Will the war between Russia and Ukraine impact the "European granary" of food security or be replaced?

  China News Weekly reporter / Yu Ran

  The impact of the war between Russia and Ukraine on global food security, which has lasted for more than two months, is becoming one of the concerns of many countries outside the war.

David Beasley, head of the United Nations World Food Programme (WFP), said recently that the war has exacerbated global food shortages and the impact will be "unseen since World War II".

And some dignitaries, including French President Emmanuel Macron, have even reminded people that a food crisis is on the way.

  Russia and Ukraine are the world's most important producers and net exporters of agricultural products.

In 2021, Russia or Ukraine (or both) will rank among the top three global exporters of wheat, corn and sunflower oil, according to information released by the United Nations Food and Agriculture Organization (FAO) on March 25.

In addition, Russia's export volume of nitrogen fertilizer, potash fertilizer and phosphate fertilizer ranks first, second and third in the world respectively.

  Russia and Uzbekistan are both major suppliers in the global food and fertilizer markets. According to FAO analysis, because the export supplies of these markets are concentrated in a few countries, they are more vulnerable to shocks and fluctuations.

Ukraine's Deputy Minister of Economy Katchka said on April 9 that the Russian-Ukrainian conflict will affect about 25% of the world's grain trade, including a reduction in the supply of grain, especially wheat, and rising food prices.

  In fact, due to the disruption of food supply chains caused by the new crown epidemic and the extreme weather of the "La Niña" phenomenon, world food prices have been rising since mid-2020.

By February this year, before the market reacted to the Russian-Ukrainian conflict, the FAO food price index had reached a record high, and after the Russian-Ukrainian military conflict "fueled" food prices, the index reached a new high.

The vegetable oil, grain and meat price indices also peaked respectively.

  According to United Nations data, about 50 countries in the world rely on food imports from Russia and Ukraine, mainly in the Middle East, Africa and South Asia.

In this round of food crisis, these regions bear the brunt of the impact.

A month ago, the World Food Programme had warned that 2022 would be a catastrophic year of hunger, with 44 million people teetering on the brink of famine in 38 countries.

Ukrainian grain cultivation and exports are severely restricted

  Among the agricultural products exported by Ukraine, the main export time window for corn is from November to May of the following year, for wheat from August to November, and for sunflower oil to remain exported throughout the year. Therefore, currently corn and corn are affected by the war. The largest crop, followed by sunflower oil.

  Agricultural consultancy APK-Inform expects Ukraine to export only 1 million tonnes of grain from March to June this year due to logistical problems.

Located on the northern shores of the Black Sea and the Sea of ​​Azov, Ukraine has unique conditions for shipping.

After the Russian-Ukrainian conflict broke out, “the Russian army destroyed the infrastructure of the Nikolayev port, the storage facilities of the Olivia port along the northern Dnieper River, etc., and also blew up some ships.” Ukraine’s Ministry of Agricultural Policy is responsible for digital transformation This has caused Ukrainian exports of goods to plummet, Taras Dzoba, the former deputy minister of business, told China News Weekly.

Food, an important part of export goods, has been hit even harder.

  "More than 90% of Ukraine's agricultural products are exported through the Black Sea." Monika Tothova, an economist at the Food and Agriculture Organization of the United Nations, told China News Weekly that these agricultural products are mainly wheat, corn and sunflower oil. .

After the shipping was blocked, the grain exported from Ukraine could only be exported from Western Ukraine by rail, and then transported to European countries such as Poland and Romania, and then exported.

  However, the problem with rail transportation is firstly that the cargo capacity of trains is far from that of cargo ships, and because Ukraine and many European countries have different gauges, Ukraine can transport goods to Europe. The place is very limited.

In addition, rail transport can push up crop costs by 10% to 15%.

  In addition to facing a slump in grain exports, Ukraine's future harvest is equally worrying.

March to May is the spring planting season in Ukraine, but many factors have led to poor planting conditions this year.

  Zoba told "China News Weekly" that due to the war, the current spring planting area has only reached 1 million hectares. The sown area will exceed 15 million hectares.

  The decline of agricultural labor is also one of the reasons affecting agricultural production in Ukraine.

During the war, the personal safety risks faced by working in the fields, the agricultural laborers abandoning farming to participate in the fighting, and the displacement caused by the war will all lead to a shortage of agricultural labor.

  In addition, the war has damaged farmland, resulting in a decline in harvested area and yields.

Zorba expects the Ukrainian sunflower seed industry to decline this year because the fields growing the crop are mostly in the southeast, which is heavily occupied by Russian troops.

  Reports say Ukraine's 2021 winter wheat plantings total 6.5 million hectares, but due to the conflict, only around 4 million hectares are expected to be harvested this year.

Ukrainian farmers can plant up to 3.3 million hectares of maize this year, compared with 5.4 million hectares in 2021, former Ukrainian Agriculture Minister Roman Leshchenko said in late March.

  The Russian-Ukrainian conflict has also changed the structure of crop cultivation.

