Why Food Prices Are Rising—And Are Never Coming Down Again

Between 2022 and 2023, food prices rose sharply due to supply chain disruptions caused by the war in Ukraine and soaring overall costs; U.S. corn prices, for example, more than doubled.

The effect of this crisis varied across regions. In Western economies, rising food prices exacerbated inflation, disproportionately affecting low-income households. Since food expenses are difficult to cut, reduced purchasing power mainly translated into lower spending on other essentials, such as services. However, this was more of a strain than a catastrophe. In poorer nations, by contrast, higher food prices threatened political stability. Sharp increases in staple food prices drove up poverty and insecurity. The cost of food is not merely an economic issue; it has geopolitical ramifications, accelerating migration from impoverished countries to developed ones.

What Drove the Surge in Agricultural Prices?

As is often the case with global crises, rising food prices were the result of a confluence of factors. First, the crisis struck as the world was still recovering from the COVID-19 pandemic, which had already done much to disrupt supply chains.

Then came Russia’s invasion of Ukraine and the placement of sanctions on Moscow, which wreaked havoc on long-existing global trade routes. Ukraine’s grain production suffered the most, plummeting from 80–85 million tonnes in 2021 to just 50–58 million tonnes in 2022–2023. It stabilised at 56 million tonnes in 2024. Russia, meanwhile, increased its grain output in 2022–2023 to compensate for the decline of Ukraine’s, but its production fell back to 120 million tonnes in 2024, with similar levels expected this year.

The Paradox of a Good Harvest

There lies a paradox in the fact that the higher a farmer’s yields (mainly by using more efficient technology), the less his produce will be worth on the market.

In the past, high yields meant higher earnings; today however, they often lead to greater losses.

For farmers in Western economies, poor harvests and natural disasters can, in some cases, be actually beneficial financially, since those with crop insurance receive payouts to compensate for failed harvests. Meanwhile, if a different region or continent experiences poor yields, global prices rise, boosting revenue for those farmers who do manage to produce a crop. Bad news for agriculture then often translates into good news for (some) farmers.

The outlook for 2025 suggests a strong global harvest, which makes those challenges that already exist even greater. Commodity prices on futures markets are already declining, yet farmers must contend with rising fixed costs.

One major concern is that genetically modified (GM) seeds are expensive. Their prices have been mounting, driven by rising research costs in an already inflationary environment and the quasi-monopolistic power of seed corporations. These companies often require farmers to commit to annual purchases, increasing their dependence on suppliers who have little incentive to lower prices.

Fertiliser costs remain another critical issue. While prices have fallen sharply compared to 2022–2023, they have not returned to pre-crisis levels. Surging water prices only add to the great expenses farmers have to shoulder.

According to the World Bank, global water costs rose from $2.2 per cubic meter in 2023 to $2.5 per cubic meter, with even steeper increases in Western economies. Farmers are thus caught in a bind: while their own costs keep rising, they get less and less for what they produce.

The result is a financial squeeze with serious consequences. Take Illinois as an example—despite record harvests in 2024, farms in the state lost an average of $30,000 each. To make matters worse, the world seems on the brink of what could be multiple trade wars, instigated by the U.S. Any disruption could deliver yet another shock to global farming.

Expensive Food Is Here to Stay

There is little hope of returning to the era of cheap food. While technological advances continue to enhance agricultural productivity, they paradoxically contribute to the problem—greater output drives down prices, pushing farmers deeper into financial distress. Governments have responded with subsidies, but these only reinforce market distortions. While they provide temporary relief, they also sustain an inefficient system that penalises successful farmers.

At the basic level, the choice is binary: either the state controls food prices more tightly or the market stops penalising efficiency. In practice, however, a hybrid model may emerge, combining regulation with market incentives. Whatever the approach, one thing remains clear—food prices will remain high.

Statement

Cheap food is a thing of the past. Farmers face mounting pressures, from the war in Ukraine to soaring fertiliser, seed, labour, and water costs. To stay afloat, they have to expand production—but paradoxically, a bigger harvest means farmers can demand less money for their produce, leaving them trapped in an inescapable cycle. For consumers, the message is clear: rising food prices are neither temporary nor cyclical—they are the new normal.

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