Squeals of horror over price caps but how are we going to fix our broken food system?

The Treasury asked UK supermarkets to cap price rises on essential foods, prompting strong opposition from supermarkets and critics of price controls. Food prices are expected to surge further after a summer increase, building on nearly a 40% rise since 2020. The rise is driven by the Iran war and a forecast record-breaking El Nino that will reduce global food production. Britain’s food system is exposed to these shocks because global supply cannot be relied on to deliver affordable food. Fertiliser supply is vulnerable, with about one-third of fertiliser trade passing through the Strait of Hormuz and about half of the world’s food supply depending on artificial fertiliser. Other chokepoints include the Strait of Malacca, Black Sea ports, and the Panama Canal, where drought has reduced grain transits and pushed up prices.

"The news that the Treasury was asking UK supermarkets to cap price rises on essential foods was greeted with predictable squeals of horror this week. Supermarkets were reportedly furious, while luminaries from the former head of the Institute for Fiscal Studies to the former chair of M&S could be found harrumphing about the evils of price controls. But this caterwauling is a distraction from two unpleasant facts."

"Firstly, the food price surge over the summer and beyond is likely to be significant and will come on top of a near-40% rise in the price of food since 2020 due to a devastating combination of the Iran war and a forecast record-breaking El Nino, which will hammer global food production. And secondly, Britain's food system is painfully exposed to such shocks."

"With about one-third of the fertiliser trade travelling through the strait of Hormuz, and about half of the world population's food supply dependent on artificial fertiliser, the shock to global food systems will play out over the next year regardless of how quickly the strait may or may not reopen. The strait of Hormuz isn't the only chokepoint in the global food system."

"In a prescient study from 2017, the foreign policy thinktank Chatham House said the world food system had become painfully exposed to 14 critical junctures, from the strait of Hormuz to the strait of Malacca, between the Malay peninsula and Sumatra, to the Black Sea ports that connect Ukrainian and Russian farmers to the world. The Panama canal is another; a multi-year drought across Central America has restricted transits through the freshwater-fed canal, which carries 16% of the world's grain trade, forcing up global prices."

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