Looming Global Food Shortages post Ukraine War

Ukraine war threatens a global food crisis

As?Russia invaded Ukraine, one of the world’s largest breadbaskets, the worst surge in global food prices since the Great Recession looms large over the world. Moscow’s war against?Ukraine?could spark crisis-level hikes, inflame the scourge of world hunger and spark political turmoil far from the conflict zone.

Food prices across the world were already rising fast amid supply chain disruptions and pandemic-related?inflation. However, some prices—especially that of wheat—have shot through the roof because of the Ukraine crisis, upending calculations of the world’s available food supply and leading to the?rationing of flour in parts of the Middle East.

50 countries?depend on Russia and Ukraine for more than 30 % of their wheat, and many are among the poorest nations in North Africa, Asia and the Middle East.

Ukraine’s nutrient-rich soils yield 10% of global wheat exports, 14% of corn exports and about half of the world’s sunflower oil. Over the past decade, Ukraine, long known as the breadbasket of Europe, has become an agricultural powerhouse for much of the developing world. Better seeds, new equipment, and better agronomy—combined with massive investment, by companies like Cargill, Bunge, and Glencore, in grain-handling infrastructure and oilseed crush plants in?Black Sea ports—have more than doubled?Ukraine’s exports?since 2012. It’s now among the?top five exporters?of several important grains and oilseeds, ranging from 10 percent of the world’s wheat exports to nearly half of the sunflower oil.

Ukraine and Russia account for nearly 30 per cent of wheat, 17 per cent of corn and over half of sunflower seed oil exports across the world. The conflict-induced bottlenecks at Black Sea ports—where cargo vessels have been struck by Russian rockets—and other complications of the war have slammed Ukrainian exports. The boycott of Russian ports by shipping companies and the knock-on effects of sanctions have also disrupted the flow of foods and feeds from Russia—creating problems that could grow as the Kremlin now threatens to impose export controls on some food commodities.

The invasion has already done is push wheat prices by 70 per cent in the last month and experts believe that the situation is only about to get worse.

Russia’s naval blockade and fighting around Ukraine ports has?all but stopped maritime shipping?and left limited means for transporting goods.?Wheat prices have hit record levels?over the effect on Ukrainian and?Russian shipments.

Russian and Ukrainian supply of wheat and other agricultural products are not easily replaceable in the world. Supply chain constraints and the?coronavirus?pandemic have already caused prices to spike and the Russian invasion has just made things worse.

A recently published report by the Food and Agriculture Organization (FAO) of the United Nations estimates food and feed prices could surge to up to 22 per cent above the already elevated levels due to the war. FAO says, large grower countries—Australia, Argentina, India and the United States—could make up for a portion of the grain shortfalls from Ukraine and Russia. However, the FAO’s preliminary assessment is that, due to the war, 20 per cent to 30 per cent of wheat, corn and sunflower seed crops will either not be planted or go unharvested during Ukraine’s 2022-2023 season.

Fertilisers Problem

If you thought that wheat and oil is at the centre of the crisis when it comes to sanctions on Russia, Moscow is also a major exporter of fertiliser, the price of which has already been soaring. Russia is the world’s largest fertiliser exporter, providing about 15 per cent of the world supply. The price of natural gas is only aggravating the issue as fertiliser producers outside Russia and Belarus need gas to make nitrogen-based products like urea. Urea has been trading near $1,000 per metric ton, about four times the price at the start of 2021. Prices of most fertilisers around the world have now more than doubled or tripled in price over the past year. Brazil, the world’s largest producer of soybeans, purchases nearly half its potash fertiliser from Russia and Belarus. It now has just three months of stock left.

