Have you noticed that the prices of kitchen items are getting more expensive now? If you think it's expensive, get ready because the global investment bank, Goldman Sachs, has just issued a warning that the Southeast Asian region is likely to face a food supply shock soon.
According to their report, a combination of several external factors is expected to push food inflation up an additional 2.1 percentage points over the next 12 months.
Here are 3 main reasons why this crisis could happen:
1. Iran & Middle East Conflict Surge in Oil Costs
The war crisis in the Middle East has caused the global fuel supply chain to be disrupted. When world oil prices surge, the cost of transportation to deliver food supplies will automatically increase. Energy is an important input in the agricultural and logistics industries, so the impact of this increase in oil prices will 'pass through' or move directly to the price of food on supermarket shelves.
2. Fertilizer Prices Soar
It's not just oil, supply disruptions from the Middle East are also affecting the global fertilizer market. According to the OECD report, this supply shortage could disrupt the planting and harvesting seasons for 2026 to 2027. When fertilizer is expensive or difficult to find, farmers' harvests will decrease, making raw food prices more expensive.
3. Threat of Extreme Weather ‘El Niño’ (End of 2026)
As a complement to this crisis “package”, Goldman Sachs predicts that a strong extreme weather phenomenon El Niño could potentially hit at the end of 2026. This extremely hot and dry weather is expected to arrive just in time when the effects of rising oil and fertilizer prices are peaking in the food chain.
Which Countries Are Most Affected?
Goldman Sachs revealed that the impact of this crisis varies by country in Southeast Asia:
Singapore & Philippines: These two countries are the most ‘severe’ and directly exposed because they are net importers of food (fully dependent on foreign food).
Thailand: Although known as an agricultural country, Thailand imports more than 90% of their fertilizer from abroad. So, their food production costs will still soar.
Malaysia & Indonesia: On paper, these two countries look safe because they have a strong palm oil industry. But make no mistake! The report states that if the palm oil sector is left aside, Malaysia and Indonesia are actually net importers of food. We still rely on imports for items such as rice, meat, and certain vegetables.
For investors and consumers, this warning suggests that the cost of living may continue to rise. Governments in this region must also be struggling to balance subsidies between fuel (oil) and food to protect the pockets of the people.
Are you ready for the next phase of rising commodity prices?
