© Jorge Royan
Extreme weather events will keep hitting harvests of key commodities like coffee and cocoa, causing sudden price spikes, according to supply chain experts.
“Food commodity prices are set to remain volatile over the coming year. In addition to climate risks, higher wages for workers and rising energy costs are also likely to cause costs for firms in the food industry to rise,” a statement from Inverto, the procurement and supply chain management subsidiary of Boston Consulting Group, said.
Central bankers around the world have been examining the impact on prices of climate change, especially in relation to the policy of targeting inflation. Global warming could add up to 3 percentage points to annual food inflation and up to 1.2 points to headline inflation globally by 2035, according to some projections.
Inverto noted that heavy rainfall and higher temperatures have led to coffee prices jumping 103% and cocoa prices rising 163% in the last 12 months. Meanwhile, sunflower oil prices have increased 56% due to drought in Bulgaria and Ukraine, and the ongoing war.
Spencer Hyman, a chocolate expert from Cocoarunnners, said the cocoa price rises are also due to chronic underinvestment in cocoa farms and investor speculation.
Central banks should consider shifting to more flexible inflation targets to respond to the supply shocks that climate change will make more likely, Luiz Awazu Pereira da Silva, the former deputy general manager of the Bank for International Settlements, has argued.
Inverto says businesses should plan for the ongoing volatility by adapting their procurement strategy.
“Food manufacturers and retailers should diversify their supply chains and sourcing strategies to reduce overreliance on any one region affected by crop failures,” said Katharina Erfort, principal at Inverto. “Companies should also undertake more contingency planning that will allow them to more quickly swap one food commodity for another.”
This page was last updated February 19, 2025
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Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
