Climate change is pushing up food prices — and worrying central banks

For millennia, food production and pricing have been disrupted by the weather, with one-off events such as heatwaves, droughts, flooding or frosts cutting harvests and raising prices. War and disease are also factors, as the world saw recently after Russia’s invasion of Ukraine, and the swine fever that swept through China’s pig population.

But another, more sustained thread has run through many sharp increases in food prices. From oranges in Brazil to cocoa in west Africa; olives in southern Europe to coffee in Vietnam, permanently shifting weather patterns as a result of climate change are reducing crop yields, squeezing supplies and driving up prices.

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Adam Davis, co-founder of global agricultural hedge fund Farrer Capital, says climate change has helped drive up prices for a long list of food commodities trading at higher levels this year. “Wheat is up 17 per cent, palm oil 23 per cent . . . sugar 9 per cent and pork 21 per cent,” he says. For the consumer, the “lag effect of those high commodity prices is not going away”.

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Rice, soyabeans, corn and potatoes are among other staples that could see yields plummet. For many crops, higher temperatures mean lower yields. “They have pretty stable productivity up to temperatures between 20C and 30C, depending on the crop,” says Friderike Kuik, an economist, who led the ECB study. “Beyond that, we see quite sharp declines.”