Ukraine war and food crisis

  • March 22, 2022
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Ukraine war and food crisis

Subject: Economy

Section: Food security

Concept:

Food prices across the world were already rising fast amid supply chain disruptions and pandemic-related inflation. However, some prices—especially that of wheat—have shot through the roof because of the Ukraine crisis

A recently published report by the Food and Agriculture Organization (FAO) of the United Nations estimates food and feed prices could surge to up to 22 per cent above the already elevated levels due to the war.

Large grower countries—Australia, Argentina, India and the United States—could make up for a portion of the grain shortfalls from Ukraine and Russia. 

Why?

  • Ukraine and Russia account for nearly 30 percent of wheat, 17 percent of corn and over half of sunflower seed oil exports across the world.
  • The conflict-induced bottlenecks at Black Sea ports—where cargo vessels have been struck by Russian rockets—and other complications of the war have slammed Ukrainian exports.
  • The boycott of Russian ports by shipping companies and the knock-on effects of sanctions have also disrupted the flow of foods and feeds from Russia.
  • 20 per cent to 30 percent of wheat, corn and sunflower seed crops will either not be planted or go unharvested during Ukraine’s 2022-2023 season.
  • Russia is the world’s largest fertilizer exporter, providing about 15 percent of the world supply.
  • Sanctions have also hit Russia’s closest ally, Belarus, a leading producer of potash-based fertilizer, critical for many major crops, including soybeans and corn.

Impact?

  • Rise in procurement cost-The World Food Program’s costs have already increased by $71 million a month, enough to cut daily rations for 3.8 million people.
  • The number of people on the edge of famine had jumped to 44 million from 27 million in 2019, according to the UN’s World Food Programme.
  • Supply chain constraints and inflation-In February, grocery prices in the US were already up 8.6 per cent over a year prior, the largest increase in 40 years, according to government data.
  •  Humanitarian crisis and unrest-Countries affected by conflict, including Yemen, Syria, South Sudan and Ethiopia, are already facing severe hunger emergencies that experts fear could quickly worsen.
  • Rise in import bill and currency depreciation
  • Trade protectionism to guard food supplies-Indonesia has set new limits on palm oil exports to control prices; Hungary has banned all grain exports etc
  • Rising cost of production-Brazil, the world’s largest producer of soybeans, purchases nearly half its potash fertilizer from Russia and Belarus. It now has just three months of stock left.

The price of natural gas aggravates the issue as fertiliser producers outside Russia and Belarus need gas to make nitrogen-based products like urea.

How has India impacted?

  • Ukraine and Russia account for a quarter of world’s wheat exports, however closing of Black Sea trade route and economic sanctions on Russia would increase India’s competitiveness in global exports for wheat.
  • The Ukraine crisis has also led to prices of vegetable oils and oilseeds skyrocketing. The benefits of it should flow to mustard growers in Rajasthan and UP, who are set to market their crop in the coming weeks. Mustard prices are ruling at Rs 6,500-plus per quintal, which is above the MSP of Rs 5,050.
  • It can act as an inducement for farmers to expand acreages under cotton, soyabean, groundnut, sesame and sunflower in the upcoming kharif planting season. That will serve the cause of crop diversification – especially weaning farmers away from paddy, if not sugarcane.
Status of agri-commodities:

  • Wheat- 
    • China, EU and India are the top three largest wheat producers, accounting for about more than 41% of the world’s total wheat production.
    • Russia is the 4th largest producer and largest exporter of wheat in the world and Egypt is the largest importer of wheat.
    • China and India are major wheat producers, but are net importers and provide relatively small shares of global wheat exports.
    • Russia and Ukraine account for 14% of global wheat production and rank 4th and 7th, respectively.
    • Russia and Ukraine account for nearly 30 percent of the global wheat supply and the halt in the black sea trade route due to the Ukraine war has disrupted the supply of wheat leading to massive rise in price i.e. a rise of 60%
    • Wheat prices are likely to remain elevated as inputs have gone up sharply with prices of fertilizers, fuel, seeds, insecticides and pesticides surging.
    • In Asia, only India has the exportable stocks of wheat and prospect of exporting wheat above the government mandated minimum support price.

  • Corn-
    • The U.S. remains the dominant global producer (32%) and exporter (33%) for corn in the world. While Japan is the largest importer of corn.
    • Ukraine now ranks 4th, contributing over 15% of world corn exports. Notably, Ukraine has been the dominant supplier of corn to China. Russia ranks 6th with a 2.3% share of corn exports.
    • Corn production in India, Mexico, and South Africa exceeds that in Russia, but accounts for smaller world export shares.

  • Barley-
    • While the EU holds the dominant production share and is the leading region for world barley exports.
    • Russia and Ukraine account for about 19% of barley production and nearly 32% of barley exports.

  • Vegetable oil- Indonesia is the largest producer of vegetable oil followed by China, and India is the largest importer of vegetable oil in the world.
    • Ukraine and Russia are the leading producers and exporters of sunflower oil which comprises a 9% production share and nearly a 2% export share for the world vegetable oil market.
    • Nearly 60% of world sunflower oil production occurs in Ukraine and Russia, and the two countries account for over 75% of world exports.
    • India imports around 90 percent of its sunflower oil from the Ukraine-Russia region.

economy Ukraine war and food crisis