Heatflation

 Economists and Environment experts have termed the rise in food prices associated with extremely high temperatures as 'heatflation'.

Several occurrences of heat waves this year wreaked havoc across the globe. Greece, France, Spain, and Portugal recorded temperatures well beyond 40oC this summer. These high temperatures sparked wildfires, forcing hundreds of people to evacuate their homes. Heat waves in India throughout April and May affected the health and economy of the country. The July heat waves in Italy resulted in droughts in many parts of the country. The drought is threatening nearly 40% of the country’s summer harvests of rice and corn.

In China, a record-breaking heat wave is melting roofs, causing residents to take refuge in underground cooling zones. China’s Meteorological Observatory warned that the high temperatures could destroy the country’s soy and corn production. China primarily uses soy and corn to feed pigs, the country’s staple meat. With a shortage of these crops, pork prices could soar.

Inflation is already driving up food prices. But these prices could rise even further as the world witnesses heat waves that destroy crops. Environment experts and economists have termed the rise in food prices associated with extremely high temperatures as ‘heatflation’. Heatflation could increase global food costs.

When droughts destroy crops, there is very little food available for people. Therefore, competition begins among them where the person with the most money can buy the food. Thus, prices rise. Heat waves in India are increasing the cost of wheat. India is the second largest wheat producer in the world.

Last year, researchers studied seasonal temperatures and price indicators in 48 countries. The team found that the unusually high temperatures during summer had the most significant and long-lasting effect on food prices.

Global Demand Is Exceeding Supply

Commodity and global markets set the price for grains like rice, maize, and wheat in advance. They set the costs based on forecasts of harvests. An expectation of a food shortage will manifest itself about four to six months after the harvest period. This is why the impact of healtflation is not felt immediately after an extreme heat event has occurred. Its effects is felt over the coming months.

Because the harvest season has already started for many crops, the July heat waves in many parts of the globe did not have a significant impact on the global food supply. But heatflation still has the potential to hit the world hard.

The world is already in an energy, food, and cost-of-living crisis because of COVID-19. Russia’s invasion of Ukraine has exacerbated this issue. In a disrupted market like this, where global demand is exceeding supply, the loss of harvests will fuel an increase in food prices. 

Heatflation also has a significant impact on livestock farming. Outdoor domestic animals like cattle cannot stand extreme heat. That means we have to keep them indoors. Once indoors, farmers also use energy to keep them cool. Heat also changes behaviour in animals. It causes chickens to lay fewer eggs and cows to produce less milk. This contributes to heatflation.

Maize, wheat, and rice account for nearly half of the world’s food supply. These crops are extremely vulnerable to extreme weather events like droughts and heat waves. Without timely help, these crops, the staple food for nearly half of the world, will succumb to climate shocks. Climate change is already causing crop failures, rising food prices, and increased hunger and malnutrition.

Adaptation

Hotter temperatures will become a regular occurrence in the future. How can food systems adapt to reduce the impact on costs for consumers?

Some farmers are turning toward producing crops that are more resistant to extreme heat and droughts. Many countries are deciding to switch from current crops to those resistant to climate shocks. An international network of crop breeding centres is improving crops for that very reason.

But this won’t be possible for everyone all around the globe due to varying geographical and climatic conditions. In some areas, climate change is causing temperatures to rise so high that farmers cannot use their land for agriculture.

Another option is to rethink how global food systems work. Our current food model is super-efficient and delivers food just in time. Above all, it maintains cheap food prices. But resilient food systems have more in-built storage, diverse supply routes, and more decentralization rather than big processing and distribution centres.

A resilient food system is expensive. That means no cheap food. But, resilient systems would ensure that our food was resistant to climate shocks. It would benefit consumers and increase political instability.

In June 2010, heat waves in Ukraine and Russia reduced crop yields to around the same amount as the current conflict has. The result was a drastic price hike in wheat flour. The heatflation affected the whole globe. It increased food insecurity, civil unrest, and poverty in many countries.

In 2021, the United Nations Intergovernmental Panel on Climate Change said that the increasing occurrence of record-breaking extreme weather events in the future is inevitable. As climate change progresses and becomes more intense, the issue of heatflation will get bigger.