An Odd Crisis: Covid‐19 and UK Food Prices

The Covid‐19 pandemic will have impacts that will vary across countries and commodity sectors, reflecting factors such as the importance of trade, differences in the functioning of supply chains and the market which producers and farmers supply. Some of these effects will be relatively short‐lived; others will be longer‐lasting. In this context, we set out the channels through which food prices will be affected by the Covid‐19 pandemic, emphasising the short‐ and longer‐term nature of the main effects. We focus on the UK but the insights extend to other (importing) countries. Drawing on a recent econometric model of UK retail food prices that accounts for both domestic and international factors, we show that the key drivers have potentially off‐setting effects, suggesting that the Covid‐19 shock to the food sector is likely to be different from previous shocks, particularly the commodity price crises of 2007–2008 and 2011. In many European countries, the Covid‐19 pandemic may manifest itself as something of an ‘odd crisis’, in which lower world and farm‐gate prices co‐exist with higher domestic retail prices. These off‐setting factors will frame policy responses targeted at different stages of the food chain across countries.