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Tuesday, May 24, 2022
HomeLatest NewsWar in Ukraine with no end in sight threatens global food security

War in Ukraine with no end in sight threatens global food security

The prolongation of the war in Ukraine and uncertainty about how long it will last threaten to deepen the food crisis in already vulnerable countries, especially in the Middle East and Africa. Since the beginning of the Russian invasion, this has been one of the fears about its consequences on a global level, and the worst predictions are coming true, with a combination of factors that have turned the conflict into one of the main elements of instability on a global level.

The blockade of grain exports from Ukraine, one of the main grain producers, and sanctions against Russia, which has restricted the export of fertilizers, are pushing up the prices of basic food products in an already boiling market due to rising energy costs. In March, export prices for wheat and corn rose by 22 and 20 percent. “Prices were already at sky-high levels before the war, and they have remained at that level throughout 2021. The conflict made things worse: in just one month, they rose by 20 percent from already record levels not seen since the war. FAO has compiled a price index since 1990. The grains and oilseeds markets have been hit the hardest,” Mario Zappacosta, an economist at the Food and Agriculture Organization of the United Nations (FAO, abbreviation in English), told

Ukraine, once nicknamed “the breadbasket of Europe”, remains, along with Russia, one of the main producers and exporters of wheat and the main exporter of sunflower oil. In a report released a month after the start of the Russian offensive, the FAO warned of the risks the conflict could bring to the global market. Together, Russia and Ukraine account for 19% of global barley production, 14% of wheat and 4% of corn, according to average production between 2016 and 2021. But the weight of the two countries is better understood by looking at the volume of exports. Russia tops the list of main exporters of wheat and meslin in the context, in which the top seven suppliers account for 79% of the market. Ukraine ranks sixth with a 10 percent market share, but it is also the world’s third largest exporter of barley and corn, where Russia’s share is smaller. And among the main importers it has the countries of North Africa and Asia.

While Europe’s dependence on Ukrainian wheat is limited (Spain, for example, imports 2.3 percent from Ukraine and less than 2 percent from Russia), in some countries in these areas imports from Ukraine account for about 50 percent of the total. In Lebanon, they make up more than 60% of deliveries. “The case of Lebanon is of great concern to us because, after the port explosion in 2020, it has very limited storage capacity and cannot play with international prices and buy when they are lower. I’m not saying that you should buy day after day, but almost, and if the price is high, you will buy at a high price. And this is in a country that is going through a severe economic crisis with a currency that has lost most of its value,” explains Zappacosta.

Other countries already hurt by high wheat consumption are the Horn of Africa (Somalia imports nearly 50 percent of its wheat from Ukraine and more than 40 percent from Russia) and countries like Yemen. “Wheat is an important component of the local diet. This is a country destroyed by war. Half of the incoming wheat is imported as humanitarian aid. But that doesn’t mean it doesn’t matter because the country doesn’t pay for it. The World Food Program (WFP) also pays for this, and if prices rise, it has to buy fewer tons. There is a problem from the point of view of humanitarian organizations,” adds the economist.

It was the WFP that warned last week about the consequences of the blockade of ports in the Odessa region. “At the moment Ukrainian granaries are full. At the same time, 44 million people around the world suffer from hunger. We must open these ports so that products can enter and leave Ukraine. Hundreds of millions of people around the world depend on these supplies,” said agency chief executive David Beasley a few days ago, also warning of increased operating costs. Rising food prices, together with higher fuel prices, have raised them to $71 million a month (about 67 million euros), which, according to the agency, is equivalent to almost a month’s daily ration for almost four years. million people.

No alternatives to logistics

Ukrainian President Volodymyr Zelensky on Monday urged the international community to take action to end the Russian blockade of the country’s ports. “Probably, this has not happened in Odessa since World War II,” he said. “Without our agricultural exports, dozens of countries around the world are already on the brink of food shortages. And over time, the situation can become absolutely terrible.” Zelensky was joined by other senior officials. European Council President Charles Michel posted a tweet on Monday after visiting wheat and corn silos in Odessa. And Canadian Prime Minister Justin Trudeau, who was in Kyiv last Sunday, assured that Canada would help Ukraine find options for exporting stored grain. “We know that there are people in the world who will starve to death because of Russia’s actions,” Trudeau said in an interview with Reuters. The Prime Minister also referred to the option of using the Danube river ports to solve the problem.

