Among the various input costs, energy is key for most food products, with both direct (fuel) and indirect (chemicals, fertilizers, electricity) channels.

The World Bank forecasts that prices in the three main natural gas hubs (Europe, the United States and Asia) will be on average 148, 71 and 71% higher in 2022 than in 2021.

In particular, rising energy prices have taken their toll on fertilizer markets since 2021, as fertilizers are the most energy-intensive commodity group.

Several companies, especially in Europe, temporarily shut down production facilities due to rising input prices and/or unavailability of raw materials.

Input costs

The already tense market could be further destabilized by continued restrictions on fertilizer exports from the Black Sea region, sanctions on exports from Belarus and a ban on fertilizer exports from China.

If energy and fertilizer prices do not moderate in 2023 and 2024 as expected, food prices could come under significant upward pressure.

Outlook

Slowing global growth and the possibility of recession in several economies raise fears of a sharp decline in household incomes.

In addition, the World Bank believes the appreciation of the U.S. dollar against most currencies has made food products more expensive in emerging market and developing economies, further eroding the purchasing power of households in low-income countries.

Together with inflationary pressures, this would reduce food affordability and access to food.

Low-income countries are particularly vulnerable, as consumers spend a large share of their disposable income on food, in some countries more than 50 percent.

Many of these countries have limited fiscal space to support vulnerable households after spending considerable resources during the pandemic.

The World Bank, created in 1946, is an international development agency that provides loans, advice and other services to more than 100 countries.