The Covid-19 pandemic, the global economic slowdown, strained supply chains, blockage of the Suez Canal, raging conflicts in the Sahel and the Horn of Africa, political instability, military coups, rising oil and gas prices, looming debt crisis, and now, the Russia-Ukraine war… the list of disruptions is long and unending. The last two years have witnessed a series of devastating crises on the political, economic, health, and military fronts and the situation has worsened after the so-called Russian “special military operation” in Ukraine.
Since 2020, the governments across the world, many of whom are already fragile, weak, poor, over-burdened, and undemocratic, have been struggling to cope with the difficult international environment as well as internal crises. The threat of Covid-19 has not really waned as yet as we can see strict lockdowns in China. The brittle global economic recovery is under severe strain because of the war in Ukraine and the imposition of Western economic sanctions. Amidst these challenges, global food (in) security is emerging as probably the most important problem.
The Black Sea region is critical for global food security for its role in supplying food, fertilizers, and energy. Russia and Ukraine are major exporters of wheat and maize. Ukraine and Russia account for 30 percent of the global wheat supply whereas in the case of maize, they account for a 20 percent share in global markets.[1] Since the beginning of the war in Ukraine, the wheat supply has been affected adversely as the Ukrainian ports are closed for commercial shipping.[2] The wide-ranging economic sanctions on Russia, especially its banks, have impacted the availability of credit for traders. Meanwhile, the cost of insurance too has gone up substantially. These factors have come together and, approximately, 13.5 million tons of wheat is stuck in Ukraine and Russia.[3]
Global food prices were already soaring even before the war and now matters are worse. According to the Food and Agriculture Organization of the United Nations (UN), “the FAO Food Price Index averaged 140.7 points in February, up 3.9 percent from January, 20.7 percent above its level a year earlier, and 3.1 points higher than reached in February 2011. The Index tracks monthly changes in the international prices of commonly-traded food commodities”.[4] A similar situation had arisen in 1914-15. While fighting in the First World War, the Ottoman Empire had closed the Dardanelles Strait and the Black Sea became inaccessible. The consequent loss of access caused the wheat prices at the Chicago Board of Trade to rise by 45 percent.[5]
In addition to the rise in food prices, due to the high demand, global oil and gas prices have been rising as well. Russia is a major oil and gas supplier and since the beginning of the Russia-Ukraine war, the oil prices have surged above the US $ 100 per barrel. It is estimated that the oil prices will remain above $ 100 per barrel as long as the war in Ukraine continues.[6] As the full effects of sanctions are beginning to take their toll on the Russian energy sector, oil prices are likely to go up even further.[7] The delays in finalizing and signing the Iran nuclear deal and the inability of the US, so far, to get its allies in West Asia to increase oil production to offset the likely impact of diminishing Russian energy exports have exacerbated the situation in the already unstable oil and gas markets. The impact of high oil prices will be felt in the transportation sector, which plays an important role in global food security.
Besides, fertilizer prices are at an all-time high level as the prices of raw materials required for fertilizer production are up 30% since the beginning of this year. Russia accounts for 14 percent of global fertilizer supplies and is a major exporter of nitrogen, potassic, and phosphorus fertilizers.[8] Gas is a key input for fertilizers and the high gas prices have contributed to the price rise in fertilizer markets. Meanwhile, as the war drags on, countries are resorting to the tried and tested method of export bans and are stockpiling wheat to minimize the impact on domestic consumers. For example, Russia has banned the export of wheat whereas Indonesia has banned palm oil exports.[9] China has been stockpiling wheat and has lifted restrictions on food imports from Russia.[10] Meanwhile, as per the World Bank, the commodity prices will remain high till at least 2024.[11]
(Source: UN Food and Agriculture Organization)
As a result, global food security is under severe pressure. The African and West Asian countries that depend on food imports from the Black Sea region are worst affected. Egypt has raised the price of bread for the first time since 1988.[12] In addition to the disruptions in supplies, the Horn of Africa is experiencing the worst drought since 1981 and needs as much support from international community as possible.[13] Countries like Nigeria, Libya, Tanzania and Kenya will find it difficult to meet the shortfall in Black Sea wheat exports in the short term. The World Food Program (WFP) is struggling to support the vulnerable populations including those in Africa. The plight of people trapped in conflict-ridden Yemen and Taliban-controlled Afghanistan is too well-known to be recounted here. In India’s neighbourhood, Sri Lanka’s economic woes have been worsened by the higher food and energy prices since February and for similar reasons, Pakistan and Nepal are staring at economic crises. These and many other countries in Africa and Asia will face the full impact of global food insecurity. Countries like India are considering wheat exports to African countries such as Egypt and Sudan. However, the heatwave in North India in the months of February and March has affected wheat production.[14] The rising inflation and the imperatives of domestic food security programs will have to be factored in by India if it seeks to ameliorate the food insecurity situation of its partner countries seeking its assistance.
