Drought and the Price of Rice in Italy

Northern Italy is in the midst of a severe drought. The region is home to the Po River, which flows from the Alps to the Adriatic Sea. Farmers in the area rely on the river to feed their crops. However, in recent years, there has been less snowfall in the Alps during winter, less rain during the spring, and higher temperatures. Residents in the area have been asked to ration water, and a state of emergency has been declared for the region.

The drought is expected to have adverse effects on a number of crops grown in the region, including tomatoes, olives, and arborio rice, which is used to make risotto. Experts expect prices of these products, to rise anywhere from 20 to 50 percent this year, in addition to price increases of 15 to 25 percent over the last two years. Importers of these products have already begun seeking out other sources of supply. Without significant rainfall in the next few weeks, farmers are poised to have a very bad harvest, as they do not have the same efficient irrigation systems used in the south of the country. If these conditions continue in future years, many farmers will lose their livelihoods.

Discussion Questions:

1. Use a supply and demand graph to illustrate how the drought affects the equilibrium price and quantity of arborio rice.
2. How will the increase in the price of olive oil affect the market for dinners in Italian restaurants? How will it affect the market for other cooking oils?
3. To the extent that drought conditions are caused by climate change, what policy tools can be used to mitigate the damage? What are some hurdles in implementing these tools?

Sources| The Guardian: We worry about it disappearing’: alarm grows over Italy’s drought-hit Po River, Northern Italy drought threatens olive oil, risotto and passata supplies; The New York Times: Drought Tightens Grip on Northern Italy; Pixabay: Italy countryside fields irrigation canal