Global food prices, energy costs and the link between the two was the main point made by the Governor of the Bank of England, Andrew Bailey, when he addressed the NFU’s Henry Plumb Memorial Lecture.
He said with Russia and Ukraine both being major producers of a number of agricultural commodities, the invasion had reduced global supply and increased uncertainty.
Speaking at the event, Mr Bailey said: “Energy prices have had a large, indirect effect on food prices” and that “more than 1.5 percentage points of food price inflation can be attributed to higher energy costs in the food supply chain. This is significantly more than in other sectors of the economy.”
He spoke about how “farmers were right” when being sceptical about food price inflation easing quickly, saying that they were continuing to face higher costs of production. He also noted that farmers have told him they’ve found it hard to find the labour they need.
On recent uncertainty within the global economy, the Governor said: “Poor weather was undoubtedly a factor. Harvests have been poor in many of the world’s agricultural regions and strained supply chains affected the distribution of agricultural commodities and food products as well as other goods. In the UK a combination of heavy rainfall and droughts caused the wheat harvest to drop to the lowest level in 40 years in 2020.”
He also paid tribute to Lord Plumb who he quoted, saying for farmers to thrive they must have the “opportunity to earn a reasonable price to ensure food production in our countryside.”
He ended by noting the value he found from speaking with farmers across the country and said: “We still have lots to learn from you.”
