A food shock is inevitable because of the Iran war – and it could get worse

Global food prices reach their highest level on record after the energy crisis of the 1970striggered by the conflict in the Middle East once inflation has been corrected. Could we be heading for a new record – the worst food shock ever – as fuel, fertilizer and pesticide prices skyrocket due to unrest in Iran?

Faced with soaring costs, many farmers are likely to plant less in the coming weeks, leading to shortages and rising food prices later this year. This is already happening, but how bad it will be depends on many factors, from how long the war continues to how hard this year’s crops have been hit by extreme weather caused by global warming.

“There is the potential for this to develop into a major crisis for poor and hungry people,” he says Matin Qaim at the University of Bonn in Germany.

“We’re in a bit of a perfect storm and there’s no easy way out,” he says Tim Benton at the University of Leeds in Great Britain. “Even if everything is resolved tomorrow, it will take time, as we have found with the post-covid reconstruction.”

After declining for decades after the 1970s peak, global food prices in real terms have been rising since 2000 and are not far from the 1970s record. A big factor is climate change, with yields being hit by more extreme heat, floods and storms, sometimes to the point of causing global food shocks like we saw in 2010. The covid-19 pandemic and Russia’s war in Ukraine have also led to big jumps.

Rising biofuel production is also pushing up food prices, with more than 5 percent of calories in food now being converted into fuel rather than consumed. While some governments have acknowledged that food-based biofuels should be phased out, a recent report estimates that 92 percent of biofuels will still be food-based in 2030.

Now, US and Israeli attacks on Iran are leading to severe shortages of raw materials essential to food production and distribution. The fuel is unambiguous. Diesel fuels a lot of farm machinery, as well as the ships and trucks that transport food, so an increase in oil prices ultimately leads to higher prices at the supermarket.

Then there are the fertilizers that are necessary to feed the world. “If we were to completely stop using mineral fertilizers worldwide, we would probably see half the world starve,” says Qaim.

Nitrogen fertilizers are produced by reacting hydrogen with atmospheric nitrogen to form ammonia, with natural gas supplying the hydrogen and energy. The ammonia is then usually converted to urea, a solid that is suitable for transport.

Thanks to its huge natural gas reserves, Qatar has become a major producer of fertilizers. It produces 15 percent of the urea used worldwide, he says Anthony Ryan at the University of Sheffield in the UK and 50 percent of the urea that is sold on international markets. Little of this urea now makes its way through the Strait of Hormuz, the narrow waterway between Iran and the Arabian Peninsula.

That’s not all. Countries such as India, Bangladesh and Pakistan produce much of their own fertilizer, but have done so with the help of gas from the Persian Gulf. Now fertilize the plants in these nations must turn off. As natural gas production facilities in the region have been damaged by the war, this disruption could continue for years. Meanwhile, the main fertilizer plant in Australia also had to turn it off due to an accident.

As a result, nitrogen fertilizer prices have already increased by more than a third and could be much higher, says Qaim. “If fertilizer prices double, it can easily happen that food prices go up by 20 to 30 percent.”

And it’s not just urea. Gulf countries such as Qatar and the United Arab Emirates are also major producers of the sulfur fertilizers needed in many areas and the sulfuric acid needed to convert mined phosphate into forms that plants can use.

Then there are pesticides, which are also key to maintaining global food yields—especially as many pests spread and become more problematic as the world warms. Pesticide prices are tied to the prices of diesel, a fossil fuel derivative that is converted into a wide range of chemicals, including plastics widely used in food packaging.

“Three of the global diesel export hubs have been hit by drones so far in March,” says analyst Here goes Tijani at Argus Media in the UK. This includes the port of Ust-Luga in Russia, which was just hit by Ukraine, as well as sites in Qatar and the United Arab Emirates.

All of these effects will translate into higher prices for food and many other goods in the coming months and years. “The number of markets that are affected by this is staggering,” he says Jason Hill at the University of Minnesota.

The problem isn’t just that farmers will have to pay a lot more for fuel, fertilizer and pesticides, says Qaim, assuming they get them at all. The thing is, if farmers aren’t sure they can make a profit, they can grow other crops or none at all. Meanwhile, he said, speculation and profitability could push prices even higher Jennifer Clapp at the University of Waterloo in Canada.

