Food shock is inevitable due to the Iran war – and it could get bad

Following the 1970s energy crisis, global food prices reached unprecedented levels after adjusting for inflation. The ongoing unrest in Iran has led to surging costs for fuel, fertilizers, and pesticides. This raises concerns about a potential new record in food prices.

As production costs climb, many farmers may reduce planting in the coming weeks, leading to shortages and higher food prices later this year. The extent of these increases will depend on factors such as the duration of the conflict and the impact of climate change-induced weather extremes on crops.

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

“We are in a bit of a perfect storm, and there isn’t any easy way out of this,” says Tim Benton from the University of Leeds, UK. “Even if everything was solved tomorrow, it will take some time, as we’ve found with post-covid reconstruction.”

After years of decline since the 1970s peak, adjusted global food prices have been rising since the 2000s and are nearing that record again. Climate change plays a significant role, with extreme heat, floods, and storms impacting yields, sometimes leading to global food crises like the one in 2010. The covid-19 pandemic and Russia’s conflict with Ukraine have also caused substantial price increases.

Increasing biofuel production is contributing to higher food prices, with over 5 percent of food calories now diverted to fuel production. Despite some governments acknowledging the need to phase out food-based biofuels, a recent report suggests that 92 percent of biofuels will still be derived from food by 2030.

The US and Israeli actions in Iran are creating significant shortages in essential raw materials for food production and distribution. Fuel, particularly diesel, is vital for powering farm machinery and the vehicles that transport food, thus oil price hikes eventually translate into higher supermarket prices.

Fertilizers are crucial for global food supply. “If we stopped using mineral fertiliser completely worldwide, we would probably see half of the world starving,” says Qaim. Nitrogen fertilizers are created by combining hydrogen with atmospheric nitrogen to produce ammonia, with natural gas supplying the hydrogen and energy. The ammonia is then typically converted into urea, a transport-friendly solid form.

Due to its extensive natural gas resources, Qatar is a significant fertilizer producer, supplying 15 percent of the world’s urea and 50 percent of the internationally traded urea, according to Anthony Ryan from the University of Sheffield, UK. Currently, little of this urea is passing through the Strait of Hormuz, the narrow waterway between Iran and the Arabian Peninsula.

Additionally, countries like India, Bangladesh, and Pakistan produce much of their own fertilizer using gas from the Persian Gulf. However, current disruptions have forced some fertiliser plants to shut down operations. Damage to natural gas production facilities due to conflict may cause long-term disruptions. Meanwhile, a significant fertiliser plant in Australia also had to shut down due to an accident.

Consequently, nitrogen fertiliser prices have already surged by over a third and are likely to rise further, Qaim notes. “If fertilizer prices double, then it could easily be that food prices increase by 20 to 30 percent.”

This issue extends beyond urea. Gulf countries like Qatar and the United Arab Emirates also produce substantial amounts of sulphur fertilizers and sulphuric acid, which are essential for converting mined phosphate into plant-usable forms.

Pesticides are also critical for maintaining global food yields, especially as pests spread and become more problematic with climate change. Pesticide prices are tied to those of naphtha, a fossil-fuel derivative used in a wide range of chemicals, including those for food packaging.

“Three of the world’s global naphtha-exporting hubs have been struck by drones so far in March,” says analyst Jide Tijani from Argus Media in the UK. These include the Ust-Luga port in Russia, recently targeted by Ukraine, as well as sites in Qatar and the UAE.

These disruptions will likely lead to increased prices for food and other goods in the months and years ahead. “The number of markets that are being affected by this is staggering,” says Jason Hill at the University of Minnesota.

The challenge is not only the rising costs for fuel, fertilizers, and pesticides, says Qaim, assuming they are even available. If farmers are uncertain about making a profit, they may switch to different crops or abandon planting altogether. In addition, speculation and profiteering could further inflate prices, according to Jennifer Clapp at the University of Waterloo, Canada.

