Food shortages are approaching, rich countries are unable to eat fish and chips, and poor countries are beginning to starve
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Wen | Special Correspondent of Caijing Jin Yan sent from Washington
Edit the | Su Qi
Food prices are already high due to COVID-19-related supply chain disruptions and declining production due to drought last year. At a fragile moment created by the superposition of various factors, the Conflict between Russia and Ukraine broke out, hitting the global food market hard. Ukraine and Russia are both the world's leading producers of wheat and maize, together accounting for about 29 percent of global wheat exports, 19 percent of global corn supplies, and 80 percent of global sunflower oil exports. In the aftermath of the Russian-Ukrainian conflict, supply chains for wheat, maize, barley, edible oil and fertilizers have all been severely affected, with global food prices rising by nearly 13 per cent. Together, Russia and Ukraine produce half of the fertilizer in the United States, and the price of fertilizer has now quadrupled.
Derek Headey, a senior fellow at the International Food Policy Research Institute (IFPRI), told Caijing that the food crisis was lurking long before the outbreak of the conflict in Ukraine, and the FAO's cereal price index showed that the level was flat in 2021 and 2008, while after the Russian-Ukrainian conflict showed a more astonishing length. Between 2019 and March 2022, grain prices rose by 48 percent, fuel prices by 86 percent, and fertilizer prices by 35 percent. These three factors make the situation even more severe in 2022. The food system was in jeopardy back in 2007. At that time, due to rising oil prices, food prices plummeted, demand for corn biofuels soared, high freight rates, speculation in financial markets, low food reserves, extreme weather in grain producing areas, and a wide range of strong trade policies made the market more volatile, which brought a perfect storm of food crisis until prices gradually fell from their highs in 2011 and 2012. That storm seems to resurface in 2022.
The United Nations World Food Programme has warned that humanity may face the "biggest food crisis since World War II", with as many as 1.7 billion people exposed to the destruction of food, energy and financial systems, leading to worsening poverty and hunger.
On May 18, local time, Ukraine's Minister of Agricultural Policy and Food Solisky said in an international conference by video that Ukraine's grain production is likely to drop by 50% this year, and the sowing of wintering crops will also be seriously affected. The international community should be prepared to raise the price of wheat per tonne from the current $430 to $700.
Referring to a report on the global food crisis released this month, the UN World Food Programme said the conflict in Ukraine has exposed the interconnected nature and fragility of the agricultural system, with serious consequences for food security, with the total number of people facing severe food insecurity reaching a record 193 million in 2021. Since the outbreak of the Russian-Ukrainian conflict, the price of wheat has risen by more than 60%.
Andy Hecht, a veteran U.S. commodity investor, told Caijing that wheat, corn and soybean prices are approaching multi-year, if not all-time, growing seasons in 2022. Agricultural prices will continue to grow over the next few months to years. Factors contributing to soaring food and oil prices in the coming weeks or months include lower-than-bottom crop yields in South America, which weighs more on already bottlenecked global supply chains, further affecting food markets, and inflation continuing to drive up import prices. The Consumer Price Index (CPI) rose 8.5 percent in March, and the Producer Price Index (PPI) rose 11.2 percent from the previous year. The cost of energy, labor and financing has increased significantly, and prices have continued to rise under multi-party pressure; at the same time as the explosive growth of fertilizer prices, due to Russia's "temporary" export ban on "unfriendly countries", including the United States and Europe, the supply of fertilizer has also become a problem; Russia and Ukraine, as the main grain-producing areas of European countries, have become mineral areas and battlefields - after the Black Sea ports become war zones, grain exports will also be affected. Russia and Ukraine export one-third of the world's annual wheat supply and are also exporters of maize, barley and other agricultural products.
Lost ground
In the face of crisis, the forces of rescue and the forces of protectionism in various countries are at each other's throats. On the 18th local time, the US Treasury Department said in a report on the food security plan that the World Bank will provide $30 billion in funds to deal with the food security crisis caused by the Russian-Ukrainian conflict. According to US media reports, $12 billion of the $30 billion is spent on new projects, and another $18 billion is used to invest in food-related projects that have been approved but not yet executed.
