The Russia-Ukraine War and Global Food Security: A Seven-Week Assessment, and the Way Forward for Policymakers
Wars have disrupted agriculture throughout history. But the nature of Russia’s war in Ukraine—a war between two agricultural production powerhouses, in the context of globalized agricultural markets—presents never-before-seen consequences for global agriculture and food security. Seven weeks into the war, the contours of these consequences are clear: exports from Ukraine have stalled, future harvests are in question, global prices of agriculture commodities have spiked, and most exposed are the countries that rely on agricultural exports from Ukraine and Russia to feed their citizens or fertilizer from Russia and Belarus to produce their own food. What can we expect in the coming months? What can be done to stave off the worst effects—for Ukraine and the world? And what are the lessons for policymakers?
Q1: What is new about this global food crisis?
A1: Global agricultural markets have endured supply-side shocks and price spikes before. In 2007 and 2008, concurrent droughts in multiple food-exporting countries, food export bans by many more, and high energy prices caused the nominal price of food to double between 2002 and 2008, according to the Food and Agriculture Organization of the United Nations (FAO). Global undernourishment may have reached a 15-year high in 2020 due to the continued effects of climate change and regional conflict, on top of the economic and supply chain shocks of Covid-19.
Two elements of today’s agriculture market disruptions are new: First, the war is disrupting markets for final agricultural products and agricultural inputs at the same time. Agricultural products like wheat and oilseeds are ingredients for staple foods like bread and cooking oil, which are primary sources of calories for millions of people around the world. The implication of fertilizer in today’s market disruptions limits options for responses by wealthy countries as well as low- and middle-income countries. As sanctions limit fertilizer exports from Russia and Belarus and fertilizer prices rise, wealthy countries that might have, for example, increased wheat production to fill projected shortfalls on the global market and capitalize on high global prices, are instead investing in less fertilizer-intensive crops. The U.S. Department of Agriculture’s (USDA) National Agriculture Statistics Service reports that American farmers intend to plant a record-high amount of soybeans, which require relatively less fertilizer, nearly double the amount of wheat farmers intend to plant in 2022, which is at its fifth-lowest acreage in over a century. High prices of fertilizer have also limited options for low- and middle-income countries that otherwise would have opted to buffer global price shocks by boosting their own agricultural productivity. Exposed to high prices, some farmers might move forward with planting plans, passing high production costs to consumers; others might reduce their use of fertilizers, reducing output. High prices of energy push food prices even higher, as natural gas is needed to produce nitrogenous fertilizers and fuel is needed for on-farm productivity and food transportation.
Second, these agriculture-market disruptions are wholly avoidable, due to a war of aggression and intentional attacks on agriculture infrastructure. By targeting all aspects of Ukraine’s agriculture—fields, farm equipment, warehouses, markets, roads, bridges, and ports—Russia intends to cripple Ukraine’s agricultural economy, thereby cutting off a major source of Ukraine’s income. In 2020, agriculture contributed over 9 percent of Ukraine’s GDP, according to the International Trade Administration. The high prices of fertilizer and fuel further limit farmers’ productivity, and precarity of labor in wartime could further limit output.
Q2: What has happened so far? What can we expect in the medium term?
A2: Released last week, the FAO’s Food Price Index for March 2022 made “a giant leap to a new highest level,” up 12.6 percent since February 2022, marking two consecutive months of record-high levels. In March, record highs were hit for the FAO’s Cereal Price Index (up over 17 percent since February), Vegetable Oil Price Index (up over 23 percent since February), and Meat Price Index (up nearly 5 percent since February). In early March, Chicago futures for wheat soared 40 percent in one week, reaching the highest levels since 2008. Ukraine supplies nearly half of sunflower oil exports worldwide, and in March, the global price of sunflower oil reached a record high, as did global prices of rapeseed (canola) oil, soybean oil, and palm oil. Prices for ammonia, nitrogen, nitrates, phosphates, potash, and sulphates, which constitute the global fertilizer market, are up 30 percent since January.
In its latest World Agriculture Supply and Demand Estimates report, also released last week, USDA lowered projected global wheat trade by 3 million tons, estimating 1 million fewer tons of exports from Ukraine (and 1 million more tons of exports from Russia, which the United States has exempted from comprehensive sanctions). USDA’s estimates pertain to last year’s harvests, as most of Ukraine’s exports shipped prior to Russia’s invasion, and not yet to future harvests. In March, Ukraine’s Ministry of Agrarian Policy and Food announced the result of a survey of approximately 2,500 farmers nationwide, who reported significant gaps in seeds, fertilizer, pesticides, and equipment required for crop cultivation and harvest. This will impact winter crops that were planted in 2021 for harvest in summer 2022: the FAO predicts that due to the war, between 20 and 30 percent of winter crop acreage will not be harvested, and that farmers will reap lower yields from acreage they can harvest. Neither USDA nor the FAO have yet estimated the impact of the war on global export from Ukraine’s next winter crops, set to be planted in 2022 for harvest in 2023.
