The war in Ukraine has caused massive human suffering already, but, as The Economist describes in its March 12 edition, a new calamity looms. It is still unclear whether Ukraine will be able to harvest existing crops, plant new ones, or sustain livestock production as the conflict continues.
How important is Ukraine to global food production? How will the war affect food security? Is it too late to act? These are pressing questions for which we must seek an answer. This article seeks to compile information from various articles on the topic, giving an overview of the current situation.
Leading up to the War
Before the start of the War on February 24, we were already living in an unprecedented situation regarding food prices. The Food-Price index compiled by FAO had reached an all-time high of 140.7 points. Wheat prices were already 49% above their 2017-21 average (since the beginning of the war, they increased by another 30%). Moreover, after poor harvests, and supply-chain disruptions caused by the Covid-19 pandemic, global stocks are 31% below the five-year average (Bruegel, 2022). Furthermore, the number of people deemed food insecure is at 800 million, the highest in the decade.
FAO economist Upali Galketi Aratchilage explains these record-high values are mainly due to the high inflation levels in the food, energy, and feed sectors, concerns over crop conditions and adequate export availabilities, and the ongoing recovery, leading to a rise in demand (UN, 2022).
Russia and Ukraine – Major Food Producers
Today, Ukraine and Russia are major food exporters, namely of commodities such as wheat, barley, maize, sunflower seeds, and sunflower oils. Just in wheat, Ukraine and Russia are, respectively, the largest and fifth-largest wheat exporters worldwide. Together, they account for 29% of international annual sales (Bruegel, 2022).
Moreover, Russia is the largest global exporter of fertilizer, essential to produce agricultural products. It is also worth referring to Belarus as the sixth largest.
The Impact of the Invasion
The Economist highlights three different areas the ongoing conflict will affect in terms of food security:
- Disruption to current grain shipments
- Low/Inaccessible future harvests
- Withered production in other parts of the world
Disruption to current grain shipments
The disruption in supply chains caused by the Covid-19 pandemic has made the biggest wheat importers in the Middle East and North Africa anxious to secure more supplies. However, with the closure and bombardment of Ukrainian ports, they are not getting them. Moreover, vessels trying to pick up grain shipments were struck by missiles (WSJ, 2022). Inland routes pose equal risk.
The Economist also highlights another concerning situation – the exports of corn. Ukraine accounts for nearly 13% of global exports, and these usually take place from the spring until the early summer. Much is shipped from the port of Odesa, which is bracing for a potential Russian assault (The Economist, 2022)
In Russia, the risk is not curtailed production but blockaded exports. Although food sales are not yet subject to sanctions, Western banks are reluctant to lend to traders. In addition to these constraints, both Ukraine and Russia have imposed export restrictions in the face of strained domestic supply. In March, Ukraine banned exports of several food products (rye, barley, buckwheat, millet, sugar, salt, and meat) until the end of 2022 (Bruegel, 2022).
Furthermore, alternative sources are unviable for low-income countries, including Tunisia, Lebanon, Egypt, Armenia, Sudan, Georgia, and Turkey. The costs of importing from further away will be difficult to absorb as freight prices increase with commodity prices in general. The spike in energy prices will aggravate the situation further (Michail et Melas, 2021).
In addition to these short-term disruptions, exports could also be limited in the medium- to -long-term. Infrastructure was damaged and crops were not planted this year (Bruegel 2021).
Withered production in other parts of the world
Yet another concerning impact of the Russian invasion will be the consequences on fertilizer production.
This decrease in production is caused by a variety of reasons. Firstly, there is a destruction in Ukraine’s productive capacity. Secondly, Russia already announced fertilizer export bans to “non-friendly countries”, a list that includes the European Union, which has already responded by introducing sanctions on Belarussian potassium exports. The EU relies on imports for 85% of its potassium consumption, including 27% from Belarus (Bruegel, 2022).
Indirect impacts will also be felt. Pauline Weil and Georg Zachmann from Bruegel recall that fertilizer production is highly energy-intensive, relying on natural gas. Fertilizer production, ammonia especially, represent 1-2% of global energy consumption (Bruegel, 2022). With the rise in demand, and negative supply shocks, prices are expected to increase even further.
Time to act
From the various articles cited above, it seems clear lower food supply and higher prices will persist in the coming months. Global inflation will continue, combined with the historic rise in energy and food prices. As the prices of staples surge, humanitarian needs, and political risks will increase. It is time to act to secure food supplies.
FAO. 2022. Ukraine: Note on the impact of the war on food security in Ukraine – 25 March 2022. Rome. https://doi.org/10.4060/cb9171en
Food Price Index hit record high in February, UN agency reports. (2022, March 7). UN News. https://news.un.org/en/story/2022/03/1113332
Michail, N. A., & Melas, K. D. (2021). Market interactions between agricultural commodities and the dry bulk shipping market. The Asian Journal of Shipping and Logistics, 37(1), 73–81. https://doi.org/10.1016/j.ajsl.2020.07.003
The Economist. (2022, March 14). War in Ukraine will cripple global food markets. https://www.economist.com/finance-and-economics/2022/03/12/war-in-ukraine-will-cripple-global-food-markets
WSJ (2022, March 8). Hundreds of Ships Trapped by Ukraine War, Endangering Sailors and Global Trade. https://www.wsj.com/articles/ukraine-war-ships-stranded-sailors-global-supply-chain-11646754357
Rudloff, B., & Götz, L. (2022, March 14). War in Ukraine and food security: Developing a judicious “food first” strategy for autumn. Stiftung Wissenschaft Und Politik. https://www.swp-berlin.org/en/publication/war-in-ukraine-and-food-security-developing-a-judicious-food-first-strategy-for-autumn
Student of the Bachelor’s Degree in Management
Nova School of Business and Economics