Casualty of war in Ukraine: The global food supply
Russia and Ukraine are major exporters of wheat and corn and other staples. The war means that food isn’t getting to people who need it.
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Ever since the war in Ukraine began, the global cost has been measured largely in terms of casualties, refugees, the need for humanitarian aid, and — when it comes to the global economy — the rise in the price of oil and gas. Far less attention has been paid to other commodities that have less to do with energy and everything to do with feeding hundreds of millions of people all around the world.
Russia and Ukraine are both powerhouse producers and exporters of basic food staples — wheat, barley, corn and sunflower oil in particular. Taken together, the two countries have accounted for roughly 25 percent of exports of those staples to the rest of the world. For all its other disruptions, Russian President Vladimir Putin’s war has either delayed those exports or shut them down entirely. Prices have jumped and fallen back with nearly every fresh bulletin from the war. And in Ukraine itself, the next plantings and harvests are in question.
There are many ways to measure the world’s dependence on Ukraine and Russia for these products. Here are just two: Egypt — the world’s largest importer of wheat — depends on Ukraine for 85 percent of those imports. And last year, the United Nations World Food Programme (WFP) — the world’s largest donor of food to countries in need — sourced 40 percent of its wheat from Ukraine. It’s just one reason why the ripple effects of the Ukraine war will be felt far beyond the theater of conflict.
As David Beasley, the WFP executive director, told the U.N. Security Council last week, “It’s not just decimating Ukraine and the region, but it will have global impact beyond anything we’ve seen since World War II.”
The war in Ukraine will have a global impact in terms of food — supplies and prices both. That impact will range dramatically, depending on different countries’ reliance on food imports generally, and imports from Ukraine and Russia in particular.
In some parts of the world, the consequences of the shortfall will be largely a matter of grocery and restaurant bills that are higher than they were before the war began; given that inflation was already biting in economies all over the world, that’s no small thing. But for other countries — those teetering on the edge of food insecurity — it’s a far more traumatic issue.
There are also political ramifications, as well as potential solutions to the crisis, should the war in Ukraine drag on. While negotiators seek off ramps for the war itself, are there ways out of the war-inspired global food crisis?
The supply shock — worst since World War I?
Students of geography and economics may recall this common one-line moniker about Ukraine: “breadbasket for Europe.” More recently, Ukrainian wheat has fed millions of people in north Africa and the Middle East as well.
In 2021, Russia and Ukraine accounted for 30 percent of global exports of wheat, 17 percent of corn, 32 percent of barley and 75 percent of sunflower oil. The latter is used not only for cooking but in canned goods, sauces, baby foods and more.
Russia’s invasion has disrupted these exports in different ways. Grain stores are blocked at Ukrainian ports, the fate of spring plantings is in question, and if the war is still raging in the summer, there may not be the labor and fuel needed to carry out the wheat harvest. Meanwhile, international sanctions have included the world’s three biggest container lines suspending cargo shipments to and from Russia, and Black Sea port closures have disrupted commerce from both countries.
The current shortfall is the “biggest global grain supply shock since 1914,” Dan Basse, the chief executive officer of AgResource, said in an industry forum. “On a caloric basis, the Black Sea accounts for 11 percent of the world’s annual use.” AgResource estimates that two-thirds of Russia’s projected 2021 grain exports will not make it out of the country due to “finance, insurance and freight difficulties.”
A complex supply chain
There are three interlocking problems stemming from the conflict between Ukraine and Russia. The first is a jump in world food prices, especially in those core staples. The second is an immediate shortfall of supply. While prices can strain consumer budgets all over the world, for countries that rely on Russian and Ukrainian grain and seed oils, the problem is not that they can’t afford wheat, it’s that it’s literally unavailable. According to estimates from the Atlantic Council, from February to March about 7 million tons of wheat exports from Russia and Ukraine disappeared. The Ukrainian government has said that almost 4 million tons of wheat and 13 million tons of corn are locked in the country, unable to be exported because of the war.
The third problem involves knock-on effects from other war-driven shortfalls, including for natural gas, a key component of fertilizer, which affects decisions growers will make in the near future.
From price per bushel to grocery bills
Since the war began, wheat prices have risen as much as 46 percent, from $8.85 per bushel to as high as $12.94, before settling to roughly $10. The pre-invasion price per bushel of corn was $6.81; it’s now trading at $7.38. Meanwhile, sunflower oil prices are up about 20 percent.
