Energy price shocks ripple through Spain’s food chain, study finds

When energy prices surged across Europe between 2021 and 2023, Spanish farmers, food processors and retailers all felt the squeeze. A new study published in Agricultural and Food Economics has now quantified exactly how those shocks travelled along Spain’s agri-food supply chain, from fertilizer factories to supermarket shelves, and found that energy was the single most powerful external force pushing food prices upward, even though most of the inflation consumers experienced was driven by sector-specific factors.

The research, led by Ana Serrano of the Spanish research system together with Lorena Olmos, Gema de Cabo and Ignacio Cazcarro, combined two complementary analytical approaches. The first, input-output analysis based on the EXIOBASE multiregional database for 2019, maps the fixed structural linkages between sectors and calculates how a cost increase in one part of the economy mechanically propagates to others under idealized, frictionless conditions. The second, a set of structural vector autoregressive models estimated on quarterly Spanish data from 2009 to early 2026, captures how price shocks actually unfolded over time, including lags, persistence and the behavior of business margins.

The structural simulations drew on official price data from Spain’s Ministry of Agriculture, Fisheries and Food. Between January 2021 and August 2022, the prices farmers paid for key inputs such as fertilizers, energy and animal feed rose by around 55 percent, driven largely by fertilizers and energy costs that more than doubled. Feeding that shock into the Leontief price model, the researchers estimated that final prices across the whole Spanish economy would rise by 33.8 percent in the maximum scenario, with especially large effects on energy itself at 75.8 percent, other industries at 33.4 percent, commerce and transport at 30.7 percent, and hospitality at 24.6 percent.

For the food industry specifically, the simulated increase reached 19.2 percent, though the burden fell unevenly across subsectors. Dairy processing and beverages showed the strongest responses, while rice, meat and oil industries were relatively less affected. Decomposing the sources of the shock revealed that energy alone accounted for roughly a 4.2 percent increase in food industry prices, an effect stemming from an exceptional surge of about 120 percent in agricultural energy inputs, far above what the sector’s modest 3 percent average share in the food industry’s input structure would suggest. Feed shocks contributed around 3.1 percent and hit meat and dairy hardest because of their reliance on compound feed, while fertilizer shocks added only about 0.7 percent.

The second simulation examined what happened when the prices farmers received for their products rose. Between January 2021 and December 2023 these output prices climbed by 55 percent, with agricultural products, notably olive oil amid drought in Spain’s olive-growing regions, growing faster than livestock products. Introduced into the input-output model, this shock translated into a modest 1.3 percent national increase in final prices but an 11.3 percent rise in food industry prices. Vegetable oils dominated the subsectoral breakdown with price increases exceeding 40 percent; excluding olive oil from the simulation cut the food industry’s overall increase to just 4.8 percent, underscoring the disproportionate influence of that single commodity.

The econometric side of the study told a consistent story. An unexpected one-standard-deviation energy price shock, equivalent to roughly 6.8 percent, produced the largest response outside the energy sector in agriculture itself, with quarterly price growth peaking at about 2.5 percent one quarter after the shock before gradually fading. Transport showed only a modest, short-lived reaction, storage remained essentially flat, and the food industry responded more slowly and persistently, peaking at around 0.4 percent in the second quarter and remaining statistically significant for up to four quarters, consistent with indirect cost pass-through via agriculture and other intermediaries.

Converted into cumulative terms, the SVAR estimates aligned closely with the structural simulations. A 120 percent energy price increase, matching the magnitude observed during 2021 to 2023, would imply cumulative rises of approximately 27.4 percent in agricultural prices, 11.4 percent in food industry prices, 8.7 percent in non-specialized retail, 4.7 percent in specialized retail, 2.4 percent in hospitality and 6 percent in the food consumer price index. All of these econometric estimates fell strictly within the theoretical boundaries defined by the Leontief cost-push framework, which the authors interpret as evidence that the two methods capture complementary facets of the same transmission machinery.

Variance decomposition added a crucial nuance: energy shocks, while significant, were never the dominant driver of downstream price fluctuations. In specialized food retail, energy accounted for roughly 20 percent of forecast error variance, food industry shocks about 35 percent, and the sector’s own shocks the largest share at around 40 percent. In non-specialized retail, own shocks explained 60 to 65 percent and energy only about 10 percent. Historical decompositions confirmed that the 2022 to 2023 inflation surge was primarily associated with positive contributions from energy shocks, followed by food-industry and downstream shocks, with the subsequent moderation reflecting their gradual dissipation.

One of the study’s most policy-relevant findings concerns business margins. Despite frequent public accusations that retailers and processors profiteered during the crisis, the SVAR models incorporating margin data found that margins did not respond systematically to energy price shocks, and their inclusion did not materially alter the estimated transmission mechanism. During the 2021 to 2023 energy crisis, margins in energy and hospitality actually fell sharply before recovering, and the authors conclude that the domestic agri-food sector acted more as a buffer than an amplifier of inflationary pressures, a result they caution is conditional on the specific period analyzed.

The authors emphasize that their structural estimates describe what would happen under perfect pass-through with fixed technology and no behavioral response, so the gap between the structural benchmark and the empirically observed transmission, roughly 7.8 percentage points for the food industry under a 120 percent energy shock, may reflect the behavioral component that input-output models cannot capture. They also note that results for specialized retail, hospitality and the food CPI include zero within their confidence intervals and should be interpreted with caution. Still, the implications are concrete: because transmission is primarily cost-push rather than margin-driven, the authors argue that targeted energy price stabilization for agriculture, modeled on Spain’s Iberian exception gas price cap, and strictly targeted income support for the roughly 26 percent of Spanish households at risk of poverty or social exclusion would be more efficient responses than across-the-board subsidies or retail margin regulation.

Subject of Research: Price transmission of energy and agricultural cost shocks through the Spanish agri-food supply chain

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

Article References: Serrano, A., Olmos, L., de Cabo, G., & Cazcarro, I. (2026). Analysis of the transmission of agri-food and energy price changes in supply chains for Spain. Agricultural and Food Economics, 14(1), Article 70. https://doi.org/10.1186/s40100-026-00517-3

Image Credits: AI Generated

DOI: 10.1186/s40100-026-00517-3

Keywords: price transmission, agri-food supply chain, energy prices, Spain, input-output analysis, SVAR, food inflation, business margins, fertilizers, olive oil, Leontief price model, food CPI