Per reporter: Li Menglin Per editor: Gao Han
Recently, the news of the collapse of the British "national dish" fish and chip shop in batches rushed to the hot search. Since the sunflower oil needed for this dish comes from Ukraine, cod, potatoes and flour need to be imported from Russia, the crisis of supply has led to the closure of a number of stores since the outbreak of the Russian-Ukrainian conflict. The National Fish and Chips Federation warned that if the government does not bail out, one-third of the UK's more than 3,000 fish and chip shops could be at risk of closure.
The wave of store closures has brought food security, a topic that was originally far from developed countries, back into the public eye, and once again highlighted the vulnerability of the global food supply system.
In early May, the Food and Agriculture Organization of the United Nations released its Global Food Crisis 2022 Report, showing that some 193 million people in 53 countries or regions experienced a further deterioration in food crisis or food insecurity last year due to the economic shocks caused by climate change, regional conflicts and the COVID-19 pandemic, an all-time high of nearly 40 million from 2020.
Image source: Food and Agriculture Organization of the United Nations
This year, the conflict between Russia and Ukraine triggered a surge in international food prices, making the situation worse. Ukraine's Minister of Agricultural Policy and Food Solisky recently warned that due to the conflict, Ukraine's food production may fall by 50% this year. According to CCTV, the United Nations World Food Programme also sounded the alarm, saying that mankind may face "the biggest food crisis after World War II".
U.N. Secretary-General António Guterres is also worried that the Conflict between Russia and Ukraine could lead up to 1.7 billion people into poverty and hunger, more than a fifth of the world's population.
In response to food security, the international community is meeting intensively to coordinate responses.
Concerned about food shortages, many countries have turned to self-protection policies, restricting the export of food and agricultural products to ensure domestic supply. Chris Barrett, an agricultural economist at Cornell University, a member of the National Academy of Sciences, told the Daily Economic News that this approach would be counterproductive and would only lead to a further rise in food prices, and the 2008 food and energy crisis was a bitter lesson.
In fact, according to FAO, the current level of cereal supply worldwide is relatively good. How to ensure the circulation of food through international coordination and cooperation and avoid humanitarian disasters is a test of the wisdom of the international community.
Photo credit: Xinhua News Agency Photo by Ahmed Goma
The Russian-Ukrainian conflict has exacerbated food insecurity, with wheat bearing the brunt
According to the Food and Agriculture Organization of the United Nations, if the global food trade is converted into calorie units of calories, the export volume of Russia and Ukraine accounts for 12% of the global share. Among them, the two countries supply 30% of the world's wheat exports, and Ukraine provides more than half of the world's sunflower oil.
After the outbreak of the conflict, the Black Sea shipping routes on which Ukraine's food exports depended were blocked, and agricultural production activities were disrupted, spurring global food prices to rise. The FAO Food Price Index hit an all-time high of 159.7 points in March and edged back 0.8 percent in April, but still 30 percent higher than the same period last year. This price index includes five major food categories: cereals, vegetable oils, dairy products, meat and sugar.
Image source: Food and Agriculture Organization of the United Nations
Wheat is a staple food for more than one-third of the world's population and has been most severely affected by the Russian-Ukrainian conflict. As a benchmark for global wheat prices, the price of the near-month wheat futures contract of CME Group of the United States rose all the way after the conflict broke out, rising more than 40% in the first week of March, breaking the all-time weekly increase record, and then hitting a 14-year high of $12.94/bushel on March 7. Wheat futures prices have risen more than 53 percent since the beginning of the year.
Image source: Ying Wei Cai
On May 18, Ukraine's Minister of Agricultural Policy and Food, Solisky, warned that due to the conflict, Ukraine's food production may fall 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.
On May 22, local time, according to the Financial Times, The Finance Minister of Egypt, the world's largest wheat importer, Mohammed Mayit, warned in an interview that "millions" of people around the world may die of starvation due to the intensification of food shortages caused by the Russian-Ukrainian conflict.
The problem of global food security has intensified in recent years. In early May, the European Union, FAO and the World Food Programme released their annual Global Food Crisis Report, data collection was completed before the Russian-Ukrainian conflict. According to the report, in terms of severity of level 1 to 5, about 193 million people in 53 countries and territories around the world experienced food insecurity above level 3 (crisis level) in 2021, an increase of 40 million from the record number in 2020. The situation of 570,000 people in Ethiopia, southern Madagascar, South Sudan and Yemen has reached the highest level of "disaster" status.