These increases follow what had already been an inflationary year for food staples. The United Nations’ measure of global food prices, based on a basket of agricultural commodities, hit its highest-ever level in February. In the U.S., the food component of the consumer price index has risen almost 8 percent in the last year, the fastest pace of growth since the late 1970s.
The Russia-Ukraine shortfall will send those consumer prices higher still. “I think a big source of secondary effects will come in the form of higher pasta and bread prices, in addition to higher prices of other wheat-based foods,” said Jonathan McFadden, an economist at the University of Oklahoma. “This is coming at a particularly bad time given the substantial inflation this past year.”
That said, the linkage between commodity prices and food prices is not a simple one. Especially for consumers in wealthy nations, a lot more goes into food — or at least the price of food — than the grains themselves.
According to an analysis of Department of Agriculture statistics by Scott Irwin, an economist at the University of Illinois, “for every dollar of retail food expenditure” in the U.S., just “14.3 cents was due to the cost of raw agricultural commodities.” Irwin calculates that this relatively low “raw commodity cost” may soften the below of higher grain prices. But that other portion — the 85.7 cents in “processing, transportation, packaging, and marketing costs” — is on the rise as well.
Bottom line: Inflation in energy costs, wages and materials will now be joined by inflation in agricultural commodities. Consumers in developed countries will likely see mild increases in food costs, probably only a few cents on the dollar. Consumers in developing countries will feel more pain.
“In less developed economies, the farm share of retail food costs is much higher because foods tend to be less processed and incur fewer marketing costs,” Irwin wrote. “This means consumers are more exposed to increases in raw commodity costs.”
Watch the price of fertilizer
There’s one more commodity — less well known but almost as important — that is being impacted by the war.
The price of fertilizer is rising for two war-related reasons: higher prices for natural gas, a key component in the production of nitrogen fertilizers; as well as disruptions in exports of potash, a major fertilizer component that is exported from Belarus and Russia.
Some fertilizer manufacturing facilities in Europe have completely shut down.
Fertilizer makes up 17.5 percent of farmers’ “on-farm” expenditures, according to the Farm Bureau. The Kansas Wheat Growers Association warned in March that “because of higher input costs and supply chain issues, the U.S. wheat crop may not get the fertility it needs to maximize yields, leading to decreased production, hindering its ability to meet worldwide demand.”
“It will cost more to produce wheat,” explained Daniel Laborde, a senior research fellow at the International Food Policy Research Institute. “Wheat is a fertilizer-intensive crop. … That will lead to lasting impact on food markets in six or 12 months.”
The WFP’s Beasley put it starkly: “If you don’t put fertilizer on the crops, your yield will be at least 50 percent diminished. So we’re looking at a catastrophe on top of a catastrophe in the months ahead.”
Food insecurity: “zone of dependence and danger”
If for wealthy nations the impact will be felt in restaurant bills or prices of goods on grocery shelves, for other countries the question will be whether there is anything on the shelves at all.
These are countries already living close to the edges of poverty and economic pain. The impact will be especially severe for poorer nations that depend heavily on Ukraine and Russia for these commodities.
“In the short term, what we are seeing is not so much a food shortage globally, but we are talking about volatility in food prices because of this war, and problems in supply chains, where the immediate impact is on countries that are particularly dependent on Russia and Ukraine,” Madhura Swaminathan, an expert on food security at the Indian Statistical Institute, told Grid.
Several countries in the Middle East and North Africa fall squarely in this zone of dependence and economic danger, Swaminathan said. According to the Food and Agriculture Organization, 14 nations in Africa import at least half their annual supply of wheat from Russia and Ukraine.
Egypt is the world’s largest importer of wheat, and 85 percent of that supply comes from Ukraine. For now, the government says it has enough food supplies in reserve to last until the middle of the year. But price rises are already weighing on an economy where the majority of people depend on food subsidy programs, particularly for bread.
Lebanon was suffering well before Russia marched into Ukraine. Twenty-two percent of families are classed by the U.N. as “food insecure” — meaning they don’t have enough to eat as it is. And Lebanon imports around 80 percent of its wheat from Russia and Ukraine. Unlike Egypt, Lebanon can store only about a month’s worth of crop, a fallout from the colossal explosion at the Beirut port in 2020, which destroyed critical grain silos. Last month, government officials said Lebanon had 45 days of grain stores remaining.
