Updated: May 10, 2022
The term “food inflation” means exactly what it sounds like – an increase in food prices. According to the United Nations’ Food & Agriculture Association (FAO), worldwide food prices are at their highest point since 2014. Food inflation has increased 18% since May of 2020. The FAO predicts that food prices are likely to continue to climb. For example, in the U.S., food inflation in January, 2021 increased at a 3.8% higher rate than it did in January, 2020.
Human beings thrive and work better together when our primary needs are taken care of. That means we don’t have to worry about where our next meal is coming from or whether we can afford it. That means our environment sustains temperatures in which we can function. That means we aren’t threatened by numerous worrisome conditions.
Heading an organization can be tough, looking after the many aspects of the organization’s health and well-being. An organization, like a person, also faces threats and has needs that it must meet every day. Add to that share price promises or other spoken guarantees the organization may have made to the public.
But while overseeing the big picture, sometimes leaders forget that the very people who support our organizations each day could be struggling. They may not be as fortunate or enjoy similar financial security. Those “at the top” can generally deal with big price fluctuations in the economy. The fact is, the majority of U.S. workers can no longer afford a $400 emergency! And price fluctuations for the essentials are getting more and more threatening. Food prices have now reached a “violent threat” level for a huge swath of workers in the U.S. and abroad.
According to the Consumer Price Index for food, only fresh fruits decreased in price over the past year. All other food categories suffered from food inflation, increasing in price.
There are multiple drivers of food inflation, with climate change being the primary one. Extreme weather conditions dry up land. Then, when it rains, rather than the water being absorbed into the soil, it runs off the brittle, parched ground. This causes floods. So agriculture suffers and food prices inflate. Also, because corn is now used as a biofuel, less of it is available to be eaten. The cost of this staple food is increasing throughout the world. Worldwide corn prices have risen by 45% just in the last year. As oil prices go up, the cost of transporting food also rises, and this expense is passed on to consumers. FAO economist Abdolreza Abbassian says this “could become a big issue for less prosperous countries which depend on imports for food.”
Historically speaking, food inflation was even worse between 2008 and 2011. That's when skyrocketing food costs led to economic and political instability throughout the world. The United States Department of Agriculture predicts that, at least in 2021, food inflation is likely subside to normal rates. Much of the 2020 inflation was ascribed to the coronavirus pandemic and its related factors.
There is no warrant for complacency, however. Climate change will continue to have an inflationary impact on food prices all over the world. It will reduce countries’ GDPs, hobble economies, and have potentially devastating consequences for individuals and families.
Governments, businesses, and civic institutions will do well to plan ahead for unpredictable fluctuations in food prices.
How can we stabilize and bring certainty to the people in our own organizations and communities? Can we thrive together over this next decade of turbulence?