The report also notes that the number of people facing crises or more severe food insecurity nearly doubled between 2016 and 2021, increasing every year since 2018.
Image source: Food and Agriculture Organization of the United Nations
"We are facing hunger on an unprecedented scale, food prices are unprecedentedly high, and the lives and livelihoods of millions of people are unresolved," UN Secretary-General António Guterres said in the report, adding that russian-Ukrainian tensions are exacerbating the crisis in the food, energy and financial sectors.
"Self-preservation of grain"? Expert: It will backfire
In the face of rising food prices, many countries have introduced export restrictions to ensure domestic supply. On May 14, India, the world's second-largest wheat producer, abruptly announced a temporary ban on wheat exports, causing CME Group's wheat futures price to jump 5.9 percent at one point, hitting exchange limits.
India's decision was a 180-degree turn. Previously, as wheat production was expected to usher in a bumper harvest, the Indian government repeatedly said that it would increase exports to fill the gap caused by the Russian-Ukrainian conflict, and indeed exported a record amount of wheat in March and April. But after the hottest March in history, India lowered its wheat production forecast. In order to ensure domestic food security and suppress inflationary pressures, India has instead adopted a temporary export ban.
Previously, Indonesia, the world's largest palm oil producer, announced that it would suspend the export of palm oil products from April 28, triggering a global edible oil price shock. Although the Indonesian government later announced that it would resume exports from May 23 under pressure from domestic palm oil practitioners, it still required producers to set aside 10 million tons of palm oil for the country.
Photo credit: Xinhua News Agency, Veery photo
Since the outbreak of the Russian-Ukrainian conflict, the list of countries that have banned or restricted the export of major foodstuffs and crops has grown, including 25 countries including Algeria, Iran, Kazakhstan, Turkey, Serbia, Tunisia and Kuwait as of May 23. According to the International Food Policy Research Institute, the proportion of global food trade restricted in calorie terms has risen to around 10 percent.
According to Cornell University economist Barrett, the food price crisis between 2008 and 2011 has proven that restricting food exports is a very bad policy, "when many countries adopted export bans to try to drive down domestic food prices." In the end, most of these efforts failed, but they exacerbated price turmoil in international markets. Barrett told the Daily Economic News reporter by email. According to the World Bank, restrictions on wheat exports in countries more than a decade ago led to a 30 percent increase in wheat prices.
Barrett cites Australian economist Kym Anderson's "stadium standing problem" theory to explain why seemingly intuitive food self-protection policies end up having more consequences than they lose.
"Imagine fans watching a great game in a stadium, some fans standing up for a better view to watch the game. After the others were blocked, they had to stand up... The end result is that everyone puts in extra effort and the viewing experience declines. Export bans are similar. Barrett explained to the Daily Economic News reporter.
The cost of food procurement has increased by 30% compared to 2019
According to CCTV News, UnAnnoUnzin Secretary-General António Guterres recently said that the impact of the Russian-Ukrainian conflict is systemic and global, and the triple instability caused by the food, energy and financial systems may lead to the risk of poverty and hunger for 1.7 billion people.
First and foremost are North Africa and the Middle East, where more than 50 percent of grain imports from the Black Sea coast come from Russia and Ukraine due to their proximity, which requires food imports from the Black Sea coast to pass through the Mediterranean Sea. Since the outbreak of the conflict, shipping routes in the Black Sea have been blocked, and more than 90% of Ukraine's grain exports need to be exported by sea.
Export cuts have pushed up the prices of food products such as wheat and edible oil, hitting countries in the region whose economies are already fragile, and many ordinary people are in trouble with their daily lives and even face the danger of starvation. According to goldman sachs research reports, rising food prices contributed the most to inflationary pressures in the Middle East and Africa, averaging 7.1 percentage points.
In Lebanon, for example, 80% of its wheat needs to be imported from Ukraine. Lebanon has been mired in a prolonged economic crisis since October 2019, with a currency depreciation of more than 90%, exacerbated by a massive explosion at the port in the capital Beirut in August 2020. The sharp contraction in the purchasing power of wages has superimposed on the soaring price of food, and many families have to abandon meat and vegetables and feed only on grains.
What is more serious is that according to the relevant data of the World Food Programme, a large proportion of the global population facing severe hunger is concentrated in countries in the Middle East and North Africa. Of the 15 emergency assistance projects of the World Food Programme, 11 are located in the Middle East and Africa, including countries such as Syria, Yemen and a group of countries affected by climate disasters in Africa.
