HUNGER FALLOUT FROM A WAR

Samantha Amerasinghe reports on the impact of war on global food security

Russia’s invasion of Ukraine has caused a ripple effect across the world, stoking fears of a looming global food crisis. The war has disrupted the world’s supply chains by driving up the cost of fuel and creating a scarcity of grains and fertiliser.

Global food security is at risk with the conflict crushing consumer systems that were already weakened by the COVID-19 pandemic, climate change and energy shocks.

And there are potential ramifications for emerging and developing economies…

According to the UN Conference on Trade and Development (UNCTAD), Russia and Ukraine together supply 28 percent of globally traded wheat, 29 percent of barley, 15 percent of maize and 75 percent of sunflower oil.

Although much of the developing world relies on rice, imports of wheat and oil provide the bulk of calories that people consume in many parts of the world.

Ukraine alone is the fifth largest exporter of wheat in the world, having shipped US$ 1.2 billion worth of grain to Egypt, 544 million dollars’ worth to Indonesia and the same to the tune of US$ 496 million to Pakistan in 2020.

Despite Russia and Ukraine representing a little over two percent of the world’s GDP, the conflict between these two countries has resulted in “sizeable economic and financial shocks,” notes an OECD report. “A complete cessation” of their wheat exports will result in serious shortages in many emerging markets and developing economies, it adds.

This situation has led to concerns that people in poorer countries will be unable to afford the food they need due to the inevitable rise in prices with demand remaining strong, and major suppliers such as Ukraine and Russia unable to export as much.

Asia and Africa will likely suffer the most with many countries in these continents experiencing high food price inflation – reflecting labour shortages, a sharp rise in fertiliser prices (almost three times higher than a year ago) and currency devaluation.

Ukraine’s food exports feed about 400 million people. With the war disrupting supplies, it’s not surprising that UN Secretary-General António Guterres has warned that the “spectre of a global food shortage” will overshadow the coming months and could last for many years.

Roughly 25 million tonnes of corn and wheat (equivalent to the annual consumption of all the world’s least developed economies) is trapped in Ukraine. Nearly 250 million people globally are on the brink of famine and a lingering war could potentially push hundreds of millions of people below the poverty line.

Climate change has worsened this situation with defensive moves by major producers such as India banning wheat exports due to a heat wave curtailing output while extremely dry weather in some parts of France has caused severe damage to grain crops.

Future prices for wheat traded on the Chicago Board of Trade (CBOT) have climbed more than 50 percent since the beginning of the year and are close to a record high at about US$ 12 a bushel at the time of writing.

Moreover, the rise in energy prices has had huge knock-on effects on the cost of fertiliser production, which is particularly energy intensive.

Benchmark Brent crude prices have climbed by nearly 50 percent to around 110 dollars a barrel. Notably, Russia and Belarus, which are under sanctions, contribute more than 40 percent of global exports of the crop nutrient potash and that’s impacting fertiliser prices.

Furthermore, there are signs that rising energy costs are leading to unrest. Social and political unrest has broken out amidst protests in countries such as Sri Lanka and Iran against fuel price hikes. Inflated food prices are also adding to Sri Lanka’s woes with inflation hitting 45 percent in May.

Efforts are underway by the United Nations to restore Ukrainian grain exports, and ensure that Russian food and fertiliser will have unrestricted access to global markets. Russia has dismissed any chance of a breakthrough with Moscow nonetheless, insisting that sanctions would have to be reviewed if it is to open access to Ukraine’s grain exports.

Guterres has urged the implementation of a five step plan to help confront the challenges that have been exacerbated by the war. These include increasing supplies of food and fertiliser; social protection systems within countries; more access to international finance; further government help for smallholder food producers; and better funding for humanitarian operations, to reduce famine and hunger.

A stark warning at the annual gathering of the World Economic Forum (WEF) held in May was that a crisis in food, fuel and finance – now worsened by the war in Ukraine – is threatening to push dozens of countries into default.

It is certainly looking grim for the foreseeable future – unless the UN somehow finds a way to accelerate its plans and confront this crisis head on.