The food sector traditionally reacts to positive changes with a significant delay. The difference in price dynamics stems from fundamental differences between commodity and consumer markets: while oil futures react instantly to political news, the food industry goes through a longer adjustment cycle as producers continue to use raw materials purchased at previous peak prices.
Businesses quickly factor rising risks into prices, but are extremely reluctant to lower prices on store shelves once the situation stabilizes. High food costs will continue to drive overall inflation, reducing real household incomes. Retailers will try to offset the risks of falling demand. Retail chains will curb price declines through loyalty programs and bonuses, keeping base prices high. After some time, wages will “catch up,” though they will not keep pace with labor productivity growth, they will still “improve” the population’s purchasing power.
Gasoline and airfare prices will be the first to react to de-escalation. Global food prices will remain high in the medium term, as the agricultural sector is more dependent on long-term climatic factors, fertilizer costs, and logistics than on short-term fluctuations in oil prices. A drop in oil prices will reduce fuel costs for tractors and ships, but this effect will take 6–9 months to reach store shelves, according to estimates by analysts at Dalhousie University in Canada.
