The United Nations' Secretary General is warning the Ukraine war is threatening to unleash an unprecedented food crisis, which could last months if not years.
Antonio Guterres warns of a cost-of-living crisis not seen in more than a generation, with escalating price shocks in the global food, energy and fertiliser markets.
Ukraine is the fifth largest exporter of wheat in the world, and is a major supplier of barley, maize and sunflower oil, but stockpiled supplies cannot be shipped from Ukraine's Black Sea ports because of Russia's naval blockade.
The Economist finance correspondent Matthieu Favas tells Kathryn Ryan the food shortage issue goes wider than Ukraine, with food prices already high after Covid supply chain disruptions and reduced yields due to droughts around the world last year.
Photo: LOUISE ALLAVOINE
International wheat prices had already risen by 50 percent before the war, Favas says, and since the war there has been another 35-50 percent increase.
“The first shock was the epidemic of swine flu in China that decimated a lot of pork, China is the biggest pork producer worldwide. Therefore, China had to import not only a lot of pork but also to import a lot of grain to feed it,” he says.
“Then you had a series of bad harvests because of droughts and floods and other extreme weather events around the world. And this is to be expected in any agricultural season because agriculture is hard to predict but [in this case] these events happened all at the same time.
“On top of that you had Covid and disruptions linked to that and when lockdowns ended in the majority of the world … logistics of the food supply chain were still being disrupted by Covid in some places. So that made for the perfect storm, even before the war started.”
Russia and Ukraine account for about 30 percent of the global traded supply of wheat, he says.
“The issue today is that the share that the Ukraine normally exports cannot get out of Ukraine.
“Fortunately, a share of that volume of exports has already gone out because the bulk of it normally happens early in the year but still it is estimated that around 25 million tonnes of grain that comprises wheat and corn is stuck in Ukraine and can’t get out.
“That’s just the beginning of the issue because the next harvest is due to start in the next few weeks, June, July and into August. The storage facilities that are utilised to store the grain are nearly full so that harvest risks being lost. That’s a much bigger volume of grain that a lot of countries depend on nutritionally.”
The blockade is just one of a number of Ukraine’s problems in the chain, he says, with farmers also experiencing shortages of seeds, pesticide, workers, and petrol to operate machinery and trucks.
“A lot of the regions where the farming normally occurs, 50 to 60 percent are actually regions where fighting has occurred or is still occurring. So as a result, the either the fields are not exploitable right now or sometimes the farmers have to plant at night to avoid air raids for example.
“All the fields actually are littered with an exploded devices so it’s very dangerous to grow and plant on them and work on them.”
Net income effect of food-price changes, % of GDP Photo: The Economist
On the other hand, Russia still manages to export most of its grains but faces difficulties in the costs of operations and logistics, Favas says.
“It’s harder to find insurance for the ships, the ship owners in the first place are not really happy to lend their ships to export the grain. So the whole exports system that Russia uses is more difficult to operate which increases the cost for the countries that buy from it as well.”
In addition, further sanctions on Russia could have flow-on effects for their importation of pesticide and seeds, which will in turn impact on production for the global supply of staples, he says.
Some countries have resorted for protectionist measures like export controls to mitigate the problem, but Favas says this only triggers a vicious cycle which can result in higher food prices.
“There is a food inflation across the board which is being worsened by these reactions, export controls and the likes.”
Having more transparency in the industry would help avoid protectionist reactions because it would give countries confidence that they could sustain a blow, he says.
“In other industries, data is widely available if you look at energy and gas it’s much easier to track what is going on. In the global food system, stock for example are notoriously opaque in a number of countries, trade flows as well.
“The second thing is that we should perhaps think about changing the way we eat in some ways. One thing that is obvious and has been talked about for some time is to perhaps eat less meat because animals [which produce meat are consuming] much more grain in terms of feed than if you were eating the grain directly in the first place.”
The best solution would be for the war in Ukraine to end, he says, but other options include finding other routes to export Ukraine’s grain supply and finding substitutes of grain feed for animals.
“That’s crucial that we act on these levers, we pull them because the adjustment will be made by the countries that depend on these grains the most and they will just have to eat less.”
