In the nearly two months since the start of the Iran war, prices of fuel and fertiliser have surged worldwide.
The question now preoccupying economists and policymakers is when – and how hard – the fallout will hit the cost of food.
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Analysts are in broad agreement that the true impact of the conflict has yet to be felt, due to the lag between rising agricultural input costs and higher prices on shelves.
They also agree that the severity of the fallout largely hinges on how long disruption to shipping continues in the Strait of Hormuz, which normally carries about one-third of global seaborne fertiliser and one-quarter of seaborne oil.
“Food prices will definitely rise in the coming months, making it more difficult for many people around the world to afford adequate and healthy diets,” Matin Qaim, executive director of the Center for Development Research at the University of Bonn in Germany, told Al Jazeera.
“Poor people in Africa and Asia will be hurt the most because they have to spend a high share of their income on food anyway,” Qaim said.
“Hunger and undernutrition will very likely rise.”
The Food and Agriculture Organization (FAO) last week warned that a prolonged crisis in the strait, which Iran has closed in retaliation for the United States and Israel’s war, could lead to a global food “catastrophe”.
India, Bangladesh, Sri Lanka, Somalia, Sudan, Tanzania, Kenya, and Egypt are among the countries most at risk, according to the FAO.
In an analysis last month, the World Food Programme said nearly 45 million more people could face acute food shortages if the conflict continues into the middle of the year and oil prices remain above $100 a barrel.
Global cereal production
So far, the war has only affected food prices modestly – to an extent that has surprised some observers.
Global food prices rose 2.4 percent last month compared with February, according to the FAO’s food price index.
Cereal prices saw an even smaller gain, edging up 1.5 percent, according to the UN agency’s index.
By way of comparison, overall food prices are still about 11 percent below average prices in 2022, when markets were grappling with the twin shocks of Russia’s invasion of Ukraine and COVID-19.
While rising prices of oil and fertilisers have driven up food production costs, most food that is being consumed globally was produced well before the war began.
Global cereal production has also never been higher.
Cereal stocks are predicted to reach a record 951.5 million tonnes by the end of the 2026 farming season, up about 9 percent from the previous year, according to the FAO.
Sandro Steinbach, an expert in agricultural policy and applied economics at North Dakota State University, said recent price moves should be interpreted with caution, describing them as a “mixed signal, not a clear reason for reassurance”.
“Input shocks often transmit with a lag,” Steinbach Al Jazeera.
“Inventories, pre-purchased fertiliser, delayed pass-through, and uncertainty about duration can all temporarily mute the effect,” Steinbach said.
“But agriculture works on biological and seasonal timelines, while fertiliser and shipping markets can reprice in days or weeks.”
Aggregate price indices produced by bodies such as the UN also do not necessarily capture the hardship felt by many individual households in poorer countries, said Shouro Dasgupta, a researcher at Fondazione CMCC, a think tank in Lecce, Italy.
“In many low-income countries, fuel prices feed directly into retail food prices, since transport expenditure makes up a far larger share of total households’ expenditure compared to high-income countries,” Dasgupta told Al Jazeera.
“So even before a potential harvest shock this year, rising energy costs are already affecting food budgets in Dhaka, Cairo, and Lagos,” Dasgupta said.
As food prices rise, households are often forced to shift away from fruits, vegetables and protein towards “cheaper, calorie-dense staples, with lasting consequences for child nutrition and long-term health”, he added.
The severity of the current situation
While there is broad consensus on the delayed impact of the war and the importance of reopening the Strait of Hormuz, observers are less united on the severity of the current outlook.
Traders who buy and sell financial contracts linked to food crops are anticipating only moderate price increases in the coming months.
Wheat and maize futures on the Chicago Mercantile Exchange imply price gains of 4-5 percent by the end of the year.
In some ways, the world is better positioned to deal with the current crisis than it was with other major shocks to the global food system.
During the 2007-08 food crisis, when global wheat prices soared more than 135 percent, numerous countries, including China, India, Vietnam and Ukraine, imposed restrictions on exports of staple crops.
Economists say the restrictions exacerbated the crisis, which was initially driven by a combination of drought, low grain stocks and rising oil prices, especially in developing countries.
There has been no comparable rush to ban food exports during the war, though Iran and Kuwait – neither of which are major food suppliers globally – have imposed restrictions.
“The current situation is a little different,” Elizabeth Robinson, a professor of environmental economics at the London School of Economics and Political Science, told Al Jazeera.
“Grain markets are not being disrupted, and countries are not reacting as they did in 2008,” Robinson said.
“Therefore, we most likely do not need to be concerned that there will be a drastic surge in food prices in the near future.”
Steve Wiggins, a research fellow at the Overseas Development Institute in London, said pessimistic forecasts underestimate the ability of markets to adjust to shocks.
“Farming across the world is diverse and dispersed, far more so than applies to, say, car manufacturing. Farmers are adept at juggling their production systems in response to changing availabilities and prices of inputs, to output prices, to technical innovations, and so on,” Wiggins told Al Jazeera.
While some analysts had predicted that cereal prices would never return to normal during the 2007-08 crisis, they eventually returned to historically low levels, Wiggins said.
“They declared the system to be broken, that the spike had revealed how hopeless the food system was,” he said.
“They were, thank goodness, mistaken.”
‘A drop in yields’
Still, the longer the Strait of Hormuz remains closed, the higher prices of urea, ammonia, sulfur and phosphates are likely to rise, spelling higher costs for farmers.
The FAO has estimated that fertiliser prices could be an average 20 percent higher in the first half of 2026 if the crisis is not resolved.
After a brief uptick over the weekend, maritime traffic in the strait has returned to a trickle since Tehran announced that ships will be restricted as long as the US maintains its blockade of Iranian ports.
In an interview with Bloomberg News on Monday, US President Donald Trump indicated that he was unlikely to extend the two-week ceasefire between the US and Iran before its expiry on Wednesday, saying he would not be rushed into making a “bad deal”.
Kathy Baylis, an expert on food security at the University of California, Santa Barbara, who advised George W Bush’s White House, said she would not be surprised to see large price increases in some countries soon.
“We’ve already seen food prices edge up in March, but I imagine the April numbers will be worse,” Baylis told Al Jazeera.
“I’d be on the lookout to see if planted area for major crops drops this spring, which would signal one possible response to increased input prices,” Baylis said.
“But even if planted area remains stable, we might see a drop in yields because of decreased input use.”
