The energy crisis obscures the food crisis

Much attention has been paid to enhancing energy security after the Russian invasion of Ukraine earlier this year. However, even as the urgency of the energy crisis dominates the headlines, the agricultural supply chain has also come under strain, increasing inflationary pressures and food security risks that could push millions of people into hunger worldwide.

Both Russia and Ukraine are major exporters of agricultural commodities. Together, they account for more than 50 percent of global sunflower oil exports and a quarter of global wheat exports. Already, the war halved agricultural exports, as the Russian blockade in the Black Sea and fighting around the Sea of ​​Azov prevented grain shipments from Ukrainian seaports (which make up an estimated 95 percent of Ukraine’s grain exports alone). Now, as the war approaches a frozen conflict, prolonged disruption to these exports is increasingly likely, with consequences of the war on Ukraine’s labor and agricultural infrastructure yet to crystallize.

As a result, the prices of the basket of agricultural commodities rose significantly. Global food prices were already on the rise due to the supply chain challenges caused by COVID-19, but the war has exacerbated this trend. Over the course of the war, wheat and corn prices rose by 37% and 21%, respectively. The Food and Agriculture Organization of the United Nations (FAO) vegetable oil price index (a major intermediate producer of many consumer goods) reached a record high in March 2022 and has increased by 23 percent since the beginning of the year.

A quick solution is not readily available. To make matters worse, concerns about food supply chain disruption and price inflation have spurred producers of alternative supplies to keep resources close to home. Indonesia, which accounts for about 60 percent of global palm oil production, has announced a ban on palm oil exports to curb food price inflation at home. Malaysia, the second largest producer of these oils, is still managing the process of recovering from the pandemic and is very slowly reopening its borders (even then only accounting for 25 percent of the global market share). India’s wheat exports, which were expected to grow by a third in response to war-induced shortages, have been brought into doubt by a record heat wave, putting up to 50 percent of this year’s crop at risk and driving New Delhi. to enforce its own export restrictions.

But rising food prices today is not the only issue. The next harvest is also at risk. The volatile natural gas prices dating back to August 2021 were exacerbated by the Russian invasion and spread to the fertilizer market, which relies on natural gas as a production input. Russia also added export quotas for nitrogen-containing fertilizers in December 2021 and recently announced that the quotas would remain in effect until the end of 2022. Some jurisdictions, including the United States and the European Union, have opposed their own import restrictions. All of these market tensions led to a 66 percent year-over-year growth of USDA fertilizer prices in March, driving a 230 percent increase in fertilizer prices since the start of the COVID-19 pandemic. Farmers will – and will have to – choose between using less fertilizer, finding alternatives that produce lower yields, or raising prices, destabilizing the food supply chain.

These shortages and price increases will appear almost immediately in some countries, while others will face the consequences during the next harvest. Russia and Ukraine are responsible for nearly 90 percent of Lebanon’s wheat imports, more than 72 percent of Egypt’s imports, and 80 percent of Turkey’s imports. Brazil, one of the world’s largest agricultural producers and the world’s largest importer of fertilizers, gets 21 percent of its nitrogen fertilizer imports from Russia and 44 percent of its potash imports from Russia and Belarus. India relies on Indonesia for nearly half of its monthly palm oil imports, and the recent export ban has reportedly blocked 290,000 of the 700,000 tons of palm oil it expected to import in March.

In addition to the stress that the food system supply chain is facing in countries that are direct importers of Russian and Ukrainian agricultural products, relief supplies are also under pressure due to the war. The United Nations World Food Program buys 50 percent of its grain from Ukraine, allowing it to feed 125 million people around the world in times of crisis. However, since the start of the war, the World Food Program has seen an increase of $71 million in monthly costs, forcing the World Food Program to ration food relief to the 8 million starving people in Yemen, Chad, Niger and Mali.

Today’s food security challenges will further drag the global economy and disrupt social stability. Many emerging markets are still grappling with significant debt and economic stress from the COVID-19 pandemic, and must now contend with the consequences of food price inflation, which has historically been followed by major political turmoil. (As examples, popular opposition has spread in Iran in recent weeks in response to rising food prices, and the Arab Spring has been seen in part as a “bread revolution.”) These increases in food prices and pressures on agriculture are likely to cause problems for regimes in Countries that lack strong and peaceful political outlets for widespread grievances.

The food crisis caused by the war in Ukraine has globalized the humanitarian consequences of the Russian invasion and will only further complicate restoring peace and security to Europe. However, after the current crisis, food security concerns will only increase in the face of climate change. According to the Intergovernmental Panel on Climate Change, extreme weather events – including droughts, floods and wildfires – have already disrupted agricultural productivity in the past decade, contributing to the current shortages in the supply chain. Therefore, while policy leaders focus on balancing energy security and mitigating climate change through the transition to net zero emissions, we must not forget the role of food security in this transition.

Reed Blackmore is deputy director and Maya Sparkman is a program assistant at the Atlantic Council’s Center for Global Energy.

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Photo: A wheat field in eastern Ukraine. (Paulina Ritova, Unsplash, Unsplash License) https://unsplash.com/license

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