Since the outbreak of the Russian-Ukrainian conflict at the end of February, wheat exports from the Black Sea region have fallen sharply, and the price of wheat and other commodities has soared. Russia and Ukraine are among the world's most important wheat producers, and millions of tons of grain are currently stranded in Ukrainian ports as a result of the conflict. Ukrainian grain broker Maximain said that as one of the world's largest food exporters, Ukraine exported 41.5 million tons of maize and wheat between 2020 and 2021, of which more than 95% was transported through the Black Sea. Officials from the Food and Agriculture Organization of the United Nations (FAO) revealed earlier this month that nearly 25 million tons of food were stranded in Ukraine and unable to leave the country due to infrastructure problems and the blockade of Black Sea ports. This state of affairs will continue. On the 18th, the Verkhovna Rada (Parliament) of Ukraine released a message on its official website on the approval of the draft presidential decree extending the state of war in the country. According to the new presidential decree, Ukraine's state of state wartime will be extended for a one-time extension of 90 days after it expires at 5:30 on May 25.
According to media reports, UN Secretary-General António Guterres is coordinating with countries such as Russia and Turkey to reach an agreement aimed at resuming Ukrainian food exports. Guterres proposed that Russia allow Ukraine to ship some grain in exchange for persuading Western countries to ease sanctions on fertilizers from Russia and Belarus. It is reported that Turkey, a neighboring country in the Black Sea, has expressed its willingness to participate in the agreement and may be responsible for matters such as maritime mine clearance and shipping management. In addition to the United Nations leading negotiations to open up food exports from the Black Sea, European countries are also helping Ukraine export grain, and the EU side hopes to transport some Ukrainian grain to the market through roads, railways and waterways on the European continent, including the Danube.
Hecht noted that in the United States, food prices have risen to historic highs; in other countries, food supplies have the potential to become serious problems leading to shortages or famines. Fertilizer shortages and rising labour costs, seeds, agricultural appliances, fund-raising and other input prices not only affect agricultural prices but also limit production. Recently, when US President Biden inspected family farms in Illinois, he announced that the federal government will launch a new action aimed at supporting American farmers, reducing food prices and ensuring global food security, including increasing the number of counties in the United States eligible for "double crop insurance" by 681 to 1935, which will reduce production risk for more farmers who grow two crops a year on the same land; and "precision agriculture" by improving crop planting efficiency. and other technical assistance to reduce farmers' production costs, expand the use of critical products, simplify farmer-related applications, and increase federal investment in domestic fertilizer production from $250 million to $500 million to reduce costs and make it easier for farmers to access these funds.
Biden emphasized the critical role of U.S. farmers in curbing inflation and rising global prices, saying that "we must ensure that U.S. agricultural exports make up for the global supply gap of the Russo-Ukrainian war." Ukraine and Russia are Europe's food producers, and the United States is the world's leading producer and exporter of corn and soybeans. The U.S. also exports barley, and Hecht believes the situation can become challenging if the supply gap created by the war cannot be filled.
A clear challenge is the growing voice of protectionism in countries, with some 20 countries around the world implementing food and food export bans, and export-restricted food accounting for about 17% of total global trade. These countries, including Argentina, Algeria, Iran, Kazakhstan, Turkey, Serbia, Tunisia and Kuwait, have restricted exports of staple food and crops. Restricted products range from staple foods including corn, flour, rye, barley, soybeans, animal oils, vegetable oils, salt, sugar, and vegetables including potatoes, eggplant, tomatoes, and onions. In addition, a variety of meats are also covered. Global inflation will cause the food CPI (consumer price index) in some countries to rise too quickly, passively carrying out food export controls, which will further boost global inflation.
