“Price indices in all commodity groups – cereals, meat, dairy products, vegetable oils and sugar – rose to varying degrees, reflecting not only underlying market fundamentals but also responses to rising energy prices associated with the escalation of conflict in the Near East,” the FAO said in a statement.
“If the conflict extends beyond 40 days with input costs rising and current margins falling, farmers will have to choose: grow the same with less inputs, plant less, or switch to less fertilizer-intensive crops.” He said FAO Chief Economist Máximo Torero.
“These choices will impact future revenues and shape our food supplies and commodity prices for the rest of this year and all of next,” Torero added.
Like CNBC’s Garrett Downs I mentioned Thursday:
Food faces a number of new inflationary pressures due to the war with Iran and the closure of the Strait of Hormuz. The increase in oil costs is driving up the price of diesel fuel, which is essential for farmers and the trucks and railroads that transport food around the country. Fertilizers are also being choked due to the closure of the strait. Even plastic, a petrochemical product commonly used in food packaging, can also contribute to higher checkout costs.
“Food prices will move dramatically,” Ketil Storsleten, an economist and professor at the University of Minnesota, told Downs. “If you put those things together, it’s a significant portion of the price of food production and that the price has gone up so much, it suggests that all of the increase in fertilizer prices is going to be passed on to food.”
Meanwhile, the United Nations Development Program revealed earlier this week appreciation Which suggests the war could cost the affected Middle Eastern economies between 3.7% and 6% of their collective GDP and push up to 4 million people into poverty.
“The escalation has exposed structural vulnerabilities in the Arab States region and underscored the stark reality that even a short-term shock can generate deep, widespread and persistent social and economic impacts throughout the Arab States region,” the UNDP said.
The agency added: “While the current military escalation remains geographically focused, its effects are spreading through interconnected systems – trade corridors, energy markets, financial flows, and logistics networks – transforming local escalation into a systemic regional shock.”
Last month, the United Nations World Food Program warned that the US-Israel war on Iran and its related effects on the global economy could push an additional 45 million people around the world into acute hunger this year.
In the United States, experts warn that as the war continues, grocery prices will continue to rise, posing a political risk to Republicans who, along with President Donald Trump, campaigned on promises to immediately lower the cost of key consumer items, including food and gasoline — which now average more than $4 per gallon. Up from $3.10 The day the president returned to the White House.
Democratic members of the Joint Economic Committee released a report Thursday showing that higher pump prices cost Americans $8.4 billion during the first month of the Iran war.
Democrats are looking to capitalize on consumer anxiety and broken promises by Republicans — not just on prices but also on “no new wars” — in the upcoming midterm elections.
“Our message is affordability and accountability,” Rep. Jared Huffman (D-Calif.) told CNBC on Thursday. “It’s a well-crafted message, very narrowly focused, and on those two pillars, Trump makes our arguments more compelling.”
As Trump seeks an unprecedented $1.5 trillion in military spending for the next fiscal year, Rep. Vicente Gonzalez (D-Texas) said voters have had enough.
“It makes them even more angry,” he said of Trump’s unfulfilled promises. “When people hear that, they say, ‘Hey, I can’t pay for groceries and you want to go pay for the war in the Middle East?’ “I think this is going to be a tough sell.”
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