Where a grain shortfall can cause a revolution
Economic pain often leads to political unrest; food prices and shortages were among the catalysts of the so-called Arab Spring revolts that changed the political landscape of much of the Middle East a decade ago. In some countries, the Ukraine war and rising food prices are already fanning the flames.
In Iraq, food price hikes fueled protests in early March in the southern city of Nasiriya. “The rise in prices is strangling us, whether it is bread or other food products,” a retired teacher, Hassan Kazem, told the Agence France-Presse news agency. “We can barely make ends meet.” And in Kenya, where discontent was visible even before the invasion, people have taken to social media to express their frustration with rising bills, using the hashtag #LowerFoodPrices.
The people of Somalia have long lived near the precipice of food shortages and economic crisis; the country is already in the grip of a crushing drought, and it imports 90 percent of its wheat supplies from Russia and Ukraine. In a little over a month, the conflict has driven up food prices in Somalia threefold, according to Care, the international humanitarian nonprofit agency. Care also reported rising prices in the Democratic Republic of the Congo, another country already struggling to feed its people.
“Prices are going up around the world, but it will have more of an impact depending on the context,” Swaminathan said. “Everywhere, when we see these things, it is sadly always the poor that suffer.”
The poorest of all are those served by the World Food Programme, and last week the WFP said that the price hikes meant that it was halving its food rations for the war-ravaged population of Yemen. Among the sad ironies in the current situation is the fact that the WFP, which has depended so heavily on Ukraine for supply, is now running an emergency effort to feed the hungry in that country.
As one U.N. official put it, war has turned Ukraine from the breadbasket nation into a bread-line nation.
Can other key producers fill the gap?
There are, of course, many other major producers and exporters of food staples in many corners of the world. Those Middle Eastern and North African countries hardest hit by the current shortfalls have already tried to go elsewhere — to countries with existing stocks — including Australia, Canada and India, among others.
“With substantial disruptions to trade in this region, part of the global demand will be picked up by India and Australia, who have ample tradable supplies and are competitively priced,” the USDA said in a March report on the global wheat market.
But Laborde cautions that in the short term at least, “We are still dealing with the disappearance of 18 and 20 million tons. That’s a lot. That’s much more than what India can export. That’s more than Argentina is traditionally exporting. It’s not like one country — one bumper harvest — can solve the problem.”
As for the U.S., a major wheat exporter, its winter wheat was planted last fall and will be harvested in the summer. The USDA said in its latest report on plantings that there was a 1 percent increase in acreage compared with last year. “One would have thought that with prices where they have been so far this year and with the loss of corn and wheat bushels from Ukraine, at least temporarily, we might see even higher intentions, but there is only so much land to be had,” wrote Dana Mantini, a senior markets analyst for Progressive Farmer.
In the northern Great Plains and parts of Canada — another big producer — there will be a planting of spring wheat in the coming months. As one Canadian agribusiness producer put in a column for the Globe and Mail, “This spring, Canadian farmers will plant the most important crop since the Second World War.”
As for those growers whose wheat is already in the ground, said Dan O’Brien, agricultural economist at Kansas State University, “It’s a valued position that they’re in. Everyone is pulling for them to have a good crop … it’s a high calling that they have this year.”
“We may be back to normal in 15 months when everyone had adjusted, but the next 15 months will be bumpy,” Laborde wrote. “So a long road ahead.”
Ultimately, the severity of the food crisis will depend on two factors: how quickly and effectively the gaps in supply can be filled by other producers, and how long the war in Ukraine drags on.
That said, there are other concerns — in particular the possibility that key global food producers may turn to more protectionist measures, holding more of their domestic production to guard against future supply shortages. Imagine a circumstance not unlike the stranglehold the OPEC cartel holds on oil supply and price — with major food producers doing the same, if in a less formal way. There are also suggestions that Russia, in particular, may choose to keep more of its staples for domestic consumption, if sanctions remain in place and continue to punish its economy.
One hope is that a resilient world can move to fill the gaps, which in turn will mean that supplies and prices of everything from wheat to potash to sunflower oil will stabilize, and that the food crisis will prove to be a small footnote to the tragedy of the war itself.
The other hope is, of course, that the guns fall silent. In which case the farmers will plant their spring crops, the summer harvests will proceed and the Black Sea ports will carry all that wheat and corn and barley to the places they need to go. And Ukraine will — after a short respite — be a breadbasket to the world once more.
Thanks to Lillian Barkley and Alicia Benjamin for copy editing this article.