Workers spread fertilizer after planting potatoes at Bluff View Farms, in West Jefferson, N.C., on Sunday. Soaring oil and fertilizer prices are pushing up food costs across the U.S. and other countries.Allison Joyce/Getty Images
The alarm bells are sounding. A food disaster is coming. Oil, natural gas and fertilizer prices have climbed to painful levels since Iran shut the Strait of Hormuz in early March in response to U.S. and Israeli attacks. Acute hunger seems inevitable. Important food officials say so.
Jorge Moreira da Silva, head of the United Nations’ Hormuz task force, told PBS last month that the shortage of fertilizers from the Persian Gulf states “will very likely trigger a massive food security crisis with devastating consequences for the poor.” He added that if the spring planting season goes awry because of the energy and fertilizer turmoil, “hunger and starvation will spread around the world.”
Hold on. While there is no doubt that conflict can drive hunger, to say that the world is on the edge of food crisis is premature.
Agriculture experts also made crisis predictions after Russia invaded Ukraine in 2022; they never came to pass. Ukraine’s grain exports certainly fell during the war, especially in the early months, when Russia blockaded Black Sea ports. But Russian exports surged and Moscow kept selling to Europe. The overall result is that only a few countries, notably Egypt, suffered grain shortages.
Drawing parallels with the global 1972 to 1975 food crisis, which resulted in roughly two million deaths in the drought-struck Sahel region in Africa, also seem far-fetched, as least at this stage.
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On the surface, the comparisons appear obvious. In 1972, a particularly strong El Nino, the periodic weather pattern that warms surface temperatures in the eastern equatorial Pacific Ocean, contributed to droughts in the Sahel, India, Bangladesh, Indonesia and parts of the Soviet Union. Guess what? Weather agencies predict that an El Nino is likely to hit later this year.
Then the 1973-1974 Arab oil embargo sent prices up fourfold. The Hormuz crisis has sent prices soaring too, but less so – Brent crude is up about 80 per cent in the past year.
That’s where the comparisons end. The big difference between now and the early 1970s is that grain inventories were dangerously low back then. There were no guidelines or regulations for what is now known as the stock-to-disappearance ratio, which measures a country’s supplies in storage of, say, wheat, to domestic demand and exports. Generally, a ratio of less than 20 per cent signals a thin buffer, which can trigger price hikes.
The U.S. Agriculture Act of 1970 actually reduced supplies by paying farmers not to grow certain grains, all the better to boost prices. Canada did the same. Ottawa’s Operation LIFT (Lower Inventory For Tomorrow) subsidized farmers to take land out of production to trim the wheat glut. It worked, contributing to the early 1970s food crisis.
Governments learned their lesson; today, inventories of grains are fairly strong. Last month, the U.S. Department of Agriculture reported a wheat stock of 938 million bushels, up 10 per cent over last year, and said that global production of corn, barley and other coarse grains would rise to 1.6 billion tons this year, thanks to rising output in India, Russia and elsewhere.
So it appears there is enough food to go around. But there is little doubt that food inflation is coming. Add energy inflation to the mix and you have a recipe for angry voters and more pressure on low-income families, who often need to spend 40 to 80 per cent of their disposable income on food.
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Soaring oil and fertilizer prices are pushing up food costs. In the U.S., food and beverage inflation climbed 7.9 per cent in March, year-over-year. Natural gas is the primary component of nitrogen-based fertilizers, such as urea; about 30 per cent of world deliveries of urea (and ammonia, another gas-derived fertilizer) have been blocked by Hormuz’s closure. Since February, when the war on Iran started, urea prices in the U.S. have almost doubled.
The next round of food inflation figures is bound to be worse, specially in developed and wealthier developing countries. The U.S., Canada, Europe, Brazil, India and China are heavy users of fertilizer; African farmers far less so (except those in Egypt), because of the products’ high costs. Fertilizer prices won’t fall as long as Hormuz stays closed.
Food inflation will hurt the poor everywhere. It will also hurt middle-income families. U.S. President Donald Trump seems well aware that gasoline and diesel prices have soared. He may be less aware that food prices may be on course to do the same because Hormuz remains blocked.
He is about to find out that when you play stupid games, you win stupid prizes. In this case, the prize could be a Republican slaughter in the midterm elections.