While many experts (myself included) on the current rise in global crude oil prices, there is an even bigger price surprise that catches the world’s attention: the existing spikes in global food prices. causing food security disruptions around the world, as war intensifies existing food crises and increases the threat of famine in some parts of the world.
The Food and Agriculture Organization of the United Nations (FAO) estimates that if the war leads to prolonged relief in food exports from Ukraine and Russia, the number of other undernourished people in the world could increase between 8 and 13 million. Food Shortages are already acute in East Africa, which experienced 3 years of drought before this crisis. Given the existing context of climate change and drought, existing food shortages and a developing world population, we deserve not to underestimate the effect that Russia has. The war in Ukraine is having, and will continue to have, globally. This will plunge some countries into famine and many other people will die.
Developed countries will most likely revel in even higher inflation, emerging unemployment and declining economic growth, just as happened in the wake of the food value shocks of the 1970s, which, at the time, were the largest the world has ever experienced. However, evolved countries will want to provide humanitarian assistance, adding food, to alleviate hunger and suffering in the world.
So far, the existing rise in food costs is the biggest moment The United States has noticed since the post-World War II era. Russia and Ukraine are two of the world’s largest exporters of agricultural products. due to monetary sanctions imposed through the United States and its allies. The disruption of agriculture is devastating to the food security of many countries.
Russia has a marketplaceplaceplaceplace share of 18% of global wheat exports, while Ukraine has a marketplaceplaceplaceplace share of 10%. For barley, Russia has a marketplaceplaceplace share of 14% and Ukraine 12%. In sunflower oil, Ukraine is the world’s largest exporter with a marketplaceplaceplace share of 37%, while Russia has a market share of 26%. Russia is also a major exporter of fertilizers and ships about 17% of the world’s supply.
The disruption of Russian and Ukrainian materials is exacerbating rising food costs, which have been emerging since early 2020, as measured by fao’s Food Price Index. Since then, food costs have risen 54% in February. The initial effect of the war over food costs began in late February and appears to have peaked, at least for some products, in early March.
Wheat costs have risen since mid-2020, then jumped from their all-time high to an additional 42% between the February maturity and early March. Since then, wheat costs have fallen by 21%, but remain at the highest levels. one bushel, up from its previous record of $9. 39 during the 2008 food crisis.
Similarly, barley is trading lately at $3. 23 per bushel, still below its high of $4. 25 in 2018. Shortly after the Russian invasion of Ukraine, the price of sunflower oil increased by 215%. The price of Russian nitrogen fertilizers has risen by 300%. since the beginning of 2021, adding a 128% growth since last September.
Wheat is a vital staple food in most countries, and 11 countries import 70% of their wheat from Russia and/or Ukraine, 30 countries import 30% or more. Some of the affected countries come with Egypt, Turkey and Somalia, Egypt is already applying the value of bread is controlled, and Somalia is already suffering from famine. For fertilizers, the five countries that import more than 50% of fertilizers from Russia are Honduras, Serbia and Mongolia. The decrease in the global source of sunflower oil would have an effect on the primary. importers, joined by India, the European Union, China and Turkey.
With East Africa importing 90% of its wheat from Russia and Ukraine, the United Nations World Food Programme expects Ethiopia, Kenya, Somalia and South Sudan to be the most affected by the food value shock. These and other countries are already in food crisis. after 3 years of severe drought, the pandemic and ongoing conflicts in East Africa. As Gabriela Bucher, Executive Director of Oxfam International, said: “The crisis in Ukraine, which is causing so much suffering there, is also amplifying suffering around the world. . “
The surprise of the value of existing food is not the first or the largest that the United States has consistently experienced. According to the FAO Food Price Index, the world’s largest food value surprise occurred between 1973 and 1974, when the value of food jumped to nearly one hundred percent. due to crop errors and the depletion of world stocks. In 1978, there were other foods that were worthwhile by surprise, leading to a 36% increase in the FAO Food Value Index between the end of 1977 and the end of 1980.
Alan Blinder and Jeremy Rudd, the leading proponents of the theory that the double value surprises of oil and food in the 1970s caused the stagnation of the 1970s, observed that food value spikes tend to disappear from memory. “All the big surprises of oil, however, many economists seem to have forgotten that each of the two inflationary episodes also had a big surprise in the value of food. “
The world experienced two other primary food crises, in 2008 and 2010. Between 2006 and 2008, the value of food increased by 62%, then fell in 2009 to 22%. Between 2009 and 2011, the value of food increased by 44%, but in 2016 it returned to 2009 levels. The recent increase in the value of food is greater than each of these periods in nominal terms, with the present value of wheat exceeding those periods in nominal terms; however, in real terms, the price of wheat exceeded in those two previous periods.
The effect of the current increase in the value of food can potentially lead to increased unemployment and inflation in the United States, but the overall effect on food security around the world requires maximum attention. the Russian-Ukrainian war is already affecting the global value of food, countries that rely heavily on Russian and Ukrainian agricultural products will have to find select resources to meet their food needs. Moreover, it is imperative that evolved nations respond temporarily to crises. For example, the United States wants to increase its source of wheat for export, likely eliminating existing regulatory requirements on biofuels, which will help reduce the price of wheat, but also the price of gasoline.
As FAO states, “the effects of the [Russia-Ukraine] shock on the food security of vulnerable teams require immediate follow-up and well-targeted social coverage interventions to mitigate the difficulties of the shock and promote immediate recovery. “