Crisis looms large over the world as many countries are imposing restrictions

Indonesia has set new limits on palm oil exports to control prices; Hungary has banned all grain exports last week; Serbia has said that it would ban exports of wheat, corn, flour and cooking oil. Egypt, which imports almost 80 per cent of its wheat from Russia and Ukraine, imposed controls on grain exports as the price of subsidised bread has already started to creep up. Ukraine has also banned the export of meat, rye, oats, buckwheat, sugar, millet and salt, and introduced some restrictions on wheat and corn. Russia may temporarily ban grain and sugar exports to a group of ex-Soviet countries. Armenia, Mongolia, Kazakhstan and Eritrea have imported virtually all of their wheat from Russia and Ukraine. Aggravating the situation is that China, the world’s biggest producer and consumer of wheat, is expected to buy much more than what it purchases from world markets this year as severe flooding last year had delayed most of its planting. In some quarters, a sense of panic is already building. Tunisia was struggling to pay for some food imports even before the war and the situation now is just pushing the country towards an economic collapse. Inflation has already set off protests in Morocco and is helping stir renewed unrest and violent crackdowns in Sudan. Countries affected by conflict, including Yemen, Syria, South Sudan and Ethiopia, are already facing severe hunger emergencies that experts fear could quickly worsen. In Afghanistan, aid workers warn that the humanitarian crisis has already been exacerbated by the war in Ukraine, making it more difficult to feed the roughly 23 million Afghans—more than half the population—who do not have enough to eat.

Ukrainian farms are about to miss critical planting and harvesting seasons. European fertilizer plants are significantly cutting production because of high energy prices. Farmers from Brazil to Texas are cutting back on fertilizer,?threatening the size of the next harvests.

The consequences

Experts have also warned that higher food prices could trigger global unrest. What the invasion has done is lay bare the consequences of a major war in the era of globalisation as economists and experts expect worse as the effect cascades. Rich nations such as the United States, Australia and much of the European Union will see food prices jump even higher, straining lower-income households that already report they are?struggling with inflation. But at least the bread and cereal aisles will still have products on the shelves. In many parts of the developing world, there will be a genuine risk of starvation and famine, because low-income countries do not have enough money to pay high food prices.?The worst possible response to the food crisis would be for wealthy nations to halt or heavily restrict exports of key crops. It’s tempting in tough times to hold on to all available supplies, but that exacerbates hunger in developing nations. The global food crisis can’t be fixed overnight, but rich nations can do a lot to prevent widespread hunger and the instability it spawns. The earlier crises sparked international food riots, toppled governments in?Madagascar?and?Haiti, and ignited the?Arab Spring uprisings?in the Middle East. The world is even more volatile today.

The WFP is planning to feed a record 140 million people this year, including more than three million displaced Ukrainians, as well as some 44 million others in 28 countries teetering on the brink of famine. Many of those nations depend on grain imports from Ukraine. These include Yemen, Afghanistan, Syria, Ethiopia, and nearly a dozen other countries in the Middle East and Africa.

The world has had 15 years since the previous food crisis to prepare its emergency response, including agreements to minimise export controls. It hasn’t done very well. The Global Trade Alert monitoring service reports food export curbs more or less doubling since the middle of 2021.

India can play a role to mitigate the effects

India has already exported over 6 million tonnes (MT) of wheat during April-January 2021-22. The same goes for rice, where non-basmati exports touched 14 MT in April-January and surpassed the 13.1 MT record for the whole of 2020-21. Even corn shipments are on course to reach 3.5-4 MT, levels last seen in 2013-14. The soaring international prices have opened up export possibilities for Indian wheat, so much so that the government might not have to undertake significant?MSP?procurement this time.

During the crisis of 2007 to 2008, India and other countries panicked and banned exports of rice despite no evidence of global shortages, resulting in huge price rises. In response, governments created the Agricultural Market Information System (Amis) to promote transparency in production. That’s fine when there are no shortfalls, but doesn’t guarantee co-operative policy reactions if there are. Despite discussions at the World Trade Organization, there are no binding agreements between governments to eschew food export restrictions. Export bans are illegal under WTO law, but cases would almost certainly fail under the exception for temporary restrictions “to prevent or relieve critical shortages of foodstuffs or other products”, a loophole you could drive a fleet of combine harvesters through.

It is in everyone’s interest to keep exports flowing, but no one wants to run short by being the only country that does

Source: https://indianexpress.com/article/explained/explained-russia-ukraine-war-global-food-crisis-7829000/

CA Harshad Shah, [email protected]