David Beasley, Executive Director of the World Food Programme, noted at the UN Security Council's high-level meeting on food security on May 18 that the Horn of Africa region, including Somalia, Kenya, Ethiopia and others, is suffering its worst drought in four decades, and that millions of people in Somalia could face famine in a few months. Senegal, Niger, Nigeria and other countries have also issued warnings to the United Nations a few days ago, saying that the country is already on the verge of disaster.
As the world's largest humanitarian organization, half of WFP's food procurement comes from Russia and Ukraine. So far this year, the cost of food procurement has risen by 30% compared to 2019, equivalent to an increase of $42 million per month, while the Russian-Ukrainian conflict has further pushed up food and fuel prices, and monthly operating costs have increased by a further $29 million. David Beasley warned that without additional financial support, WFP would have to prioritize food for hungry people to people on the verge of starvation.
Only 8 per cent of humanitarian projects have been raised globally. Of that, the $18.9 billion needed by the World Food Programme this year had not raised half of it by the end of April.
The level of cereal supply is relatively good, and trade circulation is key
In Barrett's view, the current food insecurity is more due to global distribution and high prices. He pointed out to the "Daily Economic News" reporter in an email that Ukraine's wheat production loss this year may account for less than 3% of the total global production, and the current global wheat inventory to consumption ratio is more than 25%, and the reserves are relatively sufficient.
In terms of wheat production, although Ukraine is expected to reduce production severely, as rising prices push the United States to expand the area under cultivation, Russia benefits from favorable weather conditions will increase production, Canada will recover sharply after last year's drought, and FAO expects global wheat production to increase this year.
Image source: Photo Network - 500465486
According to FAO's monthly Cereal Supply and Demand Bulletin released on 6 May, the ratio of world cereal stocks to consumption in 2021/2022, including the world's three staple foods wheat, maize and rice, is expected to be the same as in 2020/21, at 29.9%, indicating that "the level of supply is relatively good".
"The food available is enough to feed everyone in the world," Guterres stressed at the Security Council's food meeting recently, the problem lies in the global trade flow triggered by the Russian-Ukrainian conflict. He said at the Security Council that any meaningful solution to the global food problem must reintroduce Ukrainian agricultural production and fertilizers from Russia and Belarus into global markets, regardless of whether the conflict ends.
Fao estimates that while about three-quarters of the wheat harvested in Ukraine last year had been exported before the conflict, Ukraine still has 7 million tonnes of wheat, 14 million tonnes of maize and 3 million tonnes of sunflower oil trapped in the country. With the wheat harvest approaching in late June, the failure to empty these warehouses means that the newly harvested wheat has nowhere to store and is in danger of rotting.
Ensuring smooth global food trade is therefore the most important thing at present. The World Trade Organization will convene a ministerial meeting in mid-June, at which the issue of food trade freedom is expected to be discussed. However, Barrett told the Daily Economic News that the World Trade Organization lacks binding force on the ban on blocking food exports, and only pressure from the international community can maintain a relatively free flow of global food market in the short term.
Guterres is mediating with Russia, Ukraine, Turkey, the European Union and the United States in the hope of finding a solution to Ukraine's food exports. On the 21st local time, Ukrainian Foreign Minister Kureba posted a message on social media that Ukraine and its partners have opened up two land alternative routes for grain exports.
On 19 May, following the conclusion of the Security Council's food conference, it issued a proposal for action to address food security, calling on UN members to provide additional financial assistance and food reserves to international organizations, keep food and farm product markets open, and provide timely and transparent food information to avoid turbulence in international markets, especially futures markets.
On the same day, the G7 Development Ministers' Meeting concluded in Berlin, Germany, where an agreement was reached on the establishment of a global alliance for food security. Countries and organizations such as the European Union, the World Bank, the United Nations Global Crisis Response Team, the United Nations World Food Programme and the International Fund for Agricultural Development will also participate in the establishment of the Alliance to ensure increased funding and close coordination of food security measures.
A day earlier, the World Bank announced that it would provide $30 billion in funding to address the food security crisis caused by the Russian-Ukrainian conflict, including $12 billion for new projects and $18 billion for food-related projects that have been approved but not yet implemented.
"In today's materially rich world, I can never accept a child, man or woman dying of starvation." Guterres said at the Security Council.
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