Why food prices could triple by 2027

Eating will cost 200% more by 2027: the fine print behind the warning

Is it really that close before the grocery basket triples? The warnings circulating these days talk about a tripling of food prices by 2027, with the blame spread across the war in Ukraine, the conflict with Iran and even climate change. The reality, as always, is more uncomfortable: there is a specific mechanism that explains much of the price surge, and it has nothing to do with Spanish politics.

The figure that sums it up: nitrogen fertilizer is made from natural gas, and that input accounts for between 72% and 85% of the production cost of ammonia. From there comes urea, and from urea, the yield per hectare. The gas spike of 2021 and 2022 did not reach the fruit aisle immediately: it arrived with a long year's delay, and now it is compounded by the risk of the Strait of Hormuz becoming a definitive bottleneck.

The gas that eats the harvest

The explanation needs no villain: ammonia synthesis uses gas as a raw material, not just as fuel. When gas prices soar, fertilizer becomes more expensive; when fertilizer becomes more expensive, wheat, corn and even broccoli end up paying for it on the shelf. The Hormuz corridor weighs more heavily on the bag of fertilizer than on a truck's diesel, because without ammonia there is no urea, and without urea there is no worthwhile harvest.

Prices are already reflecting it. At Mercadona, a broccoli that until recently cost 0.99 euros is now priced at 3. "Cheap" apples sell for 1.5 euros each, and a dozen eggs has surpassed 3.3 euros (30 eggs no longer cost less than 10). These are anecdotes, but they point to a trend that official models fail to capture.

The oil reserves that bury their heads in the sand

The other factor the public debate is overlooking: strategic crude oil reserves. The United States, NATO countries and China are releasing millions of barrels to contain prices. The trick works for a few months, but it is not eternal: US reserves would last about four months, China's eight and Europe's barely three. Once they run out, markets will gamble on a 200-dollar barrel, and the food bill will trinc.

Some argue the problem is demand, not supply: if terraces are still full and high-end cars are selling, the economy is not doing as badly as the shouting suggests. Others, however, see a deliberate agenda by Western governments to reshape consumption, with climate change as the perfect excuse: the bad stuff is never the ruler's fault, but the ruled's.

Who pays the bill?

The political debate has been reduced to a tug-of-war over culprits: some say it is the war, some say it is Brussels' green policies, some point at the government of the day. But the calculations on Hormuz, fertilizers and strategic reserves suggest the bill will be global and will reach every economy, whoever governs. The 70% of Spaniards who consider themselves middle class will have to accept that their standard of living allows for adjustments, though nobody is willing to put it that bluntly.

In 2027, when broccoli may cost 9 euros, we will curse the usual suspects. But the mechanism that gets us there was written years ago, in the ammonia plants that depend on Russian gas and in the tankers crossing Hormuz. A bitter irony: perhaps the only luxury left will be remembering these 3-euro broccoli as the good old days.