Since the outbreak of the Russian-Ukrainian conflict, the global food system has been seriously threatened, and more and more countries have introduced relevant export bans. Caijing reporter Jin Yan
India, the world's second-largest wheat producer, imposed a temporary ban on wheat exports on May 13 to smooth out food price inflation triggered by hot weather at home. The ban provoked a strong reaction, and the next day the Group of Seven (G7) condemned the decision. India subsequently proposed that countries that requested and licensed the Indian Government would be able to continue to receive wheat exported from India. Increased demand for alternative exports in India is also the main reason for the rise in inflation. At present, India's export restrictions may exacerbate the risk of short-term disruption of agricultural supply chains, such as during the epidemic period, due to the implementation of stricter control measures in various countries, and measures such as port vessel stagnation, flight delays and social isolation have adversely affected agricultural trade. In addition, for domestic food security reasons, a country's agricultural trade restrictions often have a chain reaction on neighboring countries, further exacerbating the contradiction between supply and demand and driving inflation.
Indonesia was originally the world's largest exporter of palm oil, but in order to smooth domestic edible oil prices, Indonesia implemented a strict ban on palm oil exports from April 28, which also further exacerbated global food inflation. Indonesia's trade ministry said that because Russia and Ukraine are the main producers of sunflower oil, the Russian-Ukrainian conflict has disrupted the supply of products from the two countries, forcing some buyers to turn to palm oil as an alternative, resulting in a sharp increase in global demand for raw palm oil and a soaring price.
According to data released by the German company Statista Survey, Indonesia accounts for more than half of the world's raw palm oil supply, with exports of about 28 million tons in 2021. After the announcement of Indonesia's export ban, the market generally expected that the global supply of edible oil would become more tight, pushing up the price of edible oil and alternative foods and accelerating the rise in global food prices. Malaysia, the world's second-largest palm oil producer after Indonesia, has expressed its willingness to fill the gap in the global market caused by Indonesia's export ban.
The people take food as heaven
The World Bank warns that for every percentage point increase in food prices, 10 million people worldwide are pushed into extreme poverty. About 35% of the world's population is wheat-based, Russia and Ukraine are the first and fifth largest wheat exporters, respectively, and more than 50% of the world's 26 countries rely on their wheat supplies.
But when the food crisis is approaching, its impact on rich and poor countries is vastly different. According to British media reports, as the conflict between Russia and Ukraine continues, the British fish and chip shop has suffered a crisis of supply cuts and has encountered a wave of closures. The four main ingredients for the traditional British cuisine of fish and chips rely on imports from Russia and Ukraine: sunflower oil from Ukraine, and cod, potatoes and flour from Russia. The National Fish and Chips Federation has called on the Uk government to embark on a long-term strategy to help fish and chip shops weather the storm, or as many as a third, or about 3,000, fish and chip shops across the country will eventually close.
Photo by "Finance" reporter Jin Yan
Heidi notes that the 2007-2008 food crisis was relatively short-lived and was easily addressed by the global food system through increased production. However, we cannot confirm that the impact of the conflict in Ukraine on food, fuel and fertilizer prices will end in a short period of time. In today's world, the economies of both developed and developing regions are weaker than in 2008. Many economies face large debt-to-debt relationships and growing deficits in national revenues, weaker exchange rates, uncertain recent economic growth, and a lack of cash from foreign investors and development partners, so whether this food crisis can be overbalanced is also a question mark. Africa is undoubtedly one of the most vulnerable regions. North Africa imports large quantities of wheat from Russia and Ukraine, so it faces an imminent food crisis. Sub-Saharan Africa is predominantly agricultural, but a growing low-income urban population is more likely to consume imported food.
Due to transport and foreign exchange problems, farmers in many parts of Africa also have difficulty obtaining fertilizer at post-inflation prices. Excessive costs cannibalize farmers' profits and potentially reduce their desire to increase production, thus preventing them from reaping the effective benefits of high food prices. Countries already affected by conflict and climate are in a state of additional vulnerability. Yemen in the war relied heavily on imported food. Northern Ethiopia, one of the world's poorest regions, faces years of war and humanitarian problems. Madagascar's food system is under the influence of successive tropical storms and tornadoes in January and February. In Afghanistan, child mortality has soared because of the economy and basic health services. Myanmar's gross domestic product (GDP) shrank by 18 percent after the february 2021 military coup, while food prices rose 19 percent. Southeast Asian countries, in particular, need to band together to avoid the spread of the crisis in the rice market under trade restrictions.
(Intern Tian Yishui also contributed to this article))