Analysis | A global food meltdown?
Five factors shaking up global food supply chains
Johanna Mendelson Forman
What the war in Ukraine has taught us is how easily globalized supply chains can be disrupted. Together, Russia and Ukraine account for a quarter of the global grain trade and 12 percent of the calories traded globally. As the fighting shows little sign of ending, the world’s grain markets are bracing for a supply crisis, particularly across the Levant and North Africa. Egypt, the world’s largest wheat importer, is already having problems finding supplies on the global market at prices that will not cause food riots over the high cost of bread.
[Read more on the relationship between food insecurity and political instability in ISD’s recent report “Peace Through Food: Ending the Hunger-Instability Nexus.”]
Across the world, the disruption of trade has triggered a potential hunger crisis. Before the war started, the World Food Program (WFP) estimated that there were 811 million hungry people. Now with 4 million refugees and counting displaced from Ukraine, plus 26 million existing refugees displaced from the other 38 countries in some state of conflict, we are witnessing what the WFP has predicted: 2022 is destined to be “a year of catastrophic hunger.” The WFP estimates that it will need to raise $71 million dollars more per month to feed victims of famine and other humanitarian emergencies in 2022.
Pandemic-induced inflation was already producing higher food prices before this conflict. Now, less developed countries with great economic inequality may suffer the most. If food inequality was a problem before this war began, the current crisis may imperil any country, rich or poor. The risks of middle-income countries running out of food may still be low, but developed states will be increasingly vulnerable to supply chain disruptions. The war in Ukraine’s impact on global food supply “threatens to further jeopardize food security around the world due to its impact on global food supply chains,” according to Sarah Charles of USAID.
What will reshape supply chains in the coming year?
In the near- term five factors will transform supply chains in 2022 with a high likelihood they will continue to impact food supply in the coming years.
- High Energy Prices: Russian gas supplies large swaths of Europe. Sanctions imposed on Russia will continue to make energy costs a major factor in rising food prices. Energy is required for transport, all varieties of industrial processes, and for making fertilizer. China will benefit as the world shifts to renewable sources of energy, including solar panels, lithium batteries, and other components of “green technology.” However, the United States could also use this moment– if it chooses– to pursue greater investments in renewable energy systems.
- Labor Force Disruptions: Shortages of essential workers in the transport sector, from ship crews to stevedores to truck drivers, will affect the movement of food across the globe. Exporting countries will need to refresh their recruitment of a wide range of workers to make the supply chain more resilient.
- Food Protectionism: Many food exporting countries will revert to greater protectionist policies. Argentina, Turkey, and Egypt have already prohibited wheat exports. So did Moldova and Hungary. China and India are likely to follow with higher tariffs as they feed their citizens amidst near-term supply shortages. Combating food protectionism is important to ensure access to other sources of grains in the short run.
- Fertilizer shortages: Brazil imports 85 percent of its fertilizer in order to grow crops like soybeans that are exported to China for cattle feed. Brazil’s President Jair Bolsonaro’s government is trying to expropriate indigenous lands and deforest parts of the Amazon rainforest to secure the potassium it needs to fertilize its crops. Alternative suppliers are not readily available and the global export of soybeans to China is dependent on foreign fertilizer supplies.
- Global Inflation: Higher food prices caused by increased energy costs and shortages of commodities on the global market will accelerate protests against governments as access to food grows. Food shortages and high prices are a catalyst for political upheaval. We can expect to see sourcing of certain essential commodities from countries that were not the usual sources for wheat or corn.
Supply chains don’t only bring crops to market; they also ensure the necessary inputs: diesel fuel to run farm equipment, gasoline to fuel trucks that bring products to ports, as well as fertilizer, the essential ingredient in growing large-scale crops. The latter is yet another part of the agricultural supply chain which is now paralyzed as a result of the Russian invasion of Ukraine, since Russia and Belarus supply 40 percent of the world’s potash, 22 percent of the world’s ammonia, and 14 percent of the world’ monoammonium phosphates– all widely-used kinds of fertilizers. Overnight, the dilemmas of globalization have created a nightmare for farmers who were dependent on fertilizers from these suppliers.
The end of globalization? Not likely.
Even before the first shots were fired in the war between Russia and Ukraine, the global trading system was in distress. If trade experts were debating the end of globalization before the pandemic, today the geopolitics of a war in Europe requires a profound transformation in the management of long-distance supply chains when food access is at stake. We are all dependent on global supply chains.
Will the global supply chains that started more than three decades ago with the fall of the Berlin wall come to an end? Probably not. The interconnectedness of our global agricultural system may be geographically redefined, but will not disappear. Today, one quarter of the food produced for human consumption is internationally traded, and four out of five people live in a country that is at least partially dependent on imports to meet national food demands. What will change are the trading partners supplying the needed commodities. Some economists have predicted a future with a new Iron Curtain supply chain, where trade will be limited to more politically- aligned states, a departure from the late 20th century belief that you could ignore your enemies for the sake of efficiency and higher profits.
However, the reality is that trade is what allows us to eat a diverse diet year-round. Even in the best of possible scenarios, a world that can produce enough food for everyone is not a world where food is accessible to everyone. No country is food self-sufficient. Of the 195 countries in the world, at least 34 (5 in Asia and 29 in Africa) are unable to produce their own food due to water or land limitations.
In the coming year, a reconfiguration of food suppliers and exporters will reflect the ongoing conflict in Ukraine and the sanctions that have limited Russia’s ability to export food and energy. The global trading system will continue to rely on a world-wide value chain for industrial inputs.
Right now, it will be up to a coalition of governments, the private sector and humanitarian groups to devise ways to ensure access to food in war-afflicted states. It is also an opportunity to allow this same group of actors, public and private, to create strategies for climate-sensitive sustainable agriculture that reduces the dependency on inputs for crops that rely on few suppliers and long distances. Our interconnected food supply chains may look very different in the next five years.
Dr. Johanna Mendelson Forman is a Distinguished Fellow at the Stimson Center, and an Adjunct Professor at the School of International Service at American University. She is the creator of ConflictCuisine®, a program that examines war and peace around the dinner table. She spent the month of October on the ground in Ukraine as a guest of the Ukrainian Foreign Ministry.
Dr. Mendelson Forman recently participated in the Institute for the Study of Diplomacy’s New Global Commons Working Group on Food Security, which led to the report, “Peace Through Food: Ending the Hunger-Instability Nexus.”
Read more from The Diplomatic Pouch on global food systems:
Analysis | Russia’s war in Ukraine is going to increase global food insecurity
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Analysis | Food security is not just a humanitarian concern
Even the wealthiest countries cannot buy their way to a stable food supply. | Emily Crane Linn and Alistair Somerville
Analysis | Can food build peace?
Challenges for life in the Anthropocene | Johanna Mendelson Forman