How bad will it be? The big spike in food prices in the 1970s happened in part because global food supplies ran out, Clapp says. Food supplies are plentiful for now, but that could change if the conflict drags on, especially if extreme weather driven by warming also hits yields.

“There is a great potential for this to spiral out of control and lead to an equally serious, if not worse, crisis,” says Clapp. “If there are major climate events, it could certainly develop into something much more severe.”

“At the end of the day, prices are global prices and fertilizer prices are going up everywhere and food prices are going up everywhere. [People who] they are on the lower spectrum of the income distribution, they are the most affected because they spend a lot on food. They cannot afford the sharply rising food prices,” says Qaim.

Moreover, there have already been major cuts in international aid, and more are likely. “When food prices go up and international aid is needed, the availability of money goes down and the price of what can be bought goes up,” says Benton.

The consequences will include social unrest in the countries most affected, he says Paul Behrens at Oxford University. “Every time we’ve seen a spike in food prices in the past, you see that volatility.”

How countries can prevent food shocks

There is a way to limit the damage. “Every day in Europe we burn about 15 million loaves of bread for biofuels,” says Behrens. “It’s a crazy way to generate energy.”

Biofuel production is largely driven by subsidies and government mandates, so governments have the power to limit biofuel production and release more food into the market. “It could definitely help,” says Qaim.

He thinks there should be an international agreement to automatically limit the production of biofuels from food when food prices rise too much, but countries don’t even do it unilaterally. “We haven’t seen that in previous crises,” he says.

Instead, what is likely to happen is that countries will increase biofuel production to try to limit rising fuel prices, Qaim says. This could have a large additional effect on food prices, among other things.

It’s already starting to happen. The US announced will increase the share of bioethanol in fuels in an effort to limit price growth, and Australia is also considering it.

The thing is, increasing the production of biofuels from food will not have a big impact on fuel prices, but it will have a big impact on food prices. In the U.S., for example, a third of corn is converted to bioethanol, but that bioethanol supplies only a few percent of gasoline supplies, Hill says. “It has a disproportionate impact on food markets.”

“Blending more ethanol into gasoline is a 1990s policy that is not helping air pollution or climate change,” he says. Simon Donner at the University of British Columbia in Canada. “Rising oil prices could be an opportunity to help Americans transition to a cleaner, more advanced technology of the future: electric vehicles. Instead, the US government is going backwards.”

But the rest of the world will not want to be put in the same position again. “It’s a big shock to the system, so even if things were to go back to normal in terms of ship movement and production and stuff, it’s going to be on everyone’s mind, ‘How can we make a more resilient system?'” says Hill.

Accelerating the transition to renewables, electric cars and heat pumps, which are needed to go net-zero, will also make economies much less vulnerable to oil shocks. But beyond that, we also need to divest the entire chemical industry from fossil fuels, Ryan says.

For nitrogen fertilizers, this means producing them from electricity instead of natural gas. “Of course you can make ammonia without greenhouse gas emissions,” Ryan says. “The technology is there. We don’t have enough renewable electricity.”

And with increasing demand for electricity to power AI data centers, this situation is unlikely to improve anytime soon unless the AI ​​bubble bursts.

In the meantime, much can be done to reduce fertilizer use. In fact, fertilizers are overused in many regions, with excess washing into rivers and seas or turning into the highly potent greenhouse gas nitrous oxide. Ways to reduce overuse include precision farming technologies, crop rotation with legumes, better use of manure, and breeding plants that use fertilizers more efficiently.

“So it’s a move towards more sustainable farming systems, but sustainable is not equivalent to organic,” says Qaim. A shift to organic production would lead to huge price increases due to lower production and greatly increase deforestation due to the need for more agricultural land, he says.

“We need a transformation of the food system,” says Behrens, and part of that has to be a change in diet—for example, getting most of your protein from beans and legumes, which make their own fertilizer, rather than grain-fed meat. “It makes such a big difference,” she says.

topics:

• food and drink/
• agriculture