Technical assistance

Food supply reduced by war in Ukraine and trade bans

The impact of the Russo-Ukrainian war on the world’s food supply is magnified by nations imposing bans on food and fertilizer exports to preserve stocks for their domestic needs.

Since the invasion, 15 nations have imposed restrictions on food and fertilizer exports, including new bans imposed last week by India on wheat exports and Indonesia on oil sales. webbed.

As the FinancialTimes commented business columnist Alan Beattie: “It’s a The prisoner’s dilemma: It is in everyone’s interest to keep exports flowing, but no one wants to be short by being the only country to do so.

As a major food exporter, Australia could do more to alleviate the crisis through food aid. However, there is currently no mechanism for this as exports are handled by private trading companies.

The emerging crisis repeats the experience of 2008, when a panic over food supplies following the global financial crisis led nations to lift export barriers and create the shortages feared. This led to food riots in many countries, particularly in the Middle East, where they set the conditions for the Arab Spring uprisings in 2010-2011.

The first social disruption of the Ukrainian crisis emerged in Iran. The government has cut grain subsidies in the face of soaring fiscal costs, which has caused bread prices to triple and spark protests in several cities over the past week.

The Food and Agriculture Organization of the United Nations highlights the vulnerability of wheat-importing countries, including Egypt and Turkey, as well as the sub-Saharan countries of Congo, Eritrea, Madagascar, Namibia , Somalia and Tanzania. It predicts that the number of hungry people will increase by 13 million due to the conflict.

Russia and Ukraine supply about one-third of the world’s wheat and barley, nearly two-thirds of the sunflower oil traded and one-fifth of its corn. Moreover, Russia is the largest source of fertilizers.

Although feed and fertilizer sales from Russia have been sanctioned free, it is difficult for buyers to arrange financing and insurance, both of which are sanctioned, as well as shipping. Ukraine’s exports were largely halted by the war.

Disruptions to Ukrainian and Russian sales add to a range of other pressures. Global commodity prices have risen over the past year in response to the strong post-pandemic economic recovery and the general inflationary impulse resulting from stimulative monetary policy. Higher energy prices are also contributing to higher agricultural commodity prices.

In addition, climatic conditions have led to a reduction in supplies from many countries. The U.S. Department of Agriculture last week forecast the smallest U.S. wheat exports since 1973 as crops were hit by drought. World wheat production is expected to fall by 0.6%, mainly due to a 35% drop in production from Ukraine. India has justified its wheat export ban on the damage caused to crops by extreme heat.

So far this year, the FAO price measure shows a 20% increase for cereals; 28% for vegetable oils; and 8% to 10% for meat, dairy products and sugar. Price increases due to general inflationary pressure have led to a 30% increase in total marketed food costs since April 2021, driven by a 46% increase in vegetable oils and a 34% increase in grain costs.

Compression of trade in vegetable oils could prove the most damaging, as 40% of global consumption is supplied by imports. There are high levels of import dependency – 60% or more – in most of South Asia and much of Africa.

An analysis of American society International Food Policy Research Institute suggests that Lebanon could be one of the hardest hit, as it is already in the midst of a severe financial crisis and depends on Russia and Ukraine for more than a quarter of the Lebanese family’s calorie intake mean. Much of its silo storage was destroyed in the 2020 Port of Beirut explosion.

The spread of export restrictions follows the pattern evident during the 2008 financial crisis and, to a lesser extent, after the Covid-19 outbreak. IFPRI has 20 countries imposing export bans, up from five before the invasion. The bans cover a total of 31 products, while seven other countries have export licensing requirements for 9 products.

The FAO has proposed creating a food import financing mechanism to help the poorest countries meet their needs in the face of rising prices and global shortages. The organization’s Chinese chief executive, Qu Dongyu, told a meeting of G20 finance ministers last month that eligible countries would be required to increase investments in agricultural resilience and said the FAO believed that a fund could be created without further inflaming market prices.

The suggestion is that the fund would be established with an initial amount of US$6 billion which could cover a quarter of eligible countries’ current import costs. Another model would be for the fund to support imports above a base amount per capita.

Although the proposal will be considered further at the G20 summit in Bali in November, it is unlikely to be established in time to bring relief over the next two years.

Australia stands to gain from the global shortage, with its agricultural exports expected to rise by a third to $64 billion this fiscal year. Average rural commodity prices are at record highs, up 40% from early last year, according to the federal government. agriculture department.

The federal government would have the possibility of developing its own food aid program to directly help the poor countries of the region, in particular the neighbors of the Pacific. Australia’s aid programs frequently include agricultural productivity support measures. Australia also makes relatively small donations to the United Nations World Food Program ($40 million budgeted in 2022-23).

The United States has had a food assistance program in place since 1954 that provides both technical assistance to help countries improve their own agricultural productivity and provides direct food donations.

At a time when national income is rising by $15 billion thanks to record prices resulting from the global food shortage, Australia could do more.

National grain lobby group Grain Producers Australia has launched a fundraising appeal, Grain4Ukraine, calling on farmers to donate a share of their proceeds to help former competitors in Ukraine, so there is goodwill for international aid in Australian farming communities.