March 21, 2022

FAO: Russia-Ukraine war likely to only worsen global food insecurity

 

 

The Food and Agriculture Organization (FAO) of the United Nations has published the main risk factors for food security as the world witnesses a trade fallout resulting from the ongoing Ukraine-Russia war.

 

The conflict's intensity and duration remain uncertain. The likely disruptions to agricultural activities of these two major exporters of staple commodities could seriously escalate food insecurity globally when international food and input prices are already high and volatile. The conflict could also constrain agricultural production and purchasing power in Ukraine, leading to increased food insecurity locally.

 

According to the FAO, cereal crops will be ready for harvest in June. Whether farmers in Ukraine would be able to harvest them and deliver to the market is unclear.

 

Meanwhile, massive population displacement in the country has reduced the number of agricultural laborers and workers. Accessing agricultural fields would be difficult. Rearing livestock and poultry and producing fruits and vegetables would be constrained as well.

 

Ukrainian ports in the Black Sea region have since been shuttered. Even if inland transportation infrastructure remains intact, shipping grain by rail would be impossible due to a lack of an operational railway system. Vessels can still transit through the Turkish Straits, a critical trade juncture through which a large amount of wheat and maize shipments pass.

 

In the meantime, rising insurance premiums for the Black Sea region would exacerbate the already high costs of shipping, compounding the costs of food imports. Additionally, whether storage and processing facilities would remain intact and staffed is still unclear.

 

Russian ports in the Black Sea region stay open for now, and no major disruption to agricultural production is expected in the short term.

 

However, financial sanctions against Russia have caused an important depreciation which, if continued, could undermine productivity and growth and ultimately further elevate agricultural production costs.

 

Russia is a major player in the global energy market, accounting for 18% of global coal exports, 11% of oil and 10% of gas. Agriculture requires energy through fuel, gas and electricity use, as well as fertilizers, pesticides and lubricants. Producing feed ingredients and feedstuffs also require energy. The current conflict has caused energy prices to surge; thus negative consequences for the agriculture sector are expected.

 

Wheat is a staple food for over 35% of the world's population, and the current conflict could result in a sudden and steep reduction in wheat exports from both Russia and Ukraine, the FAO said. It remains uncertain whether other exporters would be able to fill this gap.

 

Wheat inventories are already running low in Canada, and exports from the United States, Argentina and other countries are likely to be limited as governments will try to ensure a stable, domestic supply.

 

Countries reliant on wheat imports are likely to ramp up levels, adding further pressure on global supplies.

 

Egypt, Turkey, Bangladesh and Iran are the top global wheat importers, buying more than 60% of their wheat from Russia and Ukraine, and all of them have outstanding imports.

 

Lebanon, Tunisia, Yemen, Libya and Pakistan also rely heavily on both Ukraine and Russia for their wheat supply. Global maize trade is likely to shrink due to expectations that the export loss from Ukraine will not be filled by other exporters and due to high prices.

- FAO