The Iran war has already raised energy prices globally, with the price of crude oil going past US$100 a barrel, but some experts are warning that the pain will also be felt soon at the grocery aisle.
While a relatively small portion of Canada’s food imports move through the Strait of Hormuz, where traffic has come to a virtual halt amid the war, University of Toronto professor and supply chain expert Andre Cire says skyrocketing oil prices will have an impact on food prices in Canada.
“Energy is in everything. You need to transport food from one place to the other, you need to put fuel in those ships. We’re going to start seeing some increase in food prices as well, just because the transportation costs are going to go up,” he said.
Sustained pressure on oil prices could mean Canadians will pay 10-15 per cent more at the grocery store by the end of this month, Cire added.
“This has an impact on freight costs,” he said.
The longer the crisis continues, the harder it’s going to get to ship anything anywhere, says University of Guelph food economist Mike von Massow.
“If it’s taking more days to ship things, then we might see both an increase in freight or at least a delay in freight coming through. That supply chain disruption could have some ripple impacts beyond just products that move through the Strait of Hormuz,” he said.
In the short term, Canadians may start to pay more for certain kinds of rice at the grocery store.
“There are some individual products — say, Indian basmati rice as an example — which may be slowed or redirected and that would raise the price of those [for Canadians],” von Massow said.
The more immediate impact would be on food prices in Europe and the Middle East, which receive a significant amount of their food shipments via the Strait of Hormuz, he said.
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Reuters reported that as of last week, about 400,000 metric tons of Indian basmati rice were backed up at ports and in transit, and export deals have dried up as freight rates have more than doubled since the U.S. and Israel attacked Iran on Feb. 28, trade officials said.
India is the world’s largest exporter of aromatic, premium basmati rice, with buyers in the Middle East, including Saudi Arabia, Iran and the United Arab Emirates, accounting for more than half of its shipments.
“Around 200,000 tons of basmati rice are stuck in transit, and an equal amount is stranded at Indian ports as the war has disrupted shipping routes across the Middle East,” Satish Goel, president of the All India Rice Exporters’ Association, told Reuters.
Exporters have already moved stocks to ports, but cannot ship to the Middle East because of rising container freight costs, and no alternative market can absorb the volume, Goel said.
In 2023, when India limited rice shipments to control domestic prices, it had an impact on food prices globally.
According to a 2022 report, two-thirds of the world’s calories come from four staple foods: wheat, rice, maize and soybeans. At least 72 per cent of these crops are grown in just five countries: China, the United States, India, Brazil and Argentina.
This raises fears of global food insecurity when a crucial channel like the Strait of Hormuz is choked.
Long-term inflation fears
U.S. President Donald Trump has said the war could last four to five weeks, maybe longer. A prolonged conflict, which could see oil prices soar even higher, would be “disastrous” for food prices, Cire said.
High oil prices are already causing inflationary pressure across the world.
“Everything’s under pressure right now,” he said.
“I would say that this is disastrous in the long term, because in the short term, yes, we see some increases in oil prices and so on. In the long term, everything is going to go up,” he said.
Regardless of how long the crisis continues, the uncertainty is going to be bad for pocketbooks, von Massow said.
“Even if hostilities stopped overnight, I think there would still be significant uncertainty with respect to oil movement and oil prices,” he said.
— with files from Reuters
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