At this time in previous years, Ukraine would grow barley, corn, soybeans, sunflower seeds, oats and other crops, but due to factors such as insufficient fuel for tractors and other agricultural equipment, shortages of seeds and fertilizers, export restrictions and other factors, farmers had to think about what to plant this year and what to grow. What to plant.

  Zorba said that this year's spring planting, farmers will reduce the planting of corn, and turn to more sunflower seeds, soybeans, wheat and barley.

  This is first because corn is a "technology-intensive" crop, and machines consume a lot of fuel, but the latter are not.

Ukraine is highly dependent on the import of diesel fuel from Russia and Belarus. According to data from the Kyiv consultancy A-95, Ukraine needs to import 30% of diesel fuel from Russia and 35% from Belarus.

According to Zoba, many fuel storage facilities in Ukraine were bombed by the Russian army, including two oil refineries.

"Nothing is possible without fuel," Zorba said.

Second, blocked exports have made Ukrainian farmers more inclined to grow food that is consumed domestically.

  Compared with Ukraine, Russia's grain exports were relatively less affected by the war.

Data from consultancy ProZerno showed that Russia exported 1.7 million tonnes of wheat in March, up 54.5% from 1.1 million tonnes in March 2021.

The U.S. Department of Agriculture on April 8 forecast 2021/22 Russian wheat exports at 32 million tons, but this figure is still lower than the 35 million tons forecast by the department before the Russian-Ukrainian conflict broke out.

  Russia and Ukraine still have about 13.5 million tonnes of wheat and 16 million tonnes of corn to export this season, according to estimates by research firm SovEcon.

And data from the International Grains Council (IGC) show that by the end of the 2021/22 season, wheat ending stocks in the world's major wheat exporters hit a nine-year low: the European Union, Russia, the United States, Canada, Ukraine, Argentina, Australia and Kazakhstan. Stein is expected to be 57 million tons, which makes the situation of grain shortage worse, which directly leads to the increase of grain prices on the international market.

Fertilizer prices push up food prices

  "Crops are ingenious, and fertilizer is priceless."

In 2012, a team led by Terry Roberts, then president of the International Institute of Plant Nutrition, pointed out in an article published in "Energy Engineering" that in temperate climate regions represented by the United States and the United Kingdom, chemical fertilizers increased the yield of food crops by 40%~ 60%.

  Russia is the world's major exporter of nitrogen, phosphate and potash fertilizers.

  "The ongoing conflict between Russia and Ukraine affects fertilizer prices from two aspects." Monika Tothova (Monika Tothova) analyzed the "China News Weekly", which makes the fertilizer prices, which have been rising since last year, continue to climb.

  The first is the supply side. As a major fertilizer producer and exporter, Russia's Ministry of Industry advised the country's fertilizer producers to stop exporting fertilizers, which reduced global supply.

Port blockades have exacerbated supply shortages.

  The second is that high energy prices have pushed up fertilizer prices, causing supply shortages.

The price of natural gas is now four times the average price of the past five years, and natural gas is an important raw material for the production of nitrogen fertilizer, so the price of nitrogen fertilizer has risen accordingly.

The spike in fertilizer prices translates into higher production costs and higher food prices, and could also lead to lower levels of input use, affecting production and harvests in the 2022/23 season, with further implications for the global food security situation in the coming years. risk.

Some farmers can take out loans to buy fertilizers, but more farmers can't take out loans and can only choose to use less or no fertilizers.

  The rise in fertilizer prices has led to further increases in international food and feed prices.

The United Nations Food and Agriculture Organization (FAO) estimated in March that the conflict between Russia and Ukraine could increase international food and feed prices by 20%, causing a surge in the number of malnourished people around the world.

  Among the global fertilizer importing countries, Brazil is more affected.

According to recent data from the Brazilian agricultural research company Embrapa, Russia and Belarus provide 50% of Brazil's potash supply.

Within a month after the Russian-Ukrainian conflict broke out, the price of potash fertilizer in the Brazilian market soared from US$300 per ton to US$1,100 per ton, reaching the highest price in history.

  Soybeans, corn and sugarcane are the three most important crops in Brazil. Brazil's Agriculture Minister Tereza Cristina said on March 16 local time that restrictions on the export of fertilizers may damage the output of these crops and push up inflation , and threaten food security.

The U.S. Department of Agriculture has lowered Brazil’s soybean production for several months, with the latest April supply and demand report projecting 125 million tons of soybeans in 2021/22, compared with 137.1 million tons in the last 2020/21 agricultural season.

  To minimize soybean yield losses, Brazil could adopt a Plan B.

Fan Shenggen, chair professor of China Agricultural University and dean of the Institute of Global Food Economics and Policy, told China News Weekly that Brazil could seek to import fertilizers from Canada and/or Morocco, the former being the world's largest producer of potash fertilizers, and the latter phosphate fertilizers Abundant resources.

  It is worth noting that Brazil is the largest source of soybean imports to China, and its soybean production indirectly affects the price of soybeans in China, which in turn affects the price of animal feed such as soybean meal.

