Heatflation Intensifies the Rise in Global Food Prices

Against the backdrop of worsening global climate change, "heatflation"—a term coined in 2022—has emerged as a major threat. According to a recent study, global food prices are expected to rise annually by 0.9% to 3% over the next decade, posing new challenges for economies worldwide.[1]

Heatflation is not simply a phenomenon of rising prices; it reflects the profound impact of climate change on global economic systems. Climate change has become a fundamental economic issue; and addressing inflation has become an inseparable task of combating climate change.

The impact of climate change affects many parts of the supply chain: extreme heat directly reduces crop yields, disrupted supply chains drive up transportation costs, and agricultural futures markets become volatile due to climate-related expectations. Moreover, many food manufacturers are now incorporating future climate risks into their pricing strategies, resulting in anticipatory price increases.

Global Cases of Heatflation

In 2023, significant declines were reported in rice production due to extreme droughts and floods in major rice-producing and exporting countries such as China, Pakistan, India, and Thailand. This resulted in global rice prices reaching a 15-year high.[2]By February 2024, global cocoa prices had also hit a record high, driven by the El Niño weather phenomenon, which caused drier conditions in West Africa, a key cocoa-producing region. This led to a doubling of cocoa prices, a critical ingredient in chocolate production, compared to the beginning of 2023. Meanwhile, record-breaking heat and drought in the U.S. Midwest during 2023 severely impacted soybean yield, disrupting global feed supply chains and further driving up meat prices.[3]

Export prices of Thai jasmine rice has risen significantly in 2023(Image source: Wen Wei Po)

In Italy, severe heatwaves in 2022 caused more than one-third of the country’s rice production to fail,[4]while the dairy supply chain was impacted by dairy cows suffering from heat stress.[5] Similarly, British households faced an average increase of £605 in food expenses between 2022 and 2023, with approximately 60% (£361) directly attributed to climate factors.[6] These figures clearly demonstrate the tangible impact of heatflation on livelihoods.

Impact of climate change and fossil fuels on UK food prices (Image source: Energy & Climate Intelligence Unit)

As a global metropolis heavily reliant on food imports, Hong Kong is particularly vulnerable to heatflation. Over 90% of the city’s food is imported, meaning that climate anomalies in any part of the world can disrupt the local food supply.[7]

According to data from the Census and Statistics Department, rice prices in Hong Kong rose by 1.6% in 2024 compared to the previous year, while beef prices increased by 2.3%. [8] Wholesale prices of fresh vegetables showed even greater fluctuations. Whether these price hikes are solely attributable to climate change though requires further study.

The Hong Kong government is actively working to diversify food supply sources, develop smart agriculture, and establish more robust food reserves. Strengthening agricultural collaboration with the Greater Bay Area and expanding food trade with ASEAN countries will be key to enhancing supply chain resilience.

Food companies can mitigate climate risks by improving supply chain management and adopting more sustainable procurement strategies. Promoting green finance and supporting sustainable business models will also help alleviate the long-term effects of heatflation.

Consumers can reduce reliance on imported food by choosing locally produced or seasonal ingredients. This not only helps lower food costs but also reduces carbon emissions associated with long-distance transportation. Additionally, reducing food waste and eating less meat are practical ways for individuals to cut carbon and mitigate heatflation.

Heatflation is predicted to persist in the foreseeable future.[9] As an international financial hub, Hong Kong must leverage its innovative strengths to tackle this challenge. Developing urban agriculture, promoting energy-efficient technologies, and supporting green finance will be critical measures to mitigate the impacts of heatflation.

This climate and economic challenge will require concerted efforts from the government, businesses, and citizens. Through policy innovation, business model transformation, and lifestyle adjustments, Hong Kong can forge a sustainable path amid the global challenge of heatflation.