Wchicken Russia When Ukraine invaded in 2022, the arrival of war in one of the world’s breadbaskets caused the price of food products to soar – with one exception: sugar. But last year was even worse for those with a sweet tooth. While grain prices fell, sugar prices rose (see chart).
Although they have fallen recently, they remain high. This includes the prices of a diverse class of non-essential agricultural materials that we call “gourmet goods.” The price of cocoa, which has risen by 82% in twelve months, is at its highest level in 46 years. The wholesale price of olive oil has reached a record high of 9,000 euros per tonne (the previous peak was 6,200 dollars in 2006). In New York City “OJContracts for future deliveries of frozen concentrated orange juice are trading at $3.07 per pound, up about 50% from last January. The coffee market is sleepier, but prices for Arabica beans – the finer variety – are still up 44% since 2021.
The reason for the rising prices is not that consumers suddenly prefer Coca-Cola and KitKats, but a litany of problems in regions where gourmet products are produced. El Niño, a climate pattern, has caused droughts in Australia, India and Thailand, three of the four largest sugar exporters. Torrential rains in Brazil, the largest, have made shipping difficult.
A heatwave in Spain, which produces half the world’s olive crop, left last year’s harvest at the same level as 2022’s, the worst in a decade. Hurricanes have wiped out about 10% of the orange trees in Florida, where nine out of 10 U.S. oranges are grown. Heavy rains during the summer months allowed the dreaded black pod disease and swollen shoot virus to spread in Ghana and Ivory Coast, the world’s two largest cocoa producers.
The increased prices for gastronomic products are already reflected in the prices for end products. The cost of sugar and candy in America has risen by almost 9% in 2023, and several confectionery giants have warned that such goods are likely to become even more expensive in the coming year. In theory, this should dampen demand. Yet so far there are few signs that higher prices will affect consumer appetite.
Pie lovers have little choice but to hope that prices will drop when El Niño fades, as is expected in June, and that farmers will plant more in response to existing prices. However, any delay will likely prove short-lived. The EUThe ‘Deforestation Free Regulation’ – strict new rules on exports to the bloc, covering cocoa, coffee and palm oil – will come into force at the end of 2024. Higher compliance costs and uncertainty about enforcement could prompt European importers to stockpile ahead of the deadline. With Europe normally accounting for a third of global cocoa and coffee imports, such an influx of supply would shock global markets.
Even more worrying are the symptoms that last longer. In Ghana and Ivory Coast, state-set prices at which farmers sell to wholesalers remain too low; Something Paul Joule of Rabobank, a Dutch lender, says is discouraging new plantings despite skyrocketing global prices. He does not expect the policy to change anytime soon. And as climate change makes extreme weather events more common, the risk that several key manufacturing regions will suffer at the same time – and that the world’s largest producers will curb exports in response – is only increasing.
Consumers will therefore have to pay. Farmers will increasingly fall short. And the middlemen who feed off price fluctuations will get an increasing share of the pie. ■
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