Southeast Asian food prices to spike due to extreme weather and energy transition, flags Oxford Economics report

Food prices in Southeast Asia could increase by at least 30% and up to 59% due to extreme weather events coupled with the costs of transitioning to a low-carbon economy by 2050, according to a 2024 Oxford Economics report.

The analysis reveals based on historical data that a 1% increase in the average temperature in the ASEAN region spikes food producer prices by 1-2% across Thailand, Vietnam, Malaysia, Indonesia and the Philippines.

“While we didn’t look into specific crops in this report, our previous review suggests rising temperatures in the ASEAN region threaten key food commodities like rice, palm oil, coffee, coconut and tropical fruits. These crops are vulnerable to heat stress, reduced yields and increased pests,” Thang Nguyen-Quoc, Ph.D., lead economist at Oxford Economics Asia, tells Food Ingredients First.

With this paper, published jointly with Food Industry Asia and ASEAN Food and Beverage Alliance, Oxford Economics expands its 2022 analysis to a longer time frame.

The Philippines is the most vulnerable to bad weather events, given its geographical location and the reduced ability of the domestic food production system to respond to unusual temperatures. The paper estimates that climate change has pushed food prices by 6% in the country over and above what would otherwise have occurred in the past decade.

Energy transition threatens food affordability

As governments and private companies eye net-zero emissions by 2050, Oxford economists predict a surge in the costs of energy, labor and other inputs to the F&B manufacturing and distribution processes.

ASEAN countries will particularly struggle to adapt to these disruptions due to their dependence on fossil fuels for energy. Indonesia is expected to be the most exposed to food commodity price changes due to its high reliance on fossil fuels and vulnerability to global inflationary pressures.

The analysis indicates that this cost will likely be passed on to consumers.

However, managing rising food production costs while ensuring fair pay and affordability for consumers is a joint responsibility, notes Nguyen-Quoc, urging governments and the food industry to address the price hikes in collaboration.

“It is important to realize that, first and foremost, this is a social problem whose responsibilities go beyond the F&B companies but also the local communities, ASEAN governments and international community. From the perspective of F&B companies, this will require efforts to increase production efficiency (especially energy efficiency) and reduce food waste across the whole supply chain, from farm to table.”

ASEAN investment in infrastructure

According to the report, with ASEAN governments’ support, the food manufacturing sector can benefit from subsidized energy transition costs and investment in renewable energy infrastructure. Additionally, private funding for innovation can help increase the sector’s productivity.

ASEAN F&B companies could collaborate to address disparities in climate resilience and mitigate rising food production costs.Two possible strategies are to redirect public funds toward climate-smart agriculture practices and provide welfare spending to poorer households that spend 10% more of their income on food supplies than the average household.

F&B companies in the region could collaborate across borders to address disparities in climate resilience and mitigate rising food production costs “by leveraging shared resources, technologies and knowledge.”

“Regional partnerships can focus on developing drought-resistant crops and sustainable water management systems, which can be shared with less resilient nations,” Nguyen-Quoc tells us.

“Joint investments in renewable energy and green technologies can lower production costs and reduce carbon footprints. Collaborative efforts in supply chain optimization and shared logistics can mitigate the impact of climate disruptions and improve efficiency.”

Blockchain and AI advances

While the COVID-19 pandemic has weakened ASEAN countries’ fiscal space and public revenue recovery, Nguyen-Quoc notes that novel technologies such as blockchains and AI can “revolutionize” ASEAN food supply chains by improving compliance, productivity and transparency.

“Blockchain ensures traceability by creating tamper-proof records of food origins and certifications, helping to meet safety and regulatory standards. AI optimizes productivity through demand forecasting, real-time monitoring and precision agriculture, reducing waste and improving resource allocation,” he explains.

“Together, these technologies streamline logistics, prevent fraud and enable smallholder inclusion, making ASEAN’s food systems more resilient and globally competitive. However, this will require sustained investment, training, infrastructure and regulatory frameworks to unlock these opportunities.”

The report highlights that enabling local food producers’ participation in modernized supply chains is crucial as there already exists a gap between them and leading foreign direct investment firms.

This has hindered regional manufacturers from absorbing the spillover technological benefits of foreign investment, which could worsen if left unaddressed as supply chains become more sophisticated.