May 25, 2022
The specter of a global food crisis: what can happen now?
After the Covid-19 pandemic, the war in Ukraine is also acting as an accelerator of major dynamics on a global scale, and the risk of a food crisis is no exception.
In recent months, the shadows of rising food commodity prices, due to a mix of geopolitical tensions, financial speculation, and supply-demand ratio crises, were gathering over the world. The war acted as a detonator to an already explosive situation in which market fibrillation was growing week after week, and exploding at one of the pivotal points for the global food market added further volatility.
The Rome-based organization’s FAO report “State of food security and nutrition in the world” estimated that 34.8% of the world’s population experienced hunger problems in 2021: 8.9% (just under 690 million people) were undernourished, 25.9% (as many as two billion people) had discontinuous access to food sources or experienced hunger for some periods of the year.
And the situation may worsen with war
War disrupts food markets
At the center of the Russian-Ukrainian crisis, in particular, are grain markets: the conflict is also a “wheat battle” as both Russia and Ukraine cover a substantial part of global exports of wheat (35%), barley (25%) and sunflower oil (75%) as well as corn and canola — all vital raw materials for the European food industry.
Price dynamics testify to this trend as the wheat price future, which was valued at $764 a bushel in early February, had risen to $1258 on March 7 at the height of the war, registering an increase of about 40%.
The Wheat Continuous Contract (W00) subsequently fell, but stabilized well above $1,000 a bushel (quantity compared to a volume of about 35 liters).
The boom in wheat futures goes hand in hand with those measuring the market prices of soybean sprouts (+8.27% in in February), milk (+7.35 %), and corn (+15%), and the FAO’s World Price Index touched a new historical high in the February monthly survey.
The FAO also recalls that the Vladimir Putin-led country was also the world’s largest exporter of nitrogen fertilizers in 2021 and the second-largest supplier to the market of potash and phosphate fertilizers, key product categories for agriculture and functional livestock feed crops.
Crisis fronts
There is no shortage, then, of other hot spots as 2021 has left us with dramatic famine issues and countries on the brink of collapse:
- Afghanistan where the Taliban has returned to power;
- war-torn Yemen;
- the Tigray region — the main scene of battle in Ethiopia’s civil conflict;
- sub-Saharan African countries besieged by desertification;
- Madagascar grappling with the worst drought in half a century
- and Sri Lanks on the brink of total anarchy amid food shortages and the skyrocketing inflation grappling the country.
These are just a few of the key theaters impacted by climate change and political crises.
The dynamics of rising inflation that followed the post-Covid recovery on a global scale and the war “big bang” did the rest.
This is because with war comes the triptych of issues ideal for triggering the perfect storm. First, geopolitical and economic uncertainty set up an upward jump in the futures and prices of food commodities, as well as the products critical to obtaining them (such as fertilizer). Second, it has resulted in a de-structuring of global supply chains and a risk of loss of trade shares that is clearly identifiable in the case of Odessa alone, a city close to siege from whose port enough food raw materials are shipped to feed 400 million people. Finally, the encouragement of protectionist measures and protection of food sovereignty increases instability.
The imminent risk of a “real disruption” — mainly as a disarticulation of global food supply chains — a phenomenon that in the West will manifest itself in the form of a wave of price hikes on food, from grain products to meat, or from moves like Hungary’s, with Prime Minister Viktor Orban promoting a halt to grain exports fearing that the conflict between Russia and Ukraine could cause significant shortages in domestic supply.
But that, in the context of a resulting global price spike, will especially affect those areas already plagued by humanitarian crisis. From the Middle East to North Africa, countries such as the Democratic Republic of Congo, Sudan, Libya and Yemen.
All these factors further strengthen the nexus between weapons and hunger, which for the World Food Program is one of the main causes of food crises.
Food insecurity becomes geopolitical insecurity and competition for resources.
The latter increases tensions and, in a context of environmental instability, also brings to the fore such important issues as the struggle for food raw materials and water, a factor we note is not secondary even in the Russian-Ukrainian conflict.
Toward a Global issue
“Right now the talk is not whether there will be a global food crisis, but how extensive it will be,”
said Svein Tore Holsether, head of international fertilizer distribution giant Yara, told the BBC, pointing out that
“even before the war broke out we were already at a very delicate time for the northern hemisphere, it’s the time of year when raw materials have to start moving to get to where they will be processed.”
That could be the agribusiness “Lehmann Brothers” moment, where the disruption of vital Russian and Ukrainian supplies to world markets, especially developing ones, threatens stability and growth in the periods ahead.
Reports from the United Nations in this regard point out that about one-third of the arable land of Ukraine, the “breadbasket of Europe,” may not be adapted for cultivation this year, and Russian exports are jeopardized by the country’s exclusion from international markets and the Swift system.
The agricultural crisis calls the livestock crisis (Spain, for example, imports a fifth of its livestock feed from Ukraine),
the energy crisis impacts across the board, and new market barriers do the rest. All this against a backdrop of changing climate change that multiplies natural disasters and impacts on food security.
A worrying picture
Maximo Torero Cullen, the chief economist of the FAO, pointed out in an interview with the Washington Post last December that in the current food crisis:
“we still have food availability, while the problem is access.”
The stark reality is though that the dominant economic system has pushed many countries, especially developing ones, toward massive specialization and an economic model based on producing a few products mainly for export and then having to import everything else — the key structure of a system that creates dependence.
And this problem reverberates now where we face:
- a rapidly changing globalization with increasing decoupling between Russia and the West;
- generalized insecurity in trade related to geopolitical rivalries;
- inflation and energy crises that complete the picture of generalized price increases in virtually every good and commodity.
This is all part of a global system that forces interconnectedness risks imploding when the market is in shock and can corner the most vulnerable countries on the planet. The lessons of 2010–2011, years when it was a wave of price increases in global food prices can help us understand what the consequences may be, especially in a deteriorating system.
The global food crisis, in short, may lead to further tensions as the fear of not finding bread on the table has been a driving force behind the greatest maneuvers of upheaval since ancient times…
..and this lesson, not to be forgotten, applies even in the age of globalization.
End of Part 1
For updates & the latest news and analysis — follow me on Twitter @FilandroMi
Extra Sources:
- https://www.washingtonpost.com/world/2021/12/15/global-food-crisis-pandemic/
- Food Security & Nutrition — FAO report:
https://www.fao.org/3/cb4474en/cb4474en.pdf - https://time.com/5820381/coronavirus-food-shortages-hunger/
- https://www.thenewhumanitarian.org/analysis/2022/03/02/how-russias-invasion-will-worsen-global-hunger
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