The situation could worsen. The significant spike in food prices during the 1970s was partly due to depleted global food reserves, Clapp explains. Currently, reserves are sufficient, but this could change if the conflict continues, especially if climate change-driven extreme weather reduces crop yields.

“There’s a lot of potential for this to spin out of control and lead to a just as severe, if not a worse, crisis,” Clapp warns. “If we have major climate events, it could definitely spiral into something much more severe.”

“In the end, prices are global prices, and fertiliser prices are going up everywhere, and food prices are going up everywhere. [People who] are at the lower spectrum of the income distribution are the ones that are most hurt, because they spend a lot on food. They can’t afford significantly rising food prices,” says Qaim.

International aid has already faced significant cuts, and more are likely. “When food prices go up and international aid is more needed, the availability of the money goes down and the price of what it can buy goes up,” Benton notes.

The consequences will include social unrest in the countries hit hardest, says Paul Behrens at the University of Oxford. “Every time that we’ve seen a food price spike in the past, you see this instability.”

How countries can prevent food shocks

There is a way to limit the damage. “We’re burning about 15 million loaves of bread in Europe every day for biofuels,” says Behrens. “This is a crazy way to produce energy.”

The production of biofuels is driven largely by subsidies and state mandates, so governments have the power to cut biofuel production and release more food on the market. “It could definitely help,” says Qaim.

He suggests an international agreement to automatically limit biofuel production from food when food prices become too high, but countries have not taken such action unilaterally. “We haven’t seen that happening in previous crises,” he says.

Instead, nations are more likely to increase biofuel production to try to curb rising fuel prices, Qaim predicts. This could further affect food prices.

This trend is already underway. The US has announced plans to raise the proportion of bioethanol in fuels, and Australia is considering similar steps.

The reality is that boosting biofuel production from food won’t significantly impact fuel prices, but it will raise food prices. In the US, a third of corn is turned into bioethanol, yet this bioethanol contributes only a small percentage of the gasoline supply, Hill explains. “There’s a disproportionate effect on food markets.”

“Blending more ethanol into gasoline is a policy from the 1990s, one that doesn’t help fight air pollution or climate change,” says Simon Donner at the University of British Columbia in Canada. “The oil price spike could be an opportunity to help Americans shift to the cleaner and more advanced technology of the future: electric vehicles. Instead, the US government is going backwards.”

Globally, people will want to avoid a repeat of this situation. “This is a major shock to the system and so, even if things were to go back to the status quo in terms of movement of ships and production and such, there is going to be, in everyone’s mind: ‘How can we produce a more resilient system?’,” says Hill.

Accelerating the transition to renewable energy, electric vehicles, and heat pumps, which are necessary for the net-zero transition, will also make economies significantly less vulnerable to oil price shocks. Beyond that, we need to decouple the entire chemical industry from fossil fuels, Ryan suggests.

For nitrogen fertilizers, that requires producing them from electricity instead of natural gas. “Absolutely, you can do a no-greenhouse-gas-emissions ammonia,” Ryan asserts. “The technology is there. What we don’t have is enough renewable electricity.”

And with rising demand for electricity to power data centers for artificial intelligence, this situation seems unlikely to improve anytime soon unless the AI bubble bursts.

In the meantime, there is a lot that can be done to reduce fertiliser use. In fact, fertilisers are overused in many regions, with the 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 fertilisers more efficiency.

“So it’s a push towards more sustainable farming systems, but sustainable is not equivalent to organic,” says Qaim. Going organic would lead to huge price rises because of lower production and greatly increase deforestation because of the need for more farmland, he says.

“We need a food system transformation,” says Behrens, and part of this has to be a change in diets – for instance, getting most of our protein from beans and legumes that make their own fertiliser, rather than from grain-fed meat. “It makes such a big difference,” he says.

Topics:

• food and drink/
• agriculture