From fertiliser to famine: the global food shortage explained
War on Ukraine has sent food prices rocketing and the effects are being felt around the world
Ukraine and Russia boast some of the most fertile land on Earth. Both are major agricultural producers, particularly of wheat, maize, barley and sunflower oil. Together, they grow about 15% of the world’s wheat, but account for about 30% of global wheat exports; Ukraine alone supplies about 50% of the global market for sunflower oil.
In addition, Russia, Ukraine and Belarus produce much of the world’s fertiliser supply. Prices of all these goods had already been trending upward, due to Covid-19, as well as fuel price rises that increased the cost of food production and shipping.
Now the war has stopped most food exports from Russia and Ukraine, pushed up oil prices and further disrupted global supply chains. As a result, the UN Food and Agriculture Organisation reported in March that global food prices had risen to their highest recorded level; cereals have gone up by 40% since last March, cooking oils by 55%, meats by 20%.
Are Russia and Ukraine still exporting any food?
Ukraine banned exports of wheat and other food last month to secure its own wartime supplies, but at this point it can’t really export anyway: Russian warships are blocking access to its Black Sea ports; they have also destroyed port infrastructure and grain storage facilities, and have bombed at least three civilian ships carrying Ukrainian goods.
Many Ukrainian farmers have joined the defence effort, and farms in the east of the country are being ravaged by Russian attacks. Overall, Ukraine’s spring sowing of barley, maize and other crops will be less than half of the 2021 level, its agriculture ministry reports. Russia’s food exports, meanwhile, have reduced drastically because foreign traders are unwilling to do business there; President Putin also recently said that Russia would “monitor” food exports to “hostile” nations.
Can’t the loss of food be made up?
It will have “a big effect on world agricultural markets, but not that big”, says Aaron Smith, professor of agricultural economics at the University of California, Davis. Other big producers, such as the EU, the US, Canada, Australia and India, should be able to cover some of the shortfall. But it takes time for recipient countries to rearrange their supply chains and place orders with new sources, and panicked investors have sent wheat prices soaring by as much as 50%.
The effects will be felt everywhere, but particularly in some nations in the Middle East and Africa, which are heavily reliant 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. In Tunisia and Lebanon, there are flour shortages. High food prices have caused unrest as far afield as Sri Lanka, Pakistan and Peru.
How bad will things get?
Arab nations are likely to fare the worst. They remember that the high food prices of the Great Recession were a major factor in the Arab Spring protests that erupted in 2010. In conflict-ridden Yemen, 31,000 people already face famine conditions, and that number could increase fivefold this year. Indonesia is almost out of its beloved Indomie instant noodles, made with Ukrainian wheat. Cameroon’s bakeries are seeing long lines for bread. Somalia is facing its worst drought in decades, but can’t turn to Egyptian imports to make up the difference.
The world food system is already under strain: the UN World Food Programme thinks that 44 million people are at risk of famine. And this is before the effects of the fertiliser shortage become apparent.
What effect will that have?
Even before the war, the fertiliser market was in turmoil because of Covid, high fuel prices (fertiliser production relies 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 fertiliser exports; while supplies from Ukraine, a major supplier to Europe, have largely stopped.
“Wheat will impact a few countries,” warns David Laborde of the International Food Policy Research Institute. “The fertiliser issue can impact every farmer everywhere in the world.” Brazil, the world’s largest producer of coffee, soybeans and sugar, imports 20% of its fertiliser from Russia. In the UK, over the past year prices have gone from about £250 a tonne to nearer £1,000. Farmers face a choice between reducing fertiliser purchases, in which case yields will be lower, or charging higher prices. Either way, consumers will see higher costs.
What can governments do?
In Britain, food prices are rising – they were up 5% in the year to February – but though this will affect 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, by contrast, it makes up more than 40% of household spending.
Normally, poorer governments would have to intervene in food markets in these circumstances, yet budgets are severely stretched due to the pandemic leaving little room for direct support. Fragile economies such as Egypt’s and Tunisia’s that borrowed large amounts during the pandemic will find it harder to keep paying subsidies for food, especially if prices keep climbing.
When will things get better?
It all depends on the length of the war, and climatic conditions in the world’s major cereal-producing areas. China is anticipating its worst wheat crop in history, and the US Midwest is seeing very dry conditions; though Australia and India are expecting bumper crops.
“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 bleak picture. If the planet will be generous to us this year, we should be OK. But a bad shock right now could bring us to the verge of a major food crisis.”