Russia’s war on Ukraine is a main cause of a global food crisis that could bring serious political and economic consequences.
Ukraine has become one of the biggest suppliers of foods such as sunflower oil, wheat and corn for the low-income countries worldwide as well as for the international development organizations. Ukraine had a record-breaking grain harvest last year, collecting 107 mmt (million metric tons). Ukraine’s exports comprise more than 10% of all wheat, 14% of all corn and 47% of all sunflower oil in the world.
On average, 50 mmt of agricultural products were exported from Ukraine annually. In record years, this figure reached even 65 mmt. Today it is not possible to find alternative suppliers and replace such volumes of agricultural products from Ukraine. Experts claim it is literally impossible even within the next 3-5 years.
Experts emphasize that more than 400 mln people in the world depend on grain supplies from Ukraine. The population of most of these countries traditionally suffers from food shortages and even hunger.
Dependence of countries on Ukrainian supplies (the share of Ukrainian main commodities in the country’s total imports, according to ITC, 2020, 2021):
Corn: EU27 – 32%, China – 55%, Egypt – 26%, Turkey – 32%.
Sunflower oil: EU27 – 62%, China – 59%, India – 75%, Turkey – 5%, Iraq – 74%.
The war in Ukraine poses a threat to global food security, which is particularly acute today in some of the MENA region countries (Egypt, Yemen, Lebanon, Israel, Libya, Lebanon, Tunisia, Morocco, Iraq, Saudi Arabia) and Asian countries (Indonesia, Bangladesh, Pakistan), which are the main buyers of wheat and corn on the world markets).
Russia’s attack has changed the world’s food supply chains. Products that Ukraine will not be able deliver to the world market provoke a chain reaction: developed countries are increasing their stocks, many countries are limiting trade in the background of uncertainty.
As a result, prices are rising even more and risk of a hunger in poorer countries is rising.
The war has affected about 25% of the world cereal trade and has caused an increase in world prices, food inflation and reduced access to food in the countries that import food from Ukraine. In particular, those are wheat and sunflower oil.
The FAO Cereal Price Index averaged 173.4 points in May, up 3.7 points (+2.2 %) from April and as much as 39.7 points (+29.7%) above its May 2021 value. International wheat prices rose for a fourth consecutive month, up 5.6% in May, to average +56.2% increase compared to last year value.
According to the World Bank commodity markets outlook, many foods are set to see steep rises in their costs. The UN food prices index already shows they are at their highest since records began 60 years ago.
According to the World Bank reports: more and more countries are introducing or announcing measures to reduce or ban wheat exports (more than 53 restrictive measures were introduced).
Due to the war Ukraine has lost about 20% of sown area this year (territory is occupied or under hostilities). About 13.5 mln hectares were used for spring sowing campaign (in 2021 – 16.9 mln hectares). For winter grain 7.6 mln hectares were used in fall 2021.
The full-scale russian invasion of Ukraine caused damages to the agricultural sector of the country for the total amount of $4.29 billion.
According to recent USDA report, global fertilizer prices are at near record levels and may remain elevated throughout 2022 and beyond. Fertilizer accounts for 36% of a farmer’s operating costs for corn, and 35% for wheat.
These elevated prices could have implications for crop production in 2022 and 2023.The Russian invasion of Ukraine has exacerbated the already limited fertilizer supply situation and has triggered import-export restrictions that will compound shortage concerns.
Mohammad Ali / Islamabad/ 15 July 2022
