Ukraine and Russia have some of the most fertile soils on earth. Both are major agricultural producers, particularly of wheat, corn, barley and sunflower oil. Together they grow about 15% of the world’s wheat but account for about 30% of world wheat exports; Ukraine alone supplies around 50% of the world market for sunflower oil.
Additionally, Russia, Ukraine, and Belarus produce much of the world’s fertilizer supply. The prices of all these goods were already trending upwards due to Covid-19, as well as increased fuel prices, which increased the cost of food production and shipping.
Now the war has halted most food exports from Russia and Ukraine, pushed oil prices up and on disrupted global supply chains. As a result, the Food and Agriculture Organization of the United Nations reported in March that food prices around the world had risen to their highest levels ever; Cereals are up 40% since last March, cooking oils are up 55%, meat is up 20%.
Do Russia and Ukraine still export food?
Ukraine banned wheat and other food exports last month to secure its own war supplies, but at this point it can’t really export anyway: Russian warships are blocking access to its Black Sea ports; They also destroyed port infrastructure and grain stores, and bombed at least three civilian ships carrying Ukrainian goods.
Many Ukrainian farmers have joined the defense effort, and farms in the east of the country are being devastated by Russian attacks. Overall, Ukraine’s spring sowing of barley, corn and other crops will be less than half of 2021 levels, the Ministry of Agriculture reports. Russia’s food exports, meanwhile, have plummeted because foreign traders are unwilling to do business there; President Putin also recently said that Russia will “monitor” food exports to “enemy” nations.
Can’t make up for lost food?
It will “have a major impact on world agricultural markets, but not that big,” says Aaron Smith, professor of agricultural economics at the University of California, Davis. Other big producers like the EU, US, Canada, Australia and India should be able to cover some of the deficit. But it’s taking time for recipient countries to rearrange their supply chains and place orders with new sources, and panicked investors have sent wheat prices up by as much as 50%.
The impact will be felt everywhere, but especially in some countries in the Middle East and Africa that are heavily dependent on Russian and Ukrainian wheat. Egypt, which gets 80% of its wheat imports from Ukraine and Russia, has had to fix the price of bread and devalue its currency. There is a shortage of flour in Tunisia and Lebanon. High food prices have sparked unrest as far away as Sri Lanka, Pakistan and Peru.
How bad will it get?
Arab nations are likely to fare the worst. You recall that high food prices during the Great Recession were a major factor in the Arab Spring protests that erupted in 2010 conflict-torn Yemen, 31,000 people are already affected by famine and that number could increase fivefold this year. Indonesia is almost out of its beloved Indomie instant noodles, which are made from Ukrainian wheat. Cameroon’s bakeries see long lines for bread. Somalia is facing its worst drought in decades but cannot rely on Egyptian imports to make up the difference.
The world food system is already under pressure: the United Nations World Food Program estimates that 44 million people are at risk of famine. And that’s before the effects of fertilizer shortages make themselves felt.
What effect will that have?
Even before the war the fertilizer market was in turmoil because of Covid, high fuel prices (Fertiliser production depends heavily on natural gas) and sanctions on Belarus — which, like Russia, is a major exporter of potash, ammonia, urea and other soil nutrients. In March, Russia responded to sanctions by suspending fertilizer exports; while shipments from Ukraine, a key supplier to Europe, have largely stopped.
“Wheat will affect a few countries,” warns David Laborde of the International Food Policy Research Institute. “The fertilizer problem can affect any farmer anywhere in the world.” Brazil, the world’s largest producer of coffee, soybeans and sugar, imports 20% of its fertilizer from Russia. In the UK, prices have risen from around £250 a tonne to almost £1,000 over the past year. Farmers are faced with the choice of reducing fertilizer purchases, resulting in lower yields, or charging higher prices. Either way, consumers will see higher costs.
What can governments do?
Food prices are rising in the UK – up 5% in February – but while this will hit those on low incomes the overall impact is likely to be limited: around 10% of UK household income is spent on food. In Algeria, Kenya and Pakistan, on the other hand, they account for more than 40% of household expenditure.
Normally, poorer governments would have to intervene in food markets under these circumstances, but budgets are being stretched due to the pandemic, leaving little room for direct support. Fragile economies like Egypt and Tunisia, which borrowed heavily during the pandemic, will find it harder to continue paying food subsidies, especially if prices continue to rise.
When will it get better?
It all depends on the duration of the war and the climatic conditions in the main grain-growing regions of the world. China Expects Worst Wheat Harvest In History And US Midwest Sees Very Dry Conditions; although Australia and India are expecting record harvests.
“What we can’t afford now is a major drought in Kazakhstan, Europe or Argentina,” says David Laborde. “Markets will explode. I don’t want to paint a gloomy picture. If the planet is kind to us this year, we should be fine. But a bad shock could now bring us to the brink of a major food crisis.”
https://www.theweek.co.uk/news/world-news/europe/956449/from-fertiliser-to-famine-the-global-food-shortage-explained From Fertilizer to Hunger: Global Food Shortages Explained