Food security is intimately linked to political stability and therefore, the political impact of global food insecurity will be felt across the world to a varying degree. Experts have linked the high food prices in late 2000s with the onset of Arab Spring in 2010-11.[15] The food crisis and the rising energy prices along with the looming debt crisis in some countries have already jeopardized the economic recovery. Therefore, the global effects of the Russia-Ukraine war will be much more devastating. The countries across the world have no option but to brace for the impact as the new phase of the war unfolds in Eastern Ukraine.
*****
*Dr. Sankalp Gurjar is a research fellow at the Indian Council of World Affairs.
Disclaimer: Views are personal.
References:
[1] World Food Program, “Food security implications of the Ukraine conflict”, March 2022, p. 8.
[2] Jonathan Saul, “Ukraine’s ports to stay closed until Russian invasion ends – maritime administration”, Reuters, February 28, 2022. Available at: https://www.reuters.com/world/ukraines-ports-stay-closed-until-russian-invasion-ends-maritime-administration-2022-02-28/ (Accessed on April 25, 2022)
[3] World Food Program, “Food security implications of the Ukraine conflict”, March 2022, p. 9.
[4] UN FAO, “FAO Food Price Index rises to record high in February”, March 3, 2022. Available at: https://www.fao.org/newsroom/detail/fao-food-price-index-rises-to-record-high-in-february/en (Accessed on April 25, 2022)
[5] World Food Program, “Food security implications of the Ukraine conflict”, March 2022, p. 10.
[6] IANS, “Oil prices will remain above $100/barrel as long as Ukraine war rages on” The Economic Times, April 25, 2022. Available at: https://economictimes.indiatimes.com/industry/energy/oil-gas/oil-prices-will-remain-above-100/barrel-as-long-as-ukraine-war-rages-on/articleshow/91065993.cms (Accessed on April 25, 2022).
[7] Javiar Blas, “The Second Wave of the Russian Oil Shock Is Starting”, Bloomberg, April 21, 2022. Available at: https://www.bloomberg.com/opinion/articles/2022-04-21/war-in-ukraine-the-second-wave-of-russia-s-oil-shock-is-starting (Accessed on April 25, 2022).
[8] Elliot Smith, “Fertilizer prices are at record highs. Here’s what that means for the global economy”, CNBC, March 22, 2022. Available at: https://www.cnbc.com/2022/03/22/fertilizer-prices-are-at-record-highs-heres-what-that-means.html (Accessed on April 25, 2022).
[9] Subhayan Chakraborty, “Explained | Despite talk of record wheat harvest, why are domestic prices rising fast?”, Moneycontrol.com, April 21, 2022. Available at: https://www.moneycontrol.com/news/trends/current-affairs-trends/explained-despite-talk-of-record-wheat-harvest-why-are-domestic-prices-rising-fast-8384531.html (Accessed on April 25, 2022) ; Nanda Kasabe, “Edible oil prices may rise 15-20% as Indonesia bans palm oil exports”, The Financial Express, April 25, 2022. Available at: https://www.financialexpress.com/market/commodities/edible-oil-prices-may-rise-15-20-as-indonesia-bans-palm-oil-exports/2502078/ (Accessed on April 25, 2022).
[10] Laura He, “China lifts restrictions on Russian wheat imports”, CNN, February 25, 2022. Available at: https://edition.cnn.com/2022/02/25/business/wheat-russia-china-intl-hnk/index.html (Accessed on April 25, 2022).
[11] The World Bank, “Food and Energy Price Shocks from Ukraine War Could Last for Years”, April 26, 2022. Available at: https://www.worldbank.org/en/news/press-release/2022/04/26/food-and-energy-price-shocks-from-ukraine-war (Accessed on April 27, 2022).
[12] World Food Program, “Food security implications of the Ukraine conflict”, March 2022, p. 11.
[13] UN News, “Growing risk of Somalia famine, as drought impact worsens”, March 28, 2022. Available at: https://news.un.org/en/story/2022/03/1114902 (Accessed on April 25, 2022).
[14] Zia Haq, “Heatwaves hit wheat yields, exports at risk”, Hindustan Times, April 19, 2022. Available at: https://www.hindustantimes.com/india-news/heatwaves-hit-wheat-yields-exports-at-risk-101650303611973.html (Accessed on April 25, 2022).
[15] Raphael Parens, “Food Prices, Elections, and Wagner Group in Africa”, Foreign Policy Research Institute, April 22, 2022. Available at: https://www.fpri.org/article/2022/04/food-prices-elections-and-the-wagner-group-in-africa/ (Accessed on April 25, 2022).