The year 2024 is just beginning, but comments and expectations regarding food prices and how they can impact the general level of consumer prices, officially measured by the IPCA (Broad National Consumer Price Index), are already underway. swell. And there are some points of attention that give rise to such perspectives, including the climate issue.
The El Niño phenomenon that has affected the country’s climate since the second half of 2023 was classified by the Word Meteorological Organization – WMO (2024) as one of the five strongest. This climatic phenomenon resulted in an increase in temperatures, and the prospects are that this will lose strength from April onwards, according to WMO (2024).
In addition to El Niño, global climate change, arising from the greenhouse effect, which has increased average temperatures, is a reality and one of its most relevant impacts is on agricultural production, which, depending on the culture and region , can mean a negative result in productivity, which directly influences the rise in prices of agricultural products, according to several academic works, such as that of Dhifaoui et al. (2023), demonstrate and quantify.
Increasingly, climatic conditions are one of the main determinants of agricultural supply, but this is an item that is outside the producer’s domain, which poses a great challenge, both for planning and for maintaining minimum productivity. that guarantees the producer the continuity of its activities. Because if for the consumer climate change can generate a smaller supply of products, which tends to materialize in higher prices, for the producer, the concern is also with the increase in costs, as shown by Grigorieva, Livenets, Stelmakh (2023) , whether due to the increased use of pesticides, necessary to combat pests that appear with high temperatures, the need to implement and apply new techniques, the contracting of insurance, among others.
Looking from the consumer side, in terms of the general price level in the economy, the weight that the price of food represents is widely known. In the recent period – 2021 and 2022 –, the inflation target stipulated for the country was not met, with the IPCA remaining above the ceiling, and, in both years, with a significant contribution from the food and beverages group, with, in 2021, this group presented an accumulated variation of 7.94%, which was not one of the largest, since, in this period, the price of transport and housing also accumulated relevant advances, of respective 21.03% and 13.05 %, according to IBGE (2024). In 2022, the food and beverages group presented the second highest accumulated increase in the year – 11.64% –, behind only the clothing group, which varied 18.02% in the year (IBGE, 2024).
In 2023, the inflation target was met, and the group comprising food products varied at a much lower level compared to previous years (1.03% in the year). Since the subgroup that aggregates products related to food at home closed 2023 with an accumulated drop of 0.48%, which had not happened since 2017, largely due to the expansion of supply and also the cooling of input costs, after the increases caused by the pandemic and the beginning of the conflict between Russia and Ukraine. Thus, meeting the 2023 inflation target occurred with a strong contribution from food prices.
Now, considering only the first two months of 2024, the food and beverages group accumulated an increase of 2.34%, whereas, for the same period in 2023, the increase was 0.76%, according to IBGE (2024) . The food at home subgroup accumulates, in the same period, an increase of 2.93%, which ends up leaving a warning about how such a set of prices may move throughout the remainder of the year, considering that, at least in In part, the numbers for January and February reflect implications of the El Niño phenomenon.
Just as an example, the English potato, which, in the group of tuberous vegetables, is the most consumed product, was one of the sub-items that stood out in the February 2024 inflation, with an increase of 6.79%, largely due to the delay in planting, due to the effects of El Niño. However, according to information from Hortifruti/Cepea (2024), there is an expectation that supply will increase in March, due to the humid climate and forecast rains. This illustrates the fact that each agricultural product has its specificities, as well as the ideal climate for planting and harvesting. So, when it comes to food prices in aggregate, it is always important to remember that this is a whole made up of several particularities, which must be considered.
Furthermore, it is noteworthy that concern about food prices goes far beyond the purely economic issue, reaching inflation targets and how this can reflect on the country’s monetary policy. Worrying about food prices, especially the At the consumer level, it is also concerned with the food security of a population, which basically corresponds to guaranteeing economic, physical, social, permanent and sufficient access to nutritious food, according to FAO (2024). In other words, when discussing food prices, it should also be noted how their increase can make it difficult for the poorest to access adequate food.
Data from IBGE (2020) indicate a reduction of more than 50% in Brazilians’ consumption of basic food products, such as rice and beans, over 16 years and attributes this decrease mainly to the increase in prices of such products and the growing consumption of ultra-processed products. Evidently, the near stagnation observed in per capita income in Brazil plays a strong role in restricting purchasing power, forcing the population to look for less expensive alternatives to feed themselves. This stagnation occurs in a scenario of stable poverty levels for around a third of the population. Specifically, around 11% of the population lives with a per capita income of up to ¼ of the minimum wage; 30% live on less than ½ minimum wage. In short, around 60% of the Brazilian population lives on up to one minimum wage per capita. This scenario of almost stagnant domestic demand for certain products (such as rice and beans, for example) – due to very low income – does not favor the systematic expansion of production (using updated technologies and taking advantage of economies of scale, as happens with the production of exportable products). This production therefore grows at insufficient rates (from a nutritional point of view) and is at the mercy of the climate and the occurrence of pests and diseases in crops.
In any case, when it comes to food and especially its prices, the scope is much greater than the purely economic, especially in a society with a high degree of poverty such as Brazil. Until it reaches the consumer’s table, there are many factors that matter for the formation of prices, some easier to measure and predict, others more difficult, such as the climate issue and its implications.
Therefore, any prediction about how the prices of the large and diverse group of food-related products will behave throughout 2024 is complex and imprecise. What can be said is about the importance – in a country with structural characteristics such as the Brazil – to monitor price indicators, with a close eye on the specificities of each product, without losing sight of events in the economic scenario, climate events, geopolitical issues, among other factors that directly or indirectly can influence food prices. In other words, this is not a trivial issue.
References:
DHIFAOUI, Z.; KHALFAOUI, JABEUR, SB ABEDIN, MZ Exploring the effect of climate risk on agricultural and food stock prices: Fresh evidence from EMD-Based variable-lag transfer entropy analysis. Journal of Environmental Management. V. 326, part B, 2023. Available at: < https://www.sciencedirect.com/science/article/pii/S0301479722023623>.
FAO. Available at: < https://www.fao.org/3/w3613p/w3613p00.htm >.
GRIGORIEVA, E.; LIVENETS, A.; STELMAKH, E. Adaptation of Agriculture to Climate Change: A Scoping Review. Climate, 11, 2023. Available at: https://doi.org/10.3390/ cli11100202
HORTIFRUTI/CEPEA. Hortifruti Brasil Magazine. Year 22, n.242, 2024. Available at:< https://www.hfbrasil.org.br/br/revista.aspx>.
BRAZILIAN INSTITUTE OF GEOGRAPHY AND STATISTICS – IBGE. Presence of beans in Brazilian households drops by half in 15 years. 2020. Available at:< https://agenciadenoticias.ibge.gov.br/agencia-noticias/2012-agencia-de-noticias/noticias/27301-presenca-do-feijao-nos-domicilios-brasileiros-cai-pela- half-in-15-years>.
BRAZILIAN INSTITUTE OF GEOGRAPHY AND STATISTICS – IBGE. System
National Consumer Price Index – SNIPC. IPCA. 2024. Available at:< https://sidra.ibge.gov.br/pesquisa/snipc/ipca/quadros/brasil/fevereiro-2024>.
WORLD METEOROLOGICAL ORGANIZATION – WMO. El Niño weakens but impacts continue. 2024. Available at:< https://wmo.int/media/news/el-nino-weakens-impacts-continue>.
Tags: Food prices influence climate food security nontrivial topic Center Advanced Studies Applied Economics
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