Food prices will be volatile in 2025 – experts blame extreme weather

In 2024. We have been paying up to twice as much for coffee and cocoa as before, and there is no indication that inflation in the food sector will slow down. Experts from the consulting firm Inverto warn that extreme meteorological conditions will destabilize food prices this year as well.

More expensive food products – annual analysis

Inverto is a consulting firm that is part of the Boston Consulting Group structure and focuses on supply chain and sourcing analysis. Its experts compared food prices in January 2025 with those of a year ago, noting huge increases. Over the past 12 months, cocoa has become 163 percent more expensive, and coffee 102 percent more expensive. Sunflower oil prices have risen by 55.8 percent, and orange juice prices have seen a 36.3 percent increase. Increases of more than 20 percent also affected butter, beef and cheese.

The upward trend is also confirmed by the FAO Food Price Index, published on February 7, which was 6.2 percent higher in January than a year ago. A closer analysis of its components indicated that cereal prices fell globally, but vegetable oils rose by as much as 24.9 percent. The meat price index rose by 8.1 percent, while the dairy price index rose by 3.3 percent.

Climatic factors affecting food prices

Food prices are the result of a variety of phenomena, among which the supply of agricultural raw materials plays an indispensable role. The latter is fundamentally influenced by weather – the length of the growing season, the level of temperature and humidity, and above all, extreme weather events that cause physical damage to crops. Climate change increases the traditional anomalies that farmers have faced for centuries, and further alters the thermal conditions prevailing in particular regions.

January 10 this year. The World Meteorological Organization (WMO) confirmed that 2024 was the warmest year in modern history, and that the last ten years, from 2015 to 2024, were the hottest decade on record. The global temperature has risen by 1.55°C since before the industrial revolution, and all indications are that it will continue to rise. The first month of 2025 was declared the warmest January since 1850. Even if the cooling effect of the La Niña phenomenon is included, 2025 has a 30 percent chance of becoming the next hottest on record.

High temperatures are one of the reasons for the reduction in the world’s coffee supply and the associated increase in prices. Hot weather stunts plant growth and makes them more susceptible to diseases and pests. Erratic rainfall doesn’t help either – periods of drought weaken coffee plants, and excess rain increases the incidence of fungal pathogens. According to scientists, by 2050 up to half of today’s coffee plantations may not be suitable for further cultivation.

Hot weather and droughts also adversely affect cocoa plantations – more and more trees are dying off due to a virus spread by whiteflies, which the warm climate evidently favors. Cocoa trees that survive the infestation fruit less well under extreme weather conditions, and as a result, cocoa and chocolate prices continue to rise – by 136 percent from July 2022 to February 2024.

The record warm year of 2024 has also left its mark on the sunflower crop. In Bulgaria and the Black Sea region, yields in the 2024/2025 season are expected to be up to 21 percent lower than two years ago, with the hot and dry summer primarily to blame. Hot weather of 36-41°C was responsible for the thermal shock that disrupted the vegetation process, and the lack of rainfall (50-100 percent below normal) prevented crop development in areas without irrigation. The increase in sunflower oil prices was also accompanied by increases in rapeseed oil prices due to production cuts in France, Germany, the UK and Ukraine.

Business must adapt

According to Inverto analysts, climate change and the associated reductions in food production require a change in the business model of food producers. The reduced supply of many crops is a fact that all modern food industry supply chains must take into account in order to minimize price fluctuations.

According to Katharina Erfort, director of Inverto, food producers and retailers should start thinking about diversifying their supply to avoid over-reliance on particular geographic regions. Hedging strategies to absorb supply shocks associated with weather anomalies, thus providing greater stability in food prices, seem to be a good solution in this regard. In the case of cocoa, futures contracts on exchanges or negotiating future contracts with vendors so as to mitigate the risk of price volatility are suggested. Supply chain risk management can be improved by AI tools.

According to Inverto experts, the future of the food industry also depends on planning for the eventuality of unpredictable weather phenomena, so that a scarce raw material can be easily replaced by another. For example, today’s crisis in the orange juice market is a clear impulse to turn to other fruit juices not subject to such drastic price increases.

All indications are that food prices will remain highly volatile for another year. This is due not only to climate change, but also to rising energy production and labor costs. Companies that care about success should start planning their strategy for navigating between price shocks in the market today.

Social aspect of rising food prices

In December 2024, the UK Department for Environment, Food and Rural Affairs (Defra) published an alarming report on food security in the country. It shows that an increasing number of households in Britain are finding it difficult to buy products that implement a balanced diet. There is a growing number of families who are forced to skip meals or even experience hunger. According to Defra, the problem is general inflation, which is straining family budgets, but also rising food prices resulting from climate change and Brexit. Add that 40 percent of British food is imported.

According to a study published in 2023 in the journal Climate Risk Management, the percentage of the population whose well-being will be at risk due to lack of access to adequate food will slowly increase until 2050, and will become a serious problem between 2050 and 2080. Climate change not only reduces food production, but also disrupts supply chains in the food industry, translating into volatile prices. The quality and safety of products, and in many cases the nutritional value of agricultural raw materials, are also deteriorating. As a result, an increasing proportion of hungry and malnourished people in global society can be expected, and the problem will not escape Europe either.

According to Eurostat, in 2023, already 8.3 percent of the EU population could not afford a meal containing meat, fish or a vegetable protein equivalent at least once every two days. The percentage of poor people unable to cover their basic nutritional needs was highest in Bulgaria (44.6 percent), Romania (43 percent) and Slovakia (40.5 percent). In Poland, the level of extreme poverty is also on the rise, exceeding 6 percent in 2023 for the first time since 2015.