Food price increases due to the Russia-Ukraine war are jeopardizing food security around the world. According to the FAO, 26 countries rely on Ukraine and Russia for at least 50 percent of their wheat imports. These include countries in Africa’s Sahel region, where 6 million children are malnourished and 16 million people in urban areas are at risk of food insecurity, according to the UN World Food Program (WFP). The WFP also recently noted the vulnerability of countries in East Africa, which also rely on imports from Ukraine and Russia, and are experiencing the effects of conflict and severe drought. UNICEF emphasizes the vulnerability of children in the Middle East and North Africa, where countries import more than 90 percent of food they consume, and the majority of children do not have access to adequate nutrition.
Today’s food price increases are also affecting politics around the world. In Pakistan, food prices had been rising for months prior to Russia’s invasion of Ukraine, and even higher food prices were among popular grievances that led to Prime Minister Imran Khan’s ousting this week. In Peru, President Pedro Castillo is struggling to quell unrest in response to record-high food and fuel prices; several died in protests last week. Egypt, the world’s largest importer of wheat, procures over 80 percent of its wheat from Ukraine and Russia, and as its own supplies dwindle, its government is seeking other sources for its supplies. The price of unsubsidized bread jumped 25 percent in some bakeries just weeks into the Russia-Ukraine war. High food and fuel prices are a flashpoint in the presidential election in France; Germany, Italy, and Spain have offered energy allowances, price cuts, and tax cuts to quell the impact of high energy prices.
Q3: What are the solutions?
A3: Analysts are quick to note that there is enough wheat on global markets to meet global demand, and that markets will adjust to fill gaps in exports due to Russia’s war in Ukraine. Indeed, some low- and middle-income countries stand to gain from the shock, such as India, where wheat exports reached an all-time high in March as producers fetched a higher price on global markets than the Indian government offered through its agriculture-support programs.
To quell the impacts of the war-induced global agriculture and food security disruptions, International Food Policy Research Institute (IFPRI) experts recommend that countries continue to exempt food and fertilizer from sanctions, refrain from imposing export bans, avoid hoarding and panic buying, and suspend biofuel mandates in order to retain supplies on global markets and quell prices spikes. To blunt the impact of price hikes on the poor, IFPRI recommends that countries direct food subsidies to the most vulnerable and provide humanitarian assistance through the WFP. In the long term, IFPRI recommends that countries avoid imposing market-distorting subsidies, cautiously consider decisions regarding land conservation programs, and avoid the allure of calls for food self-sufficiency.
In March, G7 leaders committed to “avoid export bans and other trade-restrictive measures, maintain open and transparent markets, and call on others to do likewise.” Leaders also committed to increasing their contributions to the WFP, called for an extraordinary session of the Council of the UN FAO to address the war’s impact on global agriculture and food security, and called for continued information sharing via the Agriculture Markets Information System. Recognizing that the impact of the war on “Ukraine’s internationally significant agriculture sector places global food security under severe strain,” last week, G7 leaders committed to “address the consequences of the global crisis on food security through a joint G7 effort, in close cooperation with international bodies such as the World Food Programme, Multilateral Development Banks and International Financial Institutions, and including through exploration of the Food and Agriculture Resilience Mission (FARM),” proposed by France. The FAO has proposed a Global Food Import Financing Facility (FIFF) to ease low- and middle-income countries’ food-importing financing costs. The FAO estimates the full cost of the facility at approximately $25 billion but suggests conditioning participation on countries’ commitments to investing in sustainable agriculture practices, thereby reducing the overall price tag of the program. Other experts have called on the G7 and China to grant debt relief to low- and middle-income countries, allowing them to use their reserves to cover the higher cost of food imports. The White House reiterated its commitments to agricultural development in low- and middle-income countries but has not yet announced support for short-term measures to quell the immediate impacts of the war on food-importing countries.
Thus far absent are proposals to rebuild Ukraine’s agriculture sector to restore the country to its pre-war levels of output once the war ends, or once the conflict subsides to a level that permits agricultural activity to rebound. Such investments would bring benefits for Ukrainian producers, the Ukrainian government, and countries and consumers who rely on Ukraine’s exports for their food security.
Q4: What are the lessons for policymakers?
A4: The causes of today’s global agriculture commodity price shocks are surprising but not unpredictable. In the 2015 Intelligence Community Assessment on Global Food Security, the U.S. intelligence community noted that “large exportable supplies of key components of food production—such as phosphates, potash, and fuel oil—come from states where conflict or government actions could cause supply chain disruptions that lead to price spikes.” In the years to come, climate change, extreme weather, conflict, diseases, resource constraints, and environmental degradation will continue to suppress agricultural production, with isolated or global effects. In their responses to today’s global food crisis, policymakers would be wise to consider establishing mechanisms with staying power so that the next time supplies fall and prices spike, they will not need to invent solutions from scratch.
Caitlin Welsh is the director of the Global Food Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
Caitlin Welsh discussed the content of this CQ as part of her participation at a University of Pennsylvania Perry World House workshop on the Russia-Ukraine war.
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