The war in Ukraine provoked a global food shortage

Russian ships and sea mines block Ukrainian Black Sea ports. Before the war, Ukraine exported on average about 6 million tons of agricultural products monthly to the countries of the Middle East, Asia and Africa. Currently, only about 15–20 percent of this volume can be exported by rail, Danube river and road (about 700,000 tons in April 2022 and about 1 million tons in May 2022). In addition, trade risks associated with Russian exports are increasing due to sanctions from various trading partners and banks. This has led to price spikes and disruptions in supply chains that have significantly undermined food security in poor importing countries.

world trade cereals, other than rice, account for just under 20 percent of total global production (about 620 million out of about 3.3 billion tons produced in 2020/2021). There is enough total production to feed all 8 billion people in the world, but production in semi-arid countries is less and some countries are falling behind their potential. This is why trade plays an important role in balancing global supply and demand. in season 2020/21Russia gave the world 52.32 million tons (7.8%), and Ukraine 69.82 million tons (11.3%) of grain.

Ukraine also exports oilseeds (sunflower, soybeans, rapeseed) with a well-established processing plant for the production of sunflower oil. fifty two percent sunflower seeds and oil sold on the world market came from Ukraine in 2020. At present, edible oil supply chains are disrupted and edible oil prices have risen even higher than cereal prices. In recent weeks, the author has not been able to buy sunflower oil in his area in Hamburg/Germany.

World markets for grains and oilseeds were tight even before the crisis due to destocking, which led to higher prices. This new supply shock has resulted in prices nearly doubling from two years earlier. Demand in the market for agricultural commodities is inelastic – people have to eat – and this has dire consequences in poor importing countries. The number of people whose food supply is insecure (about 800 million) and people facing hunger (about 44 million) is likely to grow. This will increase poverty and pose a threat to social stability in poor importing countries.

Global promotions are shrinking. World wheat reserves of about 300 million tons are sufficient to cover the annual world consumption in about four months. Of these reserves, about 50 percent (about 150 million tons) are in China. We know from the past that prices rise when stocks reach a certain critical low. In this situation, disruptions in trade caused by the crisis accelerate the development of the market and may even lead to government intervention, restricting exports to protect national interests. If many countries do this, it will be disastrous for world markets.

Ukrainian currant porridge stock estimated at about 20-25 million tons. The new harvest in autumn will be much lower than last year due to the smaller area and lower intensity caused by the lack of necessary resources and finances. Estimates are difficult, but market watchers it is said to be about 20-30 percent less, or about 30 million tons. With domestic demand unchanged, this will lead to a decrease in exports by about 40-50 percent in 2022. Thus, if the Black Sea ports remain blocked until the end of this year, there will be about 55 million tons less grain in the world. To put this into perspective, consider that 1 ton of grains can feed a family of six for an entire year. So this missing amount of cereals will mean we will have less food for more than 300 million people.

World markets for grains and oilseeds have been hit hard by the war in Ukraine.

And it could get even worse if we consider limited exports. fertilizer. The share of Russia and Belarus in the world potash trade is 40 percent. Only Russia exports about 20 percent of nitrogen and 10 percent of phosphorus. Fertilizer prices are rising. As a result of higher grain and oilseed prices, production can be expected to increase in poor importing countries, but this will be partly offset by higher commodity prices. Poor importing countries in Africa can try to stimulate more production to feed a growing population, but to achieve this they will need huge financial and investment efforts. Even if more resources are directed to agriculture in Africa, there will be a delay in the response of the proposal.

There are four entry points for reducing pressure: individual, national, international and special anti-crisis measures:

  1. On an individual level in industrialized countries, we all have to ask ourselves uncomfortable questions about our individual eating habits. We throw away too much in households (Europeans almost 200 kg and Americans about 300 kg of food per year). And we eat too much meat. Remember that it takes 3 kg of cereals to produce 1 kg of pork during the production process.
  2. At the national level, we need to rethink biofuel policy. European and US regulations for the production of biodiesel using edible oil and gasoline using corn should be flexible enough to reduce production during periods of (too) high prices. Secondly, in the EU, we need to be more pragmatic about policies to reduce fertilizer use and create productive areas for biodiversity. We currently need more production, not less. Climate goals are good for saving the planet, but we also need to feed the people of the planet.
  3. At the international level, we will need to use the G-7 and G-20 platforms to agree on measures that will relieve pressure from international agricultural and food markets. Thus, joint declarations by countries to refrain from export restrictions will be required, a reorientation of international cooperation programs towards agriculture and agribusiness will help, and the budgets of the World Food Program will need to be replenished to avoid the worst.
  4. While Russia is blocking Ukrainian ports, other transport logistics must be maintained. This includes investments in Ukrainian railways, including in loading and unloading facilities, and also phytosanitary laboratories on the Ukrainian-Polish border.

World markets for grains and oilseeds have been hit hard by the war in Ukraine. Food prices are rising and the number of people who are food secure will inevitably increase.