- Genesis of Ukraine conflict – 40
World food prices in March 2022 increased by nearly 13 per cent in comparison to February, the latest Food Price Index of the Food and Agriculture Organization (FAO) shows. This has been resulting in risk of hunger world over.
“World food commodity prices made a significant leap in March to reach their highest levels ever,” FAO said in a press statement on April 8. The increase in food prices was expected due to the disruption caused by the Russian invasion of Ukraine.
“War in the Black Sea region spread shocks through markets for staple grains and vegetable oils,” FAO reported on its latest food price index. This was mostly due to abnormal disruption in export flows, in recent time following the February 24 invasion and international sanctions against Russia.
This has led to spurred fears of a global hunger crisis, especially across the Middle East and Africa, where the knock-on efforts are already playing out.
Russia and Ukraine, whose vast grain-growing regions are among the world’s main breadbaskets, account for a huge share of the globe’s exports in several major commodities, including wheat, vegetable oil and corn, their prices reached their highest levels ever last month.
Russia and Ukraine are also major global producers and cheap suppliers of fertilizers and other staple food commodities like maize, rapeseed, sunflower seeds, and oil.
In short, the world, and specifically the more food insecure part of the world, is highly dependent on two currently warring countries to meet consumption needs. And, even more alarmingly, to address humanitarian needs.
In 2021, Ukraine was the largest single source of food for the UN World Food Programme. Many countries, from East to Western Africa, have already been grappling with soaring international food, fuel, and fertilizer prices.
As the war in Ukraine and economic sanctions on Russia are stifling food production and trade, shortages are increasing, and prices are going up further, also because of food speculation.
The UN Food and Agriculture Organization (FAO) said its Food Price Index, which tracks monthly changes in international prices for a basket of commodities, averaged 159.3 points last month, up 12.6 percent from February. As it is, the February index was the highest level since its inception in 1990.
FAO said the war in Ukraine was largely responsible for the 17.1 percent rise in the price of grains, including wheat and others like oats, barley and corn.
The average index in March was 159.3 points, a rise of 12.6 per cent from February level. February marked the highest level of world food commodity prices since the tracking started in 1990. So, the March prices are the highest ever. This is an unprecedented 33.6 per cent higher when compared to March 2021.
“The FAO Cereal Price Index was 17.1 per cent higher in March than in February, driven by large rises in wheat and all coarse grain prices largely as a result of the war in Ukraine,” FAO said.
Russia and Ukraine together produce 30% of world wheat
Ukraine and Russia together account for nearly 30 percent of the world’s traded wheat, 20 percent of maize exports. Without them, soaring food prices and shortages could touch off a wave of instability the world hasn’t seen since the Arab Spring of 2012. Maize price has also been increasing. It recorded a 19.1 per cent increase from February.
The war has all but shut down grain exports from both countries. And since the two nations (along with Russia’s sanctioned ally Belarus) also supply vast amounts of fertilizer, Vladimir Putin’s invasion of Ukraine could affect every farmer on earth this year, and into the foreseeable future.
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.
Some 26 countries around the world get more than half of their wheat from Russia and Ukraine, says Arif Husain, chief economist at the UN World Food Programme.
Ports closure limiting exports
Ukrainian ports have been blocked by a Russian blockade and there is concern about this year’s harvest as the war rages on during the sowing season.
“Port closures in Ukraine are seen as significantly limiting exports from the country, while financial and freight challenges are hindering exports from the Russian Federation,” FAO said. It forecast that the situation to continue and thus keep the prices high.
“The expected loss of exports from the Black Sea region is seen manifesting itself in lower shipments from and to the region, as well as higher global prices, reduced imports, slower demand growth and smaller stocks than previously expected in several countries,” FAO said in its detailed note on the Food Price Index.
The disruption due to the war has jacked up sunflower seed oil prices as well. “The FAO Vegetable Oil Price Index rose 23.2 per cent, driven by higher quotations for sunflower seed oil, of which Ukraine is the world’s leading exporter,” the FAO said.
“The likely disruptions to agricultural activities of these two major exporters of staple commodities could seriously escalate food insecurity globally,” Qu Dongyu, FAO director-general said in a statement in March.
The UN Food and Agriculture Organization (FAO) said its Food Price Index, which tracks monthly changes in international prices for a basket of commodities, averaged 159.3 points last month, up 12.6 percent from February. As it is, the February index was the highest level since its inception in 1990.
FAO said the war in Ukraine was largely responsible for the 17.1 percent rise in the price of grains, including wheat and others like oats, barley and corn. Together, Russia and Ukraine account for approximately 30 percent and 20 percent of global wheat and corn exports, respectively.
Prices of sugar and dairy products “also rose significantly” the FAO said. He said he could not calculate how much the war was to blame for the record food prices, noting that poor weather conditions in the United States and China also were blamed for crop concerns. But he said that “logistical factors” were playing a big role.
“Essentially, there are no exports through the Black Sea, and exports through the Baltics is practically also coming to an end,” he said.
Other large grain producers like the US, Canada, France, Australia and Argentina are being closely watched to see if they can quickly ramp up production to fill in the gaps, but farmers face issues such as climbing fuel and fertiliser costs exacerbated by the war, drought and supply chain disruptions.
Fertilizer prices are soaring
A global food crisis looms unless the war in Ukraine is stopped, because fertilizer prices are soaring so far that many farmers can no longer afford soil nutrients, said Russian fertilizer and coal billionaire Andrei Melnichenko.
Several of Russia’s richest businessmen have publicly called for peace since President Vladimir Putin ordered the invasion on Feb 24, including Mikhail Fridman, Pyotr Aven and Oleg Deripaska.
Warning again western sanctions on his country, Putin said that food prices would rise globally due to soaring fertiliser prices if the West created problems for Russia’s export of fertilisers – which account for 13 per cent of world output.
Russia is a major producer of potash, phosphate and nitrogen containing fertilisers – major crop and soil nutrients. EuroChem, which produces nitrogen, phosphates and potash, says it is one of the world’s top five fertiliser companies.
The war in Ukraine has boosted already high fertilizer prices. Russia serves as the world’s top fertilizer exporter, selling some $ 7.6 billion worth of fertilizers in 2020, according to data from the French research organization CEPII. Russia’s invasion of Ukraine slammed both countries’ abilities to trade, and in early March the Russian government called on fertilizer producers to suspend exports entirely.
Even before war, 45 million on the brink of famine
Even before the Ukraine crisis, FAO estimated that 45 million people lived on the brink of famine. And in 2020, when COVID only started to kick in, upto 811 million people did not have access to safe nutritions and sufficient food. The major producers, suppliers, and traders of our global food system don’t really seem to care about them.
Russia and Ukraine are not only the world’s biggest producers of wheat, barley, and sunflower, they were also the cheapest exporters on the market. This made them very attractive to low-income countries.
Their supply is now hampered. Meanwhile, food, oil, and shipping prices keep on rising. And droughts in for example Ethiopia and Somalia continue to interfere with farming cycles. “Instead of moving to Zero Hunger there’s only more hunger”, Peters points out.
Whatever may be the outcome of the current Ukraine-Russia war, the conflict has already jeopardised the June and possibly the winter 2022/23 harvesting seasons in the world’s grain barn. It will ripple through food systems for years to come. Food insecure nations are bracing for the future.
To address the needs of food-importing countries, the FAO was developing a proposal for a mechanism to alleviate the import costs for the poorest countries, Schmidhuber said. The proposal calls for eligible countries to commit to added investments in their own agricultural productivity to obtain import credits to help soften the blow.