Combination of rising energy and food prices leads to future problems - FAO

The combination of rising energy and food prices is a cause for concern and could lead to problems in the longer term.

This was stated to a TASS correspondent by the senior economist of the Food and Agriculture Organization of the United Nations (FAO) Abdolreza Abbassian, commenting on the situation on world markets.

According to him, the rise in prices for food commodities, reflected in the latest FAO Food Price Index, is not yet very related to the rise in energy prices. “But that could be the reason for further increases in food prices. Rising energy prices are driving up the cost of food production. Fertilizer production requires gas, and its price reaches historical highs. And farmers have to choose, so the question arises: will they be able to sow the same amount this year. Accordingly, the question is whether supplies will satisfy demand, whether an increase in fuel prices will lead to a decrease in crops, ”Abbassian notes.

“And the main concern is next year: if the yields are lower and demand remains high, serious problems may arise next year,” the expert explained. He pointed out that crop forecasts, already dependent on weather conditions and climate change, are now even more uncertain.

In addition, energy prices affect the food market in terms of higher transportation costs. “Especially when exporting food, it is necessary to take into account the increase in the cost of fuel,” the source said.

Abbassian called inflation the second risk factor. “Usually the main factors leading to inflation are the prices of fuel, food and, in more prosperous countries, housing. Food and fuel prices are the main drivers of inflation, and this is a concern, since the depreciation of money leads to serious consequences for the economy, ”the economist said.

According to him, the increase in prices is due to strengthening demand, not a decrease in supply. “Prices rise when there is not enough time to bring supply and demand into line,” the expert explained.

product.by