Extreme weather events will have increasing impacts on global food supplies in both the short and long-term, according to research.
Despite UK food prices seeing a month-on-month fall for the first time in two years in September, disruption to food supplies from climate change is “far from over,” market intelligence provider The Smart Cube warned.
The world is entering its latest “El Niño” phase – a regular climate phenomenon (that can last between 2-7 years), which impacts global climate and disrupts normal weather patterns – creating intense rain in some areas and droughts in others, it said.
This, it argues, will have a “major effect” on crop growth, quality, yield and the overall food supply chain, adding that this subsequently has a “major impact” on food prices.
Latin America, the southern US and Mexico are expected to face increased rainfall, while Australia, Indonesia, part of southern Asia, and West and Central Africa will face lower rainfall and possible drought.
Smart Cube commodity specialist, Nidhi Jain, told Supply Management that the El Niño will impact supply of “essential food commodities,” including grains, vegetable oil and sugar, and exert an “upward pressure” on food prices.
Global vegetable oil, palm oil, sugar, cocoa and soybean output is expected to fall across affected regions, driving up prices. However it is expected that corn and wheat are set to benefit from the increased rainfall – meaning prices for those crops will only rise slightly.
These predictions come on the back of the publication of a separate report – “Extreme weather leading to food and water shock” – by insurance analyst, Lloyd’s List.
It suggests high heat and humidity (and the reduced crop yields it creates), will cause costs of in-demand fertilisers and pesticides to soar.
As extreme weather events occur with increasing frequency and severity, falling crop yields will spark “massive shocks in dependent industries, and an international scramble for supplies.”
The global economy could see a potential loss of more than $5tn, it added.
The interconnected nature of food supply chains makes the system especially vulnerable to disruption, it explained, and the effects could quickly spiral out to other industries, economies and regions.
In the wake of significant disruption, it said: “Many farms are not able to access relief capital quickly enough to cope with the impacts. The global agricultural and food supply chain is disrupted, leading to panic buying and price shocks in developed markets and elsewhere. Food supplies are inherently political; and when food is scarce, the geopolitical landscape becomes increasingly tense.”
It continued: “Supply chain disruption has second order impacts on other industries as a result of increased political tension; consumer populations are stirred up by rising costs and poor guarantee of supply, while governments enact sweeping trade adjustments and add to growing geopolitical tension over global supply.”
While these events could be devastating in their own right, their frequency leaves little time for businesses to recover.
In regions that suffer these events consistently, agricultural losses can cause significant social disruption – and the number of countries able to maintain a sustainable level of food output “shrinks dramatically.”
However the Lloyd’s List report emphasised the possibility for buyers to support and improve food supply chains by better financing and insurance provision.
Such support is already coming into effect. Earlier this month Nestlé announced it is piloting a weather insurance program in Indonesia for more than 800 smallholder farmers, providing financial protection to help farmers cope with unpredictable weather patterns of rainfall and severe drought.
Nestlé's global head of green coffee development, Marcelo Burity, said: “This weather insurance helps to establish a support mechanism for smallholder coffee farmers in Indonesia. It allows them to access financial resources to re-establish their crops in the event of irregular weather conditions while building resilience in coffee farms.”
The insurance uses satellite-based climate data to determine when coffee output has been impacted by either too much or not enough rainfall during key phases of the crop cycle. Payments are issued automatically to registered coffee farmers that have been affected, according to the severity of the weather.
The initiative hopes to improve farmers’ livelihoods while supporting the adaptation of food producers to climate change.
Source: Supply Management