The conflict between Russia and Ukraine has made the already crises of global food security even worse. Russia and Ukraine, known as the “granary of Europe”, are important producers and exporters of global wheat, corn, barley, sunflower oil and other grain products, as well as major producers and exporters of agricultural fertilizers. The outbreak and continuation of the Russian-Ukrainian conflict will have unpredictable impacts on global food security.
Global food supply tensions intensify The Russian-
Ukrainian conflict will directly affect the export pattern of international wheat, corn, sunflower oil and other markets, and global food product supply tensions will intensify. Russia’s wheat production and export share account for 10% and 16.9% of the world’s total, respectively, Ukraine’s wheat and corn exports account for 11.6% and 16.4% of the world’s, and Russia and Ukraine’s sunflower oil exports account for the world’s 55%. About 50 countries and regions in the world rely on Russia and Ukraine for more than 30% of their wheat supply, and more than 50% of their fertilizer supply in many European and Central Asian countries comes from Russia. Therefore, the conflict between Russia and Ukraine will directly affect the export of agricultural products between the two countries and exacerbate the tension in the global supply of agricultural products.
On the one hand, conflict will reduce the acreage and production of food in the two countries and reduce the world’s food supply. About 35 percent of Ukraine’s wheat is grown in conflict-affected eastern regions. About 20% to 30% of Ukraine’s winter cereals, maize and sunflower seeds are not expected to be harvested or planted in 2022, according to a report released by the United Nations Food and Agriculture Organization (FAO).
On the other hand, the conflict between Russia and Ukraine has hindered the normal transportation of ports and affected the international food supply chain. Grain exports from Russia and Ukraine are at risk of cancellations or delayed deliveries as Black Sea port logistics are paralyzed. Logistics disruptions at Black Sea ports could also affect grain exports from neighbouring Romania, Bulgaria and Kazakhstan. Any disruption to food exports from the Black Sea region will have an impact on international food supply chains and further exacerbate global food security risks.
With food production affected and supply chains disrupted, global food importers will be forced to find alternative sources. However, the ability of alternative sources to fill the gap in the short term is limited. Since the beginning of this year, the combination of the new crown epidemic and the extreme weather in major grain-producing areas has affected the quantity and quality of global agricultural products, resulting in an abnormally weak global agricultural supply chain. At present, in addition to Russia and Ukraine, the world’s major wheat exporters include Canada, the United States, Australia, India and Argentina. The current wheat inventory level in Canada is already at a low level; the US wheat production has been reduced due to drought, mainly to meet domestic supply; Australia has increased exports to meet market needs, and has now completed 2/3 of this year’s grain export plan; Argentina has also 95% of the exportable wheat crop was sold. Therefore, for now, none of these alternative sources will be able to fill the gap in the reduced supply of Ukrainian wheat. In addition to wheat, oil and fat products such as sunflower oil are also facing supply risks because it is difficult to find alternative sources. Affected by the reduction of rapeseed production in Canada, the main supplier of oil and fat products, the reduction of soybean production in South America, the export restriction of palm oil in Indonesia, and the sudden increase in crude oil prices, the risk premium of oil and fat products has accumulated significantly.
According to the FAO report, the global supply shortage caused by the sharp reduction in exports of grains and sunflower oil between Russia and Ukraine will push up international food and feed prices by 8% to 22%. Even as alternative producers expand production in response to rising prices, the global grain and sunflower oil market will remain sizable supply gaps.
From the perspective of the global grain supply pattern, the shortage of global grain products will pose a greater threat to countries in the Middle East and North Africa that are highly dependent on agricultural imports. More than 40% of Ukraine’s corn and wheat is shipped to the Middle East or Africa every year, about 80% of Egypt’s wheat imports come from Russia and Ukraine, and 80% of Lebanon’s wheat imports come from Ukraine. Ukrainian grain exports are disrupted, which may trigger unrest in the Middle East and further increase the risk of global food security.
Affected by the conflict between Russia and Ukraine, Lebanon is experiencing the most serious economic crisis in history. With most of Lebanon’s wheat supply imported from Ukraine, food prices such as bread have risen sharply.
Triggering global food trade protectionism
Affected by the conflict between Russia and Ukraine, the price of global food products has risen further from last year’s high level recently, and the prices of major grains such as wheat, soybeans and corn have risen to the highest level in the past eight years.
In fact, before the outbreak of the Russian-Ukrainian conflict, global food product prices were already hovering at high levels. The sharp rise in global food product prices in recent years is the result of a series of factors. Since the outbreak of the epidemic, the tight global food supply and rising logistics and trade costs have raised the prices of global food products and have become the main driving force behind this round of food product price increases. Climate change and natural disasters have also contributed to rising global food product prices. The locust plague in Africa, the once-in-90-year drought in Brazil, and the impact of the summer heat wave in Canada have all had a negative impact on food production and supply. In addition, excess global liquidity and inflation, as well as artificial speculation and monopoly, have contributed to the rise in the price of food products.
With the rising prices of food products, many countries have adopted trade protectionist measures out of the consideration of supply security. Russia said it would ban exports of wheat, rye, barley and corn to neighboring Eurasian Economic Union countries until June 30, and white and raw sugar until August 31; Ukraine announced a ban on rye, Barley, Buckwheat, Millet, Sugar, Salt and Meat. Other countries, including Hungary, Indonesia, Argentina, etc., have placed barriers on the export of agricultural products such as wheat and edible oil to suppress domestic prices and safeguard domestic supplies. The protectionism of food trade has undoubtedly brought unsolvable risks and crises to those countries that depend on external demand, and exacerbated the poverty and hunger of the people in these countries. The World Food Programme (WFP) recently warned: “2022 will be a year of catastrophic hunger, with 44 million people expected to be on the brink of famine in 38 countries.
” Global food security may face the worst crisis since the 1970s amid soaring costs, worrisome prospects for Ukraine’s new crop and trade protectionism in various countries.
Increase the cost of importing Chinese agricultural products
At present, China’s food supply and reserves are still sufficient, and the country attaches great importance to the production and planting of food, so the direct impact of the conflict between Russia and Ukraine on China’s food security is limited. In 2021, China’s self-sufficiency rates for wheat and corn will reach 93.51% and 91.16%, respectively. Therefore, even in the event of an escalation of the Russian-Ukrainian conflict, China’s food needs can still be guaranteed.
However, China will still be hit to some extent in some of the major agricultural products exported by Russia and Ukraine to China. The self-sufficiency rate of barley and sunflower oil in China is only 24.32% and 22.36%, and the degree of dependence on foreign countries is relatively high. In 2022, China is expected to import 3.214 million tons of barley from Ukraine, accounting for 19.49% of China’s total barley supply. If supplies are cut, Chinese imports may need to be diverted to two other major suppliers – France and Canada. China’s imports of sunflower oil from Ukraine and Russia accounted for 69.40% and 28.31% of China’s total imports respectively, reaching 97.71% of total sunflower oil imports. If supplies are disrupted, China will also have to seek alternative sources of imports. It is expected that the import demand of China’s agricultural products may shift to North and South America in the future.
In addition, as the conflict between Russia and Ukraine exacerbates the rising global agricultural prices, the import cost of China’s agricultural products will increase, and the pressure of imported inflation will also increase.
