Qu Dongyu
Director-Normal of the Meals and Agriculture Group of the United Nations (FAO)
11 March 2022
Over the previous two years, COVID-19 has introduced many challenges to world meals safety. As we speak, what is going on in Russia and Ukraine provides one other important problem. Russia and Ukraine play a considerable function within the world meals manufacturing and provide. Russia is the world’s largest exporter of wheat, and Ukraine is the fifth largest. Collectively, they supply 19 p.c of the world’s barley provide, 14 p.c of wheat, and 4 p.c of maize, making up greater than one-third of worldwide cereal exports. They’re additionally lead suppliers of rapeseed and account for 52 p.c of the world’s sunflower oil export market. The worldwide fertilizer provide can also be extremely concentrated, with Russia because the lead producer.
Provide chain and logistical disruptions on Ukrainian and Russian grain and oilseed manufacturing and restrictions on Russia’s exports can have important meals safety repercussions. That is very true for some fifty nations that rely on Russia and Ukraine for 30 p.c or extra of their wheat provide. Lots of them are least developed nations or low-income, food-deficit nations in Northern Africa, Asia and the Close to East. Many European and Central Asian nations depend on Russia for over 50 p.c of their fertilizer provide, and shortages there might lengthen to subsequent yr.
Meals costs, already on the rise for the reason that second half of 2020, reached an all-time excessive in February 2022 as a consequence of excessive demand, enter and transportation prices, and port disruptions. International costs of wheat and barley, for instance, rose 31percent over the course of 2021. Rapeseed oil and sunflower oil costs rose greater than 60 p.c. Excessive demand and risky pure fuel costs have additionally pushed up fertilizer prices. As an illustration, the worth of urea, a key nitrogen fertilizer, has elevated greater than threefold previously 12 months.
The battle’s depth and period stay unsure. The seemingly disruptions to agricultural actions of those two main exporters of staple commodities might significantly escalate meals insecurity globally, when worldwide meals and enter costs are already excessive and risky. The battle might additionally constrain agricultural manufacturing and buying energy in Ukraine, resulting in elevated meals insecurity regionally.
Core threat elements recognized
Cereal crops shall be prepared for harvest in June. Whether or not farmers in Ukraine would be capable of harvest them and ship to the market is unclear. Huge inhabitants displacement has lowered the variety of agricultural laborers and staff. Accessing agricultural fields can be tough. Rearing livestock and poultry and producing vegatables and fruits can be constrained as effectively.
The Ukrainian ports on the Black Sea have shuttered. Even when inland transportation infrastructure stays intact, transport grain by rail can be not possible due to an absence of an operational railway system. Vessels can nonetheless transit by way of the Turkish Straits, a vital commerce juncture by way of which a considerable amount of wheat and maize shipments go. Rising insurance coverage premiums for the Black Sea area would exacerbate the already excessive prices of transport, compounding the prices of meals imports. And, whether or not storage and processing services would stay intact and staffed can also be nonetheless unclear.
The Russian ports on the Black Sea are open for now, and no main disruption to agricultural manufacturing is predicted within the brief time period. Nonetheless, the monetary sanctions in opposition to Russia have brought on an vital depreciation which, if continued, might undermine productiveness and progress and in the end additional elevate agricultural manufacturing prices.
Russia is a significant participant within the world vitality market, accounting for 18 p.c of worldwide coal exports, 11 p.c of oil, and 10 p.c of fuel. Agriculture requires vitality by way of gasoline, fuel, electrical energy use, in addition to fertilizers, pesticides, and lubricants. Manufacturing feed elements and feedstuffs additionally require vitality. The present battle has brought on vitality costs to surge, with unfavorable penalties on the agriculture sector.
Wheat is a staple meals for over 35 p.c of the world’s inhabitants, and the present battle might end in a sudden and steep discount in wheat exports from each Russia and Ukraine. It’s nonetheless unclear whether or not different exporters would be capable of fill this hole. Wheat inventories are already working low in Canada, and exports from the US, Argentina and different nations are more likely to be restricted as authorities will attempt to make sure home provide.
International locations reliant on wheat imports are more likely to ramp up ranges, including additional strain on world provides. Egypt, Turkey, Bangladesh, and Iran are the highest world wheat importers, shopping for greater than 60percent of their wheat from Russia and Ukraine, and all of them have excellent imports. Lebanon, Tunisia, Yemen, Libya, and Pakistan additionally rely closely on the 2 nations for his or her wheat provide. International maize commerce is more likely to shrink as a consequence of expectations that the export loss from Ukraine is not going to be stuffed by different exporters and due to excessive costs.
Export prospects for sunflower oil and different different oils additionally stay unsure. Main sunflower oil importers, together with India, the European Union, China, Iran, and Turkey, should discover different suppliers or different vegetable oils, which might have a spill-over impact on palm, soy, and rapeseed oils, for instance.
Coverage suggestions
1. Maintain world meals and fertilizer commerce open. Each effort needs to be made to guard the manufacturing and advertising and marketing actions wanted to satisfy home and world calls for. Provide chains ought to maintain shifting, which suggests defending standing crops, livestock, meals processing infrastructure, and all logistical programs.
2. Discover new and extra various meals suppliers. International locations depending on meals imports from Russia and Ukraine ought to search for different suppliers to soak up the shock. They need to additionally depend on present meals shares and diversify their home manufacturing to make sure folks’s entry to wholesome diets.
3. Assist weak teams, together with internally displaced folks. Governments should increase social security nets to guard weak folks. In Ukraine, worldwide organizations should step in to assist attain folks in want. Throughout the globe, many extra folks can be pushed into poverty and starvation due to the battle, and we should present well timed and well-targeted social safety packages to them.
4. Keep away from advert hoc coverage reactions. Earlier than enacting any measures to safe meals provide, governments should take into account their potential results on worldwide markets. Reductions in import tariffs or using export restrictions might assist to resolve particular person nation meals safety challenges within the brief time period, however they’d drive up costs on world markets.
5. Strengthen market transparency and dialogue. Extra transparency and data on world market circumstances will help governments and traders make knowledgeable selections when agricultural commodity markets are risky. Initiatives just like the G-20’s Agricultural Market Info System (AMIS) will increase such transparency by offering goal and well timed market assessments.