Affected by the international market, the price of soybean meal in China rose significantly.

The spot price of soybean meal in March once rose to 5,430 yuan/ton, while the price in January was only 3,200/ton.

  In addition, China is highly dependent on the import of potash fertilizers, and the shortage of potash fertilizers has also led to soaring prices.

Institutional data shows that the price of potassium chloride, the main variety of potash fertilizer in China, has reached 4,200 yuan/ton in March, a monthly increase of 20.86% and a year-on-year increase of over 106%.

In this regard, 11 departments including the National Development and Reform Commission issued a notice at the end of March to deploy the work of ensuring the supply and price of chemical fertilizers for spring ploughing.

Food crisis may trigger regional unrest

  Reduced production of grains and oilseeds, disruptions to transportation and shortages of fertilizers have left global food supplies short and prices soaring.

"Agricultural activities in the two major exporters of staple food commodities (Russia and Ukraine) may be disrupted, which could seriously exacerbate global food insecurity," Qu Dongyu, director-general of the Food and Agriculture Organization of the United Nations, said in a statement.

  Totova told China News Weekly that in 2021, the wheat exports of Russia and Ukraine will account for about 30% of the global market, of which Ukraine will account for 10%.

About 50 countries in the world rely on imports from Russia and Ukraine to ensure 30% or more of their wheat supply, and 26 of them rely on imports from the two countries for more than 50% of their wheat supply.

Countries in the Middle East and North Africa are the main importers of grain from the Black Sea region, mainly due to price advantages and proximity.

In this global food crisis caused by the conflict between Russia and Ukraine, these countries are the first to be affected.

  Qu Dongyu mentioned in the aforementioned report that Egypt, Turkey, Bangladesh and Iran are the largest wheat importers. More than 60% of the wheat in these countries is purchased from Ukraine and Russia, while the wheat from Lebanon, Tunisia, Yemen, Libya and Pakistan Supply is also heavily dependent on these two countries.

  Joseph Graubel, a senior researcher at the International Food Policy Research Institute, told a recent seminar on food security at the Center for Strategic and International Studies (CSIS) in the United States that the disruption to Black Sea grain exports would be particularly damaging to Egypt.

He analyzed that Egypt, with a population of 105 million, is very dependent on Russia and Ukraine for wheat imports, and has become more and more dependent over the past 15 years.

  Egypt's supply minister said in late March that the country's wheat reserves could last about four months and edible oil reserves for about six months.

However, if the conflict between Russia and Uzbekistan continues, and food production is reduced and cannot be exported, the country will fall into a food crisis.

  Yemen is also highly dependent on food imports due to its long-term conflict.

Totova said Yemen is already facing a severe hunger crisis, with 17.4 million people in need of food aid.

From June to December this year, the humanitarian crisis in the country will intensify, with about 19 million people unable to meet their minimum food needs, a record number.

Meanwhile, some 1.6 million people will fall into "catastrophic" levels of hunger, pushing the total to 7.3 million.

  In addition, food insecurity in Syria and Lebanon is also high.

These countries need to find alternative wheat importers while relying on grain storage.

  Unfortunately, this year the Horn of Africa is in the midst of its worst drought in decades, and this, coupled with a lack of fertilizers, has raised concerns about food security in the region.

The World Cereals Trade and Consumption Forecast for 2021/22 released by the Food and Agriculture Organization of the United Nations on April 8 predicts that Morocco, western Algeria and central Tunisia in North Africa will experience a shrinking harvest in 2022 due to drought in North Africa.

  The food issue may cause political turmoil. One of the reasons for the "Arab Spring" that broke out at the end of 2010 was the rise in food prices.

Fan Shenggen believes that countries now caught in the food crisis should take this as a lesson. "For example, countries such as Egypt, Tunisia and Morocco need to find ways to ensure food supply. The government can consider subsidizing the poor so that the poor will not suffer from high food prices. impact."

  Finding alternative import source countries is one of the feasible solutions to alleviate food shortages.

The aforementioned UNFAO global cereal trade and consumption forecast mentioned that Canada and the United States are expected to expand plantings and increase production due to higher crop prices.

Wheat production in Canada is forecast at 31.2 million tons, a marked increase from 2021, and in the United States at 53 million tons, although a prolonged drought could affect production.

In addition, India's wheat production in 2022 is expected to increase slightly.

  The UN Food and Agriculture Organization forecast also mentioned that Brazil and Argentina are expected to produce well above average corn production in 2022.

Brazil is set to record a production of 112 million tons due to high yields of the newly planted corn variety, although drought has curbed Brazil's off-season corn production.

  Totova expects that the EU and India have the ability to increase their exports in the short term and can serve as alternative export source countries.

"60% of the world's wheat is sown in the autumn," Totova said. After a few months, when the United States, Canada and Australia harvest, the food-deficit countries led by the Middle East and North Africa can seek to buy their grain.

But she cautioned that long distances from importing countries would increase shipping costs.

'Food protectionism' hurts the world

  The food shortage has panicked countries, and they have begun to implement export controls and increase food reserves to prioