As always the answer depends on how this affects the balance between supply and demand. Assuming that demand grows steadily each year broadly in line with population (income effects aside), the major price swings should thus come from the supply side.

As we all know growing food is sensitive to variations in the climate, and since discussing future global warming scenarios usually involves some type of natural catastrophe, we speculate that most people would expect that food prices increase as the world gets warmer and vice-versa.

We decided to test this hypothesis using a very narrow set of (oversimplifying) assumptions.

First, let’s start with the measurement of global temperatures. There are several ways to go about this. Given the debate around some ground weather stations being affected by the gradually changing environment around them (such as urbanization, new industrial developments) and their limited geographical representation, we decided to use global temperature data provided by satellite measurements (for both land and sea, since we extract food from both).

This series is regularly updated by the University of Alabama in Huntsville. The graph above shows monthly readings as a deviation from (a positively sloped) trend line since November 1978. The data is fairly noisy but we can note in the first half of the series plenty of cooling observations interspersed with occasional warm spells, and the opposite occurring since the mid 1990s.

The next step is to find a proxy for food prices. We decided to use the Producer Price Index portion for processed foods and feeds in the US (not seasonally adjusted), as provided by the Bureau of Labor Statistics.

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