How the Iran war could raise food prices | Global News Podcast

Welcome to the Global News podcast on. YouTube. I'm Charlotte Gallagher. And. today we're joined by our business. correspondent Michelle Fleury. Michelle, it's been a really turbulent time for. the global economy after the US Israel. war with Iran started. The head of the. International Energy Agency has said the. world is facing a worse crisis than the. oil shock of the 1970s. and the fallout from the Ukraine war. combined. I mean, what is going on in. the financial markets? They're going. haywire. I don't think there's really. any other way other than that to.

describe it. You've got markets up, down. You've got oil prices again, you know, moving sharply. This. volatility is being driven by the fact. that people just don't know how long. this conflict is going to last and how. much economic damage it's going to. cause. And at the same time, obviously. you've got the head of the International. Energy Agency saying that world leaders. are underestimating the impact. And I And I think, you know, talking to. kind of traders here on Wall Street,

you're hearing. a similar thing, which is that, you. know, no company is going to be spared. from this. The longer this goes on. because oil is such a crucial input in. so many aspects of our lives. that it's going to trickle through to to. so many things. And the longer it lasts, the more that that impact is going to. be. In In terms of the actual shipping. markets, obviously we've seen. rates and insurance rates and everything. go up and down. The cost of shipping.

fuel has also increased. And so it's. making it very difficult beyond the. simple sort of maritime blockade that is. effectively taking place in the Strait. of Hormuz. It's just incredibly difficult for for. companies that run tankers to know where. to dock. Where is the safe place? Let. alone what passage. And even if they do. attempt to kind of make a voyage, how do. they get fuel? Where can they go? So the. chaos in logistical terms is deeply. challenging and it it's kind of causing.

a lot of frustration, late nights, lots. of headaches for those in the industry. And we've talked so much about oil and. gas, but also food is going to become a. problem if this war continues. The. United Nations has warned that tens of. millions more people could face acute. hunger if this war lasts until June. Yeah, I mean, this has to do with. fertilizer and the cost of fertilizer. I. think as you say, so much of the. attention on the shipping route has been. on on energy going through there. But, you know, crucially the Gulf accounts.

for about a third of urea, which is kind. of nitrogen fertilizer, passes through. that shipping route. And so it too is. suddenly stuck. There is also the fact. that in countries like India, for. example, they've already. are struggling with imports of liquefied. natural gas. That is a key component. used to make fertilizer. And so they've. had to scale back production. domestically. So you've got this kind of. double whammy going on where you can't.

import, but also domestically trying to. make it is challenging because of what. is happening with the energy picture. And it comes at a crucial time because. in parts of the world it's planting. season. So you can imagine if suddenly. your costs have shot up, in some cases. as much as 40% for fertilizer, then then that kind of has a knock-on. effect. Now, speaking to kind of. agricultural experts in this, they say. it takes roughly about 6 months to a. year before that translates into higher. prices at the grocery store. But make no.

mistake, the impact is being felt. immediately by farmers who, as I say, are currently kind of planning their. next planting season. And China as well, they do produce a lot of fertilizer, but. now they're saying we're not going to. export any. We need to keep this in. reserves for our own agriculture. industry. Yeah, I mean, so countries like India, places like that. rely heavily on imports from the Gulf. And I think there had been hope amongst. officials in those countries, look, maybe China, which makes a lot of.

fertilizer, will ride to the rescue. But instead, what they've announced is. export controls. So that's going to have. a knock-on effect. I mentioned India, but another country is Thailand. Another. one is Brazil. And the reason for that. is because they are big consumers of. fertilizer from China. So you're. starting to see the kind of domino. effect, how it ripples through and. becomes a much bigger problem. Thailand, in turn, makes rice. It is a kind of a. kind of crop that depends heavily on. fertilizer. So you could see the. knock-on effect feed back to China where.

