The Iran war has already raised energy prices globally, with the value of crude oil going past US$100 a barrel, but some experts are warning that the pain will even be felt soon on the grocery aisle.
While a comparatively 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 provide chain expert Andre Cire says skyrocketing oil prices could have an impact on food prices in Canada.
“Energy is in every little thing. You could transport food from one place to the opposite, it’s essential to put fuel in those ships. We’re going to begin seeing some increase in food prices as well, simply because the transportation costs are going to go up,” he said.
Sustained pressure on oil prices could mean Canadians pays 10-15 per cent more on the food market by the top 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 would see each a rise in freight or no less than a delay in freight coming through. That offer chain disruption could have some ripple impacts beyond just products that move through the Strait of Hormuz,” he said.
Within the short term, Canadians may begin to pay more for certain sorts of rice on the food market.
“There are some individual products — say, Indian basmati rice for example — which could also be slowed or redirected and that might raise the value of those [for Canadians],” von Massow said.
The more immediate impact could be on food prices in Europe and the Middle East, which receive a big 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 greater than doubled for the reason that U.S. and Israel attacked Iran on Feb. 28, trade officials said.
India is the world’s largest exporter of fragrant, premium basmati rice, with buyers within the Middle East, including Saudi Arabia, Iran and the United Arab Emirates, accounting for greater 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 because 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 due to rising container freight costs, and no alternative market can absorb the quantity, Goel said.
In 2023, when India limited rice shipments to regulate domestic prices, it had an impact on food prices globally.
Based on a 2022 report, two-thirds of the world’s calories come from 4 staple foods: wheat, rice, maize and soybeans. Not less than 72 per cent of those crops are grown in only five countries: China, the USA, India, Brazil and Argentina.
This raises fears of worldwide food insecurity when a vital channel just like the Strait of Hormuz is choked.
Long-term inflation fears
U.S. President Donald Trump has said the war could last 4 to 5 weeks, perhaps longer. A chronic conflict, which could see oil prices soar even higher, could be “disastrous” for food prices, Cire said.
High oil prices are already causing inflationary pressure the world over.
“The whole lot’s under pressure without delay,” he said.
“I might say that that is disastrous in the long run, because within the short term, yes, we see some increases in oil prices and so forth. In the long run, every little thing goes to go up,” he said.
No matter how long the crisis continues, the uncertainty goes to be bad for pocketbooks, von Massow said.
“Even when hostilities stopped overnight, I believe there would still be significant uncertainty with respect to grease movement and oil prices,” he said.
— with files from Reuters
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