Food inflation is running at the highest rate in post-war history – Geopolitical tensions & climate change is pushing countries into conflict over a dwindling supply of goods.
Is global food security at risk? Is the rising cost of food the new battleground? Will the next food wars be fought?
No one can give a clear answer except to focus on some of the facts: Food inflation is running with higher rates in post-war history and protectionism and climate change are creating a suffocating framework for the global food chain.
Bloomberg recently revealed that top Chinese officials have been ordered to build up sufficient reserves in the energy, commodities and food sectors. Against the superpower from the East, the West processes the data and on the one hand fights to normalize the situation in the supply sector and on the other hand always has second thoughts in its mind to create reserves.
Food inflation and… government intervention
With geopolitical tensions rising and climate change declared 'present', the views of market people who are called upon to 'read' what's coming are of great interest…
The world is heading for 'food wars' according to with one of the world's largest agricultural commodity traders.
Oil is important for energy sufficiency.
“We have fought many wars over oil. We will fight even bigger wars for food and water,” said Sunny Verghese, chief executive of Olam Agri, a Singapore-based agricultural trading house.
Speaking at the Redburn Atlantic and Rothschild consumer conference, the Financial Times reports, Verghese warned that trade barriers imposed by governments trying to shore up domestic food stocks have exacerbated food inflation.
The Major agricultural traders, who made record profits in 2022 after Russia's invasion of Ukraine – sending food prices skyrocketing – have been accused of exacerbating food inflation through markups they imposed to boost their profits.
But Verghese does not entirely buy into the above, arguing that increased food inflation is partly the result of government interventions. He said the proliferation of non-tariff trade barriers in 2022—in response to the war (a total of 1,266 from 154 countries by his count)—has “created an excessive supply-demand imbalance.”
Games on the geopolitical chessboard
Richer countries were creating surpluses in strategic goods, leading to excess demand and in turn higher prices, he noted. “India, China, they all have safety stocks, this is exacerbating the global problem,” he added.
Food prices started to rise due to the coronavirus pandemic and soared after Russia's invasion of Ukraine. Food insecurity in the poorest countries worsened and consumers around the world faced an unprecedented cost of living crisis.
Meanwhile, climate change has hampered agricultural production worldwide, pushing governments increasingly into protectionist policies.
In 2022, Indonesia banned palm oil exports to protect the local market, while last year India imposed export tariffs. restrictions on certain types of rice in an attempt to limit the rise in domestic prices ahead and sparked fears of shortages in the supply chain. and more this”.
And climate change in the equation
Olam Group, which processes and supplies grains, seeds, edible oils, rice and cotton, is part of the wider Olam Group. Its business in the food and agricultural products sector (it supplies ingredients, feed and fiber to global brands such as Nestle and Unilever) has had a difficult year.
The planet at risk
The company, which has made its mark in Asia and Africa, was investigated by Nigerian authorities last year following media reports that he was involved in a multi-billion dollar fraud. The company's shares soared in February when it was cleared of the charges.
Verghese, referring to the impact of climate change on global yields, appealed to consumer executives, including the bosses of Coca Cola and Associated British Foods, to “wake up” and take more action on climate change.
Governments should charge a tax on carbon dioxide emissions, he argued. “Emissions are free today, so we pollute indiscriminately,” he said.
In a rapidly changing world, the “stock war” exists and does not exist… If we make the assumption that it exists, it is not difficult to imagine the winners. Those who will stock on a larger scale, faster and cheaper products of strategic importance. They will be the countries that hold the top of the pyramid of economic and geopolitical power.
source: In.gr