maybe 6 months to a year from now their. imports of rice from Thailand or from. countries like Brazil where they import. a lot of soybeans, you know, those. crops, if they get affected and they. start having to pay higher prices, you. start to see how this snowball effect. kind of gains speed. And that's why you. have these officials warning about the. the knock-on effect this will have on. prices on food prices down the road. And. Michelle, all this could affect crops. like rice. And when we're looking at. less developed nations, they really rely. on these crops. I mean, what could that.

mean? Yeah, and when you are talking about. less developed nations, the other thing. to remember is that the the people kind. of, you know, we're not talking giant. agricultural firms. We're talking. smallholders who really aren't able to. bear these higher costs of things like. fertilizer. And so that's why you have. agencies like the UN World Food Program. warning that, you know, there is a risk. of of acute hunger for some sort of 45. million people as a result of this. conflict kind of worsening conditions on.

the ground. And this could have serious. political consequences for President. Trump because people are already feeling. it when they're buying fuel for their. car at the pumps, but also the. consequences it could have for US. farmers. And I know that you've been. speaking to some of them, haven't you, Michelle? Yeah, I mean, I was speaking to Lance. Lilibridge. He's a kind of corn farmer. in Iowa. He was also the head of the. former head of the Farmers Corn Growers. Association there. And he was saying, look, even before this crisis, prices. have been shooting up.

And he was sort of pointing out that the. US only buys about 6% or so. of fertilizer from the Gulf region. And. yet it's having a massive impact. to the point where he was saying in some. cases it's no longer economical to plant. this. And And he was kind of telling me. about, you know, there were lots of. factors in the US that led to this. moment, but this is kind of, if you like, the cherry on top. It's. pushing things to breaking point where. it becomes unsustainable for many.

farmers. And that is obviously a huge concern. because in his case, corn, you know, that's important not just in itself, but. also corn is important in livestock. food. So that means that starts. trickling up and pushing up the price. there. It is also used in cases in. industrial uses, for example, in paper. So there are ways in which we can't even. begin to imagine how this will impact. And yet they are sounding the alarm.

right now saying, look, this is a. problem for us. This is, you know, unsustainable. And I'm just thinking back to the last. presidential campaign and President. Trump saying that he was going to lower. grocery prices in the US. What could it mean if they keep going up. for President Trump? Yeah, I mean, this. was an election in which Donald Trump in. the last election said, you know, I will. make your lives better in in economic. terms. And yet you look at what's. happening right now and it's going to be. interesting to see. I mean, America is.

heading to the polls in November for. national elections. How is that going to. impact that? What are people going to be. saying? It all depends again on how long. this conflict goes on. But the worry is. that people are going to see prices go. up. And and so that's going to worsen an. affordability crisis. So right now, you. go to the petrol pump, obviously you're. reminded daily of of kind of higher. prices. But, you know, in a couple of. months from now, will you start to see. that in food prices? Maybe a bit too. soon. But if the perception among.

consumers is that things are moving in. the wrong direction, it'll be interesting to see, you know, how that hurts or doesn't hurt. Republicans and Donald Trump in. November's midterms. Is there anything that can be done to. manage the problems in the supply chain? I mean, it's hard to see what you can do. short of reopening the Strait of Hormuz. I mean, we've seen from past crises, remember. the attacks of the Houthis in the Red. Sea, that effectively kind of deterred.

traffic around that that sort of. waterway. And companies tried to find workarounds. But the Strait of Hormuz is somewhat. different. You know, there are talks. about whether or not naval escorts could. get it reopened. There's talks about. whether Iran will start charging ships. for safe passage. Is that really. workable or not? Aside from that, in some ways it's hard. to see sort of what can be done. And I. think that's what is putting increasing. political pressure certainly in the US.

who do care about what what is happening. to global markets. And so you've seen the president. increasingly trying to get allies on. board to sort of help with that plan of. naval escorts. But, you know, short of a reopening, it's really hard to see what can be. done. I mean, mitigation, but that only. takes you so far. Michelle, thanks so much. That was the. BBC's Michelle Fleury in New York. And. if you want to hear more from the BBC's. Global News podcast, please click the. link below. Thanks so much.