In the port of #Odessa with @Denys_Shmyhal I saw silos full of grain, wheat and corn ready for export.
This much-needed food is stuck due to the war with Russia and the blockade of the Black Sea ports. Causing dramatic consequences for vulnerable countries. We need a global response.

— Charles Michel (@eucopresident) May 9, 2022

Prior to the Russian invasion, Ukraine exported 90 percent of its agricultural products through ports on the Black Sea, and currently the alternatives to land transport, road or rail, present a number of logistical challenges that do not allow a satisfactory solution to be offered in the short term. The track gauge, a spokesman for a Ukrainian railway company explained to the Financial Times, differs in Ukraine from its European neighbors, meaning that goods must be fully unloaded at the border or wagons transferred to a different set of wheels, significantly increasing delivery times. The European Commission presented on Thursday a set of measures aimed at preventing bottlenecks, asked market agents to provide more vehicles and facilities, and urged national authorities to apply maximum flexibility and adequate personnel when crossing the border.

The blockade of ports is also affecting Ukraine’s storage capacity, which could find itself in the paradoxical situation of retaining much of its production but running out of space to store its crops. Agriculture Minister Nikolai Solsky explained on Monday that about seven million hectares of spring crops have been sown this year, which is 25-30% less than the previous year. “At the moment there are concerns, but it is too early to say how the war will affect production. In Ukraine, wheat and rapeseed are now being harvested, corn and sunflower are being planted. And planting corn seems to be working. For corn and sunflower, production is expected to decline by 20-30 percent, which for a country in such a situation is almost an excellent result,” says Zappacosta.

Domino effect

The market shares liberated by the blockade of Ukraine are beginning to be occupied by other countries. India, the world’s second largest wheat producer, exported 1.4 million tons in April, according to data obtained by Reuters. This is a record amount: in April last year, its exports amounted to less than 250,000 tons. And for the first time, Turkey and Egypt began to import wheat from this country. The sharp rise in the price of bread, up to 50 percent, prompted the government of Egypt, the world’s leading wheat importer, to intervene early in the war to lock in the selling price of the product while maintaining the price of subsidized bread, to which 70 percent of the population has access. “There will be grain that will come from Argentina, Brazil, Canada, Australia or other sellers. The problem is that they will ask for a higher price, sometimes much higher. Of great concern are the countries of North Africa, which traditionally subsidize bread. It is one thing to subsidize bread made from inexpensive raw materials, and another to subsidize bread made from very expensive wheat. The government needs to take stock and decide whether to continue to subsidize and keep the population satisfied by emptying the public treasury, or let prices rise and face social unrest, as in 2007-2008,” stresses the FAO economist.

If market volatility continues, problems affecting the most vulnerable countries in the short term could spread to more commodities and escalate into a global crisis with a combination of rising prices and high competition in demand. Also key is the cost of energy, which is central to agricultural production, both for the fuel and for the fertilizers used. “If until now we are worried about wheat and vegetable oil, then the energy problem will become a cross-cutting problem and will affect all products, fruits, livestock … And all countries will be affected. More developed countries use much more fertilizer than poorer countries. What can happen? This is a reduction in cultivated areas or a decrease in yields, that is, a decrease in production, which is reflected in higher prices,” explains Zappacosta. “Talking about global hunger is big words, but the idea that the problem can spread like an oil slick exists.”

Our news department has been covering the war and its consequences for the whole of Europe for several weeks now. We make special efforts to report, explain and verify available information in difficult circumstances and have deployed our reporters to Ukraine, Poland and Moldova, among other key locations. We tell you specific stories and try to give you an overview of the economic and political implications in the medium term, looking for the most experienced voices to interview in Ukraine, Russia, the US or China.

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