It’s no secret that a warming world will drive up food prices, a phenomenon increasingly known as “heat radiation.” What is less known, but a growing area of interest among economists and scientists, is the role of individual extreme weather events – blistering temperatures in Texas, a destructive tornado in Iowa – have power over what American consumers pay at the supermarket.
At first glance, the answer may seem logical: A drought or flood that affects agricultural production will eventually drive up prices. But it’s not that simple, because what consumers pay for groceries reflects not just crop yields or herd sizes, but the entire supply chain. That’s where it gets interesting: Economists are starting to see a growing trend that suggests weather forecasts play a role in squatter shock. Sometimes the mere prediction of an extreme event – such as the record-breaking temperatures, hurricanes and wildfires are predictors getting ready for this summer – may cause an increase in prices.
That’s not to blame for the forecast itself, but concerns about what the coming weather could mean for the entire supply chain as food manufacturers manage their risks and the expected future value of their goods, said Seungki Lee, an agricultural economist at Ohio said. State University.
“When it comes to the climate risk on food prices, people typically look at the production side. But over the past two years, we have learned that extreme weather can increase food prices, [cause] transportation disruptions, as well as production disruptions,” Lee said.
How much we pay for the food we buy is determined by retailers, who take into account the producer’s price, labor costs and other factors. Any increases in what producers charge are typically passed on to consumers because grocery stores operate on thin profit margins. And if producers expect to pay more in the future for commodities like beef or specialty crops like avocados, they can raise prices now to cover those expected increases.
“The whole discussion about the climate risks on the food supply chain is based on probabilities. It is possible that we may not see extreme temperatures this summer, or even later this year. We may realize that there was no significant weather shock that hit the supply chain, but unfortunately that will not be the end of the story,” said Lee.
Supply chain disruption and labor shortages are among the reasons why food prices have climbed 25 percent since 2020. Climate change may also contribute. A study published earlier this year found “heat radiation” could push them up by as much as 3 percentage points per year globally in just over a decade and by about 2 percentage points in North America. Simultaneous disasters in major crop and cattle producing regions around the world – known as multi-breadbasket failure – are among the primary forces driving these costs. Crop shortages in these regions can also hit prices, which can create volatility in the world market and push up consumer costs.
Historically, a single, localized heat wave or storm would not usually disrupt the supply chain enough to spur price increases. But a warming world could change that dynamic as extreme weather events increase and their co-occurrence becomes the norm. How much it adds to consumers’ grocery bills will vary, and depends on whether these climate-driven disasters hit what Lee calls “supply chain nodes,” such as important shipping channels during harvest seasons.
“As the weather becomes more erratic due to climate change, we’re seeing this problem more frequently,” he said. “So what that means is that the supply chain is becoming more likely to be compromised by these types of risks that we’ve never seen before.”
An ongoing drought that plagued the Mississippi River system from the fall of 2022 to February provides an excellent example of this. The Mississippi River Basin, which covers 31 states, is a linchpin of America’s agricultural supply chain. It produces 92 percent of the country’s agricultural exports, 78 percent of the world’s feed grains and soybeans, and most of the country’s livestock. Ships she navigates about 2,350 miles of channels carry 589 million tons of cargo annually.
Transport barriers created by low water have the ability of crop producing states in the Wheat belt to send commodities such as corn and soybeans, which are mainly used for livestock feed, to livestock producers in the South. Thus arises a high demand, low supply situation as shipping and commodity prices shot upwith economists expect consumers to absorb that cost.
Previous research showing that retail prices rise with commodity prices suggests that the drought probably contributed higher overall food costs last year – and because droughts have a lingering impact on production even after they have ended, they can fuel stubbornly high grocery prices today.
But while it seems clear that the drought contributed to higher prices, especially for meat and dairy products products, exactly how much should be measured. One reason for that is a lack of research analyzing the relationship between this particular weather event and the consumer market. Another is that it is often difficult to figure out which of several possible factors, including global trade, war and export embargoesaffected specific examples of sticker shock.
While droughts certainly cause declines in agricultural production, Metin Çakır, an economist at the University of Minnesota, says whether they are felt by consumers depends on numerous factors. “This will mean higher raw ingredient costs for foods sold in grocery stores, and some of those higher costs will be passed on to consumers through higher prices. However, are consumer prices really going to rise? The answer depends on many other supply and demand factors that may occur at the same time as the impact of the drought,” Çakır said.
In a forthcoming analysis previewed by Grist, Çakır explored the connection between a persistent drought in California, which a third of the country’s vegetables and almost two thirds of its fruits and nuts, and cost of products purchased nationwide at major grocery stores. While the event increased consumer vegetable prices to a statistically significant degree, they did not rise as much as Çakır expected.
This volatile consumer spending effect is largely due to the resilience of America’s food system. Public safety nets such as crop insurance and other federal programs played a major role in mitigating the impact of adverse weather and strengthening the food supply chain against climate change and other shocks. By ensuring that farmers and producers do not bear the brunt of those losses, these programs reduce costs passed on to consumers. Advanced agricultural technology, modern infrastructure, substantial storage and efficient transport links also help ensure retail price stability.
A 2024 study of the role that climate change played on the US wheat market from 1950 to 2018 found that although the impact of weather shocks on price variability increased with the frequency of extreme weather, adaptation mechanisms, such as a well-developed production and distribution infrastructure with sufficient storage capacity , minimized the impact on consumers. Yet the paper warns that such systems could collapse when faced with “unprecedented levels of weather variability.”
Last year was the world’s hottest on recordcreates an onslaught of challenges for washed and sweep producers nationwide. And this year is set to be even more brutalwith the transition of El nino — an atmospheric phenomenon that heats ocean temperatures — up to La Niña, its counterpart that cools them down. This cyclical change in global weather patterns is another potential threat to crop yields and source of supply chain pressures that economists and scientists are watching.
According to Weston Anderson, an assistant research scientist at the University of Maryland and NASA Goddard Space, they will be particularly focused on the Midwest and regions of the Wheat Belt, two regions prone to drought as an El Niño cycle for A La Niña makes way. Flight Center. Those growing regions for corn and soybeans are what he will watch closely as La Niña develops.
That’s something Jennifer Ifft, an agricultural economist at Kansas State University, is thinking about, too. “If you have a really bad drought in the Wheat Belt … that’s going to be the biggest deal because it’s going to increase production costs for cattle, hogs, poultry,” Ifft said. “So it will probably have the biggest inflationary impact.”
Though JanuaryU.S. beef cattle herd stocks were at their lowest in 73 years, several reports of which were noted as a result of ongoing drought that began in 2020. Americans, the majority of whom already spending more on groceries than last year, is ready to see soon “record” beef prices at the supermarket. Food prices are also expected to rise further 2.2 percent in 2024according to the USDA’s Economic Research Service.
In a world tangled in extremes, we are already fragile food supply chain could be the next system teetering on the brink of collapse due to human-induced climate change. And more expensive groceries tied to looming risk is the first of many warning signs that it’s already fracturing.
