Analysis of the transmission of agri-food and energy price changes in supply chains for Spain

Abstract This study examines the transmission of price increases in energy and agricultural commodities through supply chains, with a focus on the Spanish agri-food system. Utilizing both Input-Output Analysis (IOA) and Structural Vector Autoregressive (SVAR) models, the research assesses how cost shocks propagate from primary producers to final consumers. The findings reveal that energy price fluctuations significantly impact agricultural input costs, with knock-on effects on food processing, retail, and hospitality sectors. Scenario analysis using the IOA model indicates that between January 2021 and August 2022, a 55% increase in agricultural input costs would lead to a 33.8% rise in final prices. Additionally, between January 2021 and December 2023, output price increased in agriculture, which alone would have contributed to an 11.3% rise in food industry prices. With the SVAR, we estimate the persistence and transmission of shocks through the supply chain, revealing that energy price fluctuations contribute approximately 20% to inflation in the specialty food retail sector, while sector-specific factors account for the majority of the change. Cumulative impulse-response functions show that a (revealed during the cited period) 120% increase in energy price growth leads to a 30% rise in primary sector price growth and a 12% increase in food industry price growth, with delayed but significant effects across industries. The study points to key policy considerations, including the need for supply chain resilience measures, targeted price stabilization mechanisms, and safeguards for vulnerable consumers against inflationary pressures.