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The military action of the Russian Federation against Ukraine heaped fresh risks on global food markets already struggling with soaring prices, supply-chain disruptions, and a bumpy recovery from the pandemic. Before the Ukraine crisis, overall conditions in markets for staple foods looked reasonably favorable and seemed to augur well for softening prices during 2022, even as rising food prices on world markets and in domestic markets in many developing countries continued to raise concerns about greater food insecurity. The escalation of the conflict is now putting markets into serious turmoil.
Ukraine and the Russian Federation combined account for more than 30% of global wheat exports. Ukraine is also among the top exporters of barley, corn, sunflower and other oilseeds. Russia and Ukraine are breadbaskets to many food import-dependent developing countries in the Middle East, South Asia, and sub-Saharan Africa. Ukraine and Russia each provide about 6 percent of the globally traded supply of food energy in kilo calories. Any serious disruption of production and exports from these suppliers will no doubt drive up prices further and erode food security for millions of people.
Russia is a major producer of all three key fertilizer ingredients, nitrogen, phosphorus, and potassium. Disruptions in those supplies, and rising prices for oil and gas, are driving up fertilizer prices. Policy barriers, and particularly export restrictions, are aggravating the problem: China, Russia and Ukraine have banned the export of fertilizers and Russia is limiting exports of grain. These, and other export barriers are increasing the upward pressures on world prices.
It is still too early to foresee the full ramifications of disruptions in the supply of key food staples from Ukraine and Russia as well as the implications of a prolonged rise in oil and fertilizer prices on agricultural markets. Wheat harvests in the two countries will occur during the European summer, so some of the impact will depend on how the invasion affects production in the Russian Federation and Ukraine, and for how long export channels are blocked.
In the near term, world food prices are likely to rise further amidst all uncertainty, adding to global food insecurity. This will also fan consumer food price inflation which rose substantially during 2021, especially in net food-importing low-income countries, but also in Ukraine and the Russian Federation. Poor farmers may earn higher incomes from increasing food prices, but most are net consumers of food. The stress on poor farmers in the Middle East has also been increased by severe drought in that region, which has both slashed farm incomes from production and reduced global food availability, adding fuel to the fire of price increases. Governments of low-income countries have very limited fiscal capacity to protect the purchasing power of low-income families and prevent higher food prices from causing greater food insecurity and further deterioration of diets. Given the global ramifications of food price inflation, strengthening this capacity through additional financial assistance should be an immediate priority for the international community.
Knowledge gaps and policy responsiveness
The IMF Managing Director, Kristalina Georgieva, stated on March 13, that “the war in Ukraine, means hunger in Africa”. While this is liekly the case, the vulnerability to the shock will vary greatly by country as the transmission of impacts from the war onto global food markets and onto domestic food markets and household welfare will be mediated by an array of risk factors that do not equally apply in each country case. This will require careful monitoring and analysis of vulnerabilities applicable to each specific context. Existing monitoring mechanisms of global food markets and early warning systems of food crises, like AMIS, the Food Security Portal, or the IPC and FEWS NET based food crises assessments, were designed to either monitor global food market (price) trends or acute food insecurity but are not equipped with analytical tools to assess the impacts of global and domestic food market and price shocks on food security and nutrition.
This page aims to fill this void by developing: (a) improved monitoring tools identifying risks to global food market stability and the vulnerability factors driving transmission of such market shocks onto household level food security in low- and middle-income countries; and (b) analyses of policy response capacity to insulate food price shocks and prevent these from causing greater poverty and food insecurity.
The immediate objective of the work program will be to assess the ramifications of the Ukraine crises for food insecurity in the context of 15-20 vulnerable countries. The objectives for the medium- and longer term will be to build a permanent capacity for high-response monitoring of food crisis risks emanating from global and domestic food market shocks.