The conflict between Russia and Ukraine poses a great threat to global food security. In the short term, it will affect the stability of the global wheat market and disrupt the fertilizer market. In the long run, it will affect the agricultural production of the next planting season. The indiscriminate and indiscriminate imposition of sanctions will only further exacerbate the risk, and those who are starving will be the main victims. Therefore, governments and international organizations should strengthen cooperation and review measures from the perspective of ensuring food security for the global population.
The conflict between Russia and Ukraine has not only cast a huge shadow on the world economy, which is struggling to recover from the new crown pneumonia epidemic, but also raised the alarm for global food security. In the short term, the conflict between Russia and Ukraine will affect the stability of the global wheat market, disrupt the natural gas and fertilizer markets, and in the long run, it will affect agricultural production in the next planting season. This would further drive up already high food prices, with potentially serious consequences for low-income net food importers.
The world‘s granary is “smoke”
Russia is the world‘s largest grain producer and the world‘s largest exporter of wheat. Ukraine’s black land area accounts for 23% of the world‘s black land area. With its fertile land resources, Ukraine has become one of the world‘s major exporters of agricultural products and is known as the “granary of Europe”.
According to the United Nations Trade Statistics database, Russia and Ukraine are major exporters of many important grains and oilseeds, with wheat, barley, sunflower seeds and corn among the top five exporters in the world. Russia’s exports of wheat, barley and sunflower seeds accounted for 24.1%, 14.2%, and 19.6% of global trade, respectively; Ukraine’s exports of wheat, barley, and corn accounted for 10%, 12.6%, and 15.3% of global trade, respectively. The two countries are also important exporters of sunflower oil, with Ukraine accounting for 49.6% of the global market and Russia 23.1%.
Many countries are highly dependent on agricultural products from Ukraine and Russia. For example, more than 50 percent of North Africa and the Middle East’s grain needs, as well as most wheat and barley needs, are met by imports from Ukraine and Russia. In addition, Ukraine is an important corn supplier to the European Union, China and several North African countries including Egypt and Libya.
The current Russian-Ukrainian conflict will have a direct impact on Ukrainian and Russian grain exports. Most of the wheat and barley crops in both countries are harvested in the summer, and exports begin in the fall and are largely complete by February. For Ukraine, the peak season for corn exports is from spring to early summer. Most of Ukraine’s grain exports need to be shipped from ports in Odessa and the western Black Sea, but the current military campaign could cut off some of those exports, triggering supply shortages and sending food prices spiraling. Wheat prices on the Chicago Board of Trade have risen as much as 40% since the conflict broke out between Russia and Ukraine on February 24. As of March 7, the main wheat contract on the Chicago Board of Trade has hit the daily limit for five consecutive days, with a quotation of $12.94 per bushel, a new high since 2008.
According to statistics, the Luhansk and Donetsk regions account for about 5% of Ukraine’s barley production, 8% of wheat production, and 9% of sunflower seed production. There are also large areas in eastern and northern Ukraine directly bordering Russia and Belarus, which account for 25% to 30% of Ukraine’s corn and sunflower seed production, 10% to 15% of barley production, and 20% to 25% of wheat production. Unfortunately, many of these areas have been devastated by war. After 4 months, the wheat harvest is coming. At that time, if the harvest is delayed due to military operations, or transportation is affected due to damage to ports, railways, etc., the global wheat market will be further impacted.
In addition, if the conflict persists, agricultural production in the next planting season will face huge uncertainty, and next year’s agricultural harvest will be equally worrying.
Fertilizers are running out
The United States, the European Union and other countries have imposed tough economic sanctions on Russia, which could have a major impact on Russia’s natural gas and fertilizer exports. Russia’s natural gas exports account for about 20% of the global natural gas trade, and the EU currently imports 40% of its natural gas from Russia. Sanctions could push gas prices to higher levels. While Europe could switch to importing U.S. LNG, logistical and facility issues have kept costs high, making it difficult to see significant relief in the short term.
