A new analysis from the Economic and Planning Department of the Iran Chamber of Guilds shows that currency fluctuations directly affect food prices, and this impact reaches people's tables through various channels. This report identifies four main channels through which currency shocks are transmitted to the food market: direct imports, production inputs, transportation and logistics, and market expectations and psychological behavior.
Channels of Currency Fluctuation Transmission
The exchange rate in the food market does not pass through a single channel. In goods such as crude oil and imported rice, this channel is almost direct, and the increase in the exchange rate is quickly reflected in import costs. However, in products such as chicken and meat, the situation is different. The production of these goods occurs domestically, but their production costs depend on inputs such as corn and soybean meal. Therefore, the currency shock is first transferred to the inputs and then seen with a delay in the final price.
Another channel through which currency shocks affect prices is the increase in transportation costs. The cost of fuel, tires, and parts dependent on currency can lead to an increase in the prices of all goods. Additionally, market expectations also play an important role. Market participants may limit supply in anticipation of further increases in the exchange rate, which can itself contribute to rising prices.
Impact on Chicken and Meat Prices
Chicken is one of the goods that is directly affected by currency fluctuations. In the first half of September, the regulated supply of chicken helped stabilize the market, but with the onset of the second half of the month, increased seasonal demand and input costs put more pressure on the market. This reality shows that regulated supply cannot control prices alone, and as long as production costs remain high, pressure on the market will continue.
In the red meat market, drought and reduced pasture quality have also added to the sensitivity of this market to currency costs. In September, the cautious behavior of livestock farmers and their reluctance to supply livestock due to rising expectations led to price increases. This situation indicates that producers' decisions are influenced by economic expectations and anticipated changes.
Economic and Social Consequences
In the egg market, rising feed costs and seasonal demand brought pressures. However, the gradual transfer of increased costs to final prices indicates that prices may remain stable in the short term, while new costs have not yet been passed on to consumers. It is important for policymakers to pay attention to the cost structure of production, as controlling prices without regard to this structure may create new problems.
Finally, milk appears to be a completely domestic product, but its currency dependencies also affect it. Feed, medicine, and other packaging materials are influenced by the exchange rate, and this impact gradually affects milk prices. In this situation, dairy industries face serious challenges in managing costs and prices.
