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Head of Livestock, Rob Wells looks into how energy prices can affect livestock values, across feed, transport and the wider agricultural supply chain.

Energy prices are often viewed as mainly a concern for transport or heavy industry.

However, in the livestock sector, oil, gas and electricity costs have particularly widespread effects; taking in the price of feed, the movement of animals, refrigeration and, ultimately, livestock values. As instability in energy markets becomes more entrenched, it is crucial to understand these mechanisms for producers, lenders, traders and insurers alike.

At a macro level, the relationship between oil prices and food costs is, of course, well established. Historical data shows close alignment and correlation between crude oil prices and global food price indices, reflecting oil’s role at almost every stage of agricultural production and distribution, from fertiliser manufacturing to refrigeration logistics.

When energy prices rise sharply or unexpectedly, the costs are felt throughout supply chains which are already capital‑intensive and margin‑sensitive.

Diesel is used for farm machinery and feed delivery, as well as the movement of animals between farms, feedlots, processors and ports. Recent price spikes have translated directly into higher operating costs for livestock producers and traders, increasing the cost of getting animals to market. These costs are rarely absorbed and tend to contribute to rising market prices for livestock, particularly where supply is already constrained.

Feed production represents a second, more structural transmission route. Grain and oilseed cultivation is energy‑intensive, relying on fuel, electricity and fertilisers whose prices are closely linked to oil and, critically, natural gas.

Feed price inflation has been a dominant driver of livestock input cost increases over recent years, particularly in pig, poultry and dairy systems. With rising feed costs often comes rising replacement values and insured sums for livestock.

Fertiliser markets further amplify this effect. Nitrogen fertilisers are produced using natural gas, making fertiliser prices highly sensitive to energy shocks and geopolitical disruption.

Periods of high energy prices have repeatedly tightened fertiliser supply and pushed crop input costs higher, with knock‑on effects for feed availability and pricing. These pressures tend to emerge with a lag, extending the impact of energy volatility well beyond the initial price spike.

Refrigeration and cold‑chain logistics add a further layer of exposure. Meat and dairy products depend on continuous temperature‑controlled storage and transport. Rising electricity prices increase refrigeration costs, while energy‑driven transport disruption raises spoilage risk during transit.

Recent analyses of global cold‑chain disruption highlight how energy shocks can affect not just costs, but physical loss and deterioration risk across livestock‑derived products.

Taken together, these forces help explain why livestock values can rise sharply during periods of energy stress, even as operating margins tighten. For insurers, this creates a familiar challenge: rising declared and undeclared sums insured, greater accumulation risk, and increased sensitivity to valuation accuracy.

Consortium structures with large, diversified global capacity – such as the Global Livestock (Re)Insurance Consortium at Lloyd’s 9644 – are very well positioned to absorb rising values, manage aggregation across territories, and maintain continuity of cover as energy‑driven cost inflation feeds through livestock markets.

As energy volatility becomes a more permanent feature of the risk landscape, underwriting insight, global capacity and disciplined valuation will remain essential – from fuel, all the way through to feed.

For insurers, the top-line message is clear: energy volatility is no longer a background economic variable but one of the material drivers of livestock valuation risk. Rising fuel, feed, fertilizer and cold‑chain costs push insured values higher, often rapidly and unevenly across regions and production systems.

This increases the importance of accurate valuation, disciplined monitoring of sums insured, and careful management of aggregation across portfolios. In this context, scale and diversification matter. Access to large, globally distributed consortium capacity allows insurers to support clients through periods of inflationary pressure, absorb valuation drift, and maintain underwriting stability as energy‑driven cost dynamics feed through the livestock supply chain.

As energy markets continue to influence agriculture from fuel to feed, underwriting insight and capacity strength remain central to managing long‑term livestock risk effectively.

Original Article, click here.