“Rising food prices are certainly not just due to climate change”

On November 13, 2024, the National Bank of Belgium (BNB) published a report exploring the effects of climate change
Climate justice
climate change
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on food inflation. In a context where climate skepticism is on the rise, particularly with the re-election of Donald Trump and the rollback of regulations resulting from the Green Deal, it is useful for a national institution to reaffirm fundamental scientific truths, such as the existence of the effect greenhouses and the links between climate and food systems.

However, this report raises several questions. Why does the BNB rely on an analysis based on literature that it itself describes as “still in its infancy”? And why, at the same time, does she categorically reject the idea of ​​“greedflation” (inflation motivated by excessive profits) even though it is supported by institutions like the International Monetary Fund (IMF)?

Climate as a smokescreen

It is undeniable that climate change impacts food inflation. However, reducing this complexity to a simple cause and effect relationship between extreme climatic events and price increases is simplistic, especially in a country like Belgium, which largely depends on imports for its food. In its analysis, the BNB diverts attention from the real structural dynamics: speculation in raw materials, the concentration of market power and the excessive margins of certain companies. The BNB, although aware of the lack of scientific consensus on the climate and inflation, minimizes the well-documented influence of the profit margins of large companies

Finance and speculation: forgotten responsibilities

Several reports, including that of the IMF [1] show that in the eurozone, 45% of inflation between 2022 and 2023 was attributable to increased corporate profits. Another study, carried out by the Institute for Public Policy Research (IPPR) in 2023, reveals that the profits of large multinationals, particularly in the food sectors, have increased by 30% on average since 2019, well beyond of the increase in real costs.

Highly financialized products such as wheat or coffee suffer the effects of speculation which exacerbates price fluctuations, making food inaccessible and disrupting the financial situation of peasants and farmers. However, these dynamics are absent from the analysis of the BNB.

In Belgium, the economist and professor at ULB, Olivier Malay, has repeatedly highlighted [2] that Belgian manufacturers, particularly in the food sector, took advantage of inflation to significantly increase their profits [3]. In 2022, more than 45% of Belgian food manufacturers saw their profits jump. We are talking about an increase in profit of more than 662 million euros for this sector, well beyond the increases justified by production costs. Nearly half of these additional profits were made internationally, according to Malay, showing that these superprofits are not made only at the expense of Belgians, but also in all countries where products from the food industry are exported.

As for supermarkets, Malay emphasizes that, if they did not directly benefit from inflation in 2022, it is very likely that from 2023 they will have increased their prices to return to their pre-crisis level of profitability. . Although they depend on manufacturers (more particularly suppliers and distributors) to set their purchase prices, they maintain a model centered on the search for profits. This strategy will undoubtedly have contributed to increasing prices.

Public stocks: a forgotten structural solution

Faced with these systemic crises, the implementation of mechanisms to regulate agricultural markets is more necessary than ever. Public stocks offer concrete and proven alternatives. These regulatory mechanisms make it possible to purchase, store and distribute food. Public stocks can help control inflation and fight against speculation, protect producers by ensuring production outlets as well as consumers by maintaining the availability of food. They therefore represent a tool of public control and are a way of intervening in the setting of prices, provided that they are in sufficient quantities to exert a real influence.

The example of past food (price) crises, such as that concomitant with the financial crisis of 2007-2008 or that of 2022 following the war in Ukraine, clearly shows that speculation activities and the absence of sufficient stocks have worsened price spikes. Forced to obtain food from international markets, heavily importing countries have thus experienced situations of food insecurity with dramatic consequences.

However, the existence of sufficient stocks makes it possible to temporarily reduce dependence on international markets and thus mitigate the impact of external shocks. Furthermore, transparency with regard to public and especially private stocks is essential in order to avoid phenomena of financial speculation4.

Towards a global and equitable response

Rather than limiting ourselves to monetary solutions or simple recognition of climate impacts, it is time to propose comprehensive policies that address the root causes of food inflation.

This includes not only regulating financial markets, combating speculation and improving transparency on profit margins in supply chains, but also reforming international trade relations. Such a reformed trading system should support public stockpiling and contribute to the development of regional and local food systems, thereby strengthening resilience and enabling more equitable distribution within the food chain.

Given that the figures from the National Bank of Belgium (BNB) mostly stop before the major indexation of January 2023, it would be relevant for it to review its conclusions in the light of more recent data, but also that it calls for regulating financial markets, fighting speculation and demanding increased transparency on profit margins in supply chains.

Signatories: Fairouz Gazdallah, responsible for Food Sovereignty at Oxfam Belgium; Lara Sarcinella, researcher at FairFin; Amaury Ghijselings
Amaury Ghijselings

food sovereignty advocacy officer at CNCD-11.11.11; Jonas Jaccard, advocacy officer at Humundi; Tomaso Ferrando, professor at the University of Antwerp, Law and Development Research Group and Institute of Policy Development.