Natural gas is an important raw material for the production of nitrogen fertilizers such as ammonia and urea. Russia is an important supplier of nitrogen and potash fertilizers, and its export share accounts for 15% of the global nitrogen fertilizer trade and 17% of the potash fertilizer trade. Belarus accounts for 16% of the global potash export market share. Because Belarus is an ally of Russia, it has also become the target of international sanctions. Sanctions on these two countries will further restrict global fertilizer supply and push up global fertilizer prices. According to World Bank data, European urea prices have soared from $317.6/ton at the beginning of 2021 to $890/ton at the end of 2021, while diammonium phosphate has risen from $494.8/ton at the beginning of the year to $745/ton.
Fertilizer shortages will have a huge global impact. In particular, many developing countries are highly dependent on the import of chemical fertilizers from Russia and Belarus. For example, the Central African Republic and Mongolia rely more than 90% on nitrogen fertilizers in Russia and Belarus, and Moldova, Azerbaijan, and Kazakhstan rely on them. The degree is also over 80%. High fertilizer prices will largely lead to reduced fertilizer use in developing countries, increasing the likelihood of crop failures.
Food prices face new shocks
Previously, due to the ongoing impact of the epidemic and other factors, food prices have been high for some time. For example, poor agricultural harvests and supply chain problems in South America have reduced global grain and oilseed stocks. The world‘s largest palm oil exporter, Indonesia, has imposed export restrictions, causing international palm oil prices to rise sharply recently. At the same time, rising international crude oil prices stimulated biodiesel production, and the use of palm oil and soybean oil as feedstocks increased sharply, another reason why vegetable oil prices rose to record levels. In addition, the prices of key energy-intensive inputs such as fuel, fertilizers and pesticides are also near record highs.
The Food and Agriculture Organization of the United Nations (FAO) predicts that both world cereal production and consumption will hit a record high in 2021/2022, of which cereal production will reach 2.793 billion tons, a year-on-year increase of 0.8%; cereal consumption is expected to reach 2.805 billion tons, a year-on-year increase of 1.6% %; consumption has exceeded output for many consecutive years.
According to the latest statistics released by the FAO on March 4, in February 2022, the FAO food price index reached a record high of 140.7, a month-on-month increase of 3.9% and a year-on-year increase of 20.7%; the FAO cereal price index reached 144.8 points, a month-on-month increase of 3.0 points. %, up 14.8% year-on-year; the FAO dairy product price index was 141.1 points, up 6.4% month-on-month, up 24.8% year-on-year; the FAO vegetable oil price index rose to 201.7 points, up 8.5% month-on-month and 36.8% year-on-year, a record high.
Today, the Russian-Ukrainian conflict has brought a new shock to food prices. More than 1 million Ukrainians have been forced to flee Ukraine, and the number is growing, according to figures released by the United Nations refugee agency a few days ago. The food producers of “yesterday” have become the recipients of “today”, which will further increase the market unease and make the “nerves” of the already tightened global food prices more vulnerable.
Global cooperation to tackle the crisis
The current Russian-Ukrainian conflict poses a greater threat to global food security, and indiscriminate sanctions will further aggravate the risk. Sanctions on sectors such as food and fertilizers will only deepen the world‘s food shortages, and those who are starving will be the main victims.
In this sense, governments and international organizations need to strengthen cooperation and take a series of countermeasures. From the perspective of ensuring the food security of the global population, we must ensure that any sanctions imposed on Russia will not affect third parties that rely on Russian exports, and allow grain and fertilizer exports to continue unimpeded. If this is not possible, a package of compensatory measures should be provided to the affected third-party countries.
In response to the soaring grain and oil prices caused by the conflict between Russia and Ukraine, some countries have taken measures to restrict the export of agricultural products. Such as the implementation of export licensing system, reduce export quotas and so on. These beggar-thy-neighbor policies and measures will adversely affect grain and oil importing countries, especially those vulnerable African countries.
Gilbert F. Houngbo, president of the International Fund for Agricultural Development (IFAD), said: “For those directly involved, the conflict is already a tragedy; for those already struggling to support their families, The ongoing impact of the conflict would be disastrous for people in the Middle East and Africa, where 40 percent of Ukraine’s wheat and maize are exported, and which are already struggling to tackle hunger, and further food shortages or higher prices could spark social unrest. “
Food security is a fundamental issue related to human survival, and all countries share weal and woe. All countries in the world should unite and cooperate to make unremitting efforts to maintain world food security.