Shipping issues, high food prices make volatile situation

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The only clarity to emerge in the eight months that have passed since Russia invaded Ukraine is that there is no end in sight.

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The only clarity to emerge in the eight months that have passed since Russia invaded Ukraine is that there is no end in sight.

Everyone can agree this war has profound implications for grain markets and global food security. However, our understanding of how fundamentally this conflict is changing the geopolitics of food is just starting to evolve.

The numbers tell us this region is a significant player in the global food trade. An analysis released this week by Farmers Business Network (FBN) says Russia and Ukraine typically account for about 29 per cent of global wheat exports, 32 per cent of barley exports, 19 per cent of rapeseed (canola) exports and 17 per cent of corn exports.

We can see how supply chains are disrupted. While grain exports from the region were almost non-existent in the days and weeks following the invasion, they have resumed on a limited basis. FBN estimates Russia’s exports were still off 29 per cent and Ukraine’s by 46 per cent during the period of July through September.

We know critical infrastructure such as grain storage facilities and transportation corridors have been damaged or destroyed.

We also understand how the war has made it harder for farmers in the affected zones to work in their fields, repair their machinery and access the seed and crop inputs they need. Yet they are still getting the job done.

Ukraine is still achieving above-average production levels in two out of four of the key grain-growing regions, the FBN report says. Russia, meanwhile, had a record-setting wheat harvest.

In fact, grain stockpiles in these regions are growing. USDA data cited in the report project that Ukraine’s stockpiles of wheat will rise to four times their normal levels while corn stocks will be nine times their normal levels for 2023.

“This surplus creates a lot of excess supplies that could flow to world buyers if export corridors were normalized,” the FBN report says.

It’s all contributing to volatility in grain markets already jumpy because of weather-related production shortfalls and pandemic-induced supply chain hiccups. It creates more risk than reward for farmers. Costs of production always follow grain prices up, but down? Not necessarily.

Harder to quantify has been the “immediate and far-reaching cascading consequences” for global food security, authors Tarek Ben Hassen and El Bialai say their paper: “Impacts of the Russia-Ukraine War on global food security: towards more sustainable and resilient food systems,” published in the journal Food.

They warn the war underscores inherent weaknesses in global agri-food systems and call for changes that can improve their ability to adapt quickly to sudden shocks to supply or distribution chains.

No one is suggesting that the world is at risk of running out of food, at least not any time soon.

However, the disruption to grain shipments and the high prices are making it more difficult to get those food commodities to the people who need it. While some exporting countries have stepped up to try to fill the gap using their own surpluses, others have shut down for fear of compromising their own population’s food security.

The number of countries enforcing food export restrictions, such as export bans and export-licensing requirements, has increased from three to 26 — and counting.

The Food and Agriculture Organization (FAO) of the United Nations says 50 countries depend on Russia and Ukraine for at least 30 per cent of their wheat import needs. Many of these countries are emerging economies where consumers typically spend more than a third of their incomes on food. By comparison, Canadians spend a tenth of their earnings on food.

According to the World Bank, for every one percentage point rise in food costs, 100 million people are pushed back into poverty.

One survey found that between 32 and 71 per cent of consumers in countries that import wheat from this region have lacked enough money to buy food within the past 12 months. A hungry population is not conducive to political stability.

In a nutshell, we know what we see and what the numbers tell us. What’s harder to predict is how people will react.

Laura Rance is vice-president of content for Glacier FarmMedia. She can be reached at lrance@farmmedia.com

Laura Rance

Laura Rance
Columnist

Laura Rance is editorial director at Farm Business Communications.

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