows. The UK imports nearly half of its food supplies, and prices rose 27.8% in September – easily a record.
As a result, overall food prices are starting to rise quite sharply. September’s 14.5% increase was the sharpest since the late 1970s, reconfirming the sense that this is already the worst crisis since the OPEC-induced oil crises of the period.
The key issue is that the real problems are only just beginning as I warned here in April:
“The rise in food prices is exacerbated by a dramatic increase in the cost of natural gas, a key ingredient of nitrogenous fertilizer. Surging fertilizer prices along with significant cuts in global supplies have important implications for food production in most countries, including major producers and exporters, who rely heavily on fertilizer imports.”
Since then, the situation has got worse rather than better:
- President Putin has continued to weaponise natural gas supplies
- He has steadily cut back supplies into Europe along the various pipelines
- The Nord Stream pipeline was also mysteriously blown up recently
Understandably, the main effort has been focused on filling Europe’s gas storage ahead of the winter. Even with this objective achieved, industrial users are likely to face further cutbacks in Q1. A hard winter would make the situation very much worse.
Unfortunately, natural gas is also vital for ammonia production and hence for fertilizer output
Until now, Europe and the world have been eating food produced in the previous planting season, But once this is gone, it is hard to see how actual shortages can be avoided. As the Our World in Data chart shows, half the world’s population depends on nitrogen fertilizer for its food:
- Poorer countries risk seeing 80-100 million people facing famine
- Richer countries will have better availability, but inevitably prices will rise
In the medium and longer-term of course, today’s looming disaster will prompt major changes in the way we produce and consume food.
The role of fossil fuels such as natural gas in farming will likely see a major reduction. The good news is that nobody will ever want to risk going through this type of crisis again. In turn, this will help reduce carbon emissions in line with Net Zero targets.
But in the short-term, food shortages and price rises are inevitable next year. So we all need to reduce the 25% of food now thrown away each year in the developed world. And in the developing world, we need to reduce the 25% lost due to logistics and storage failures. The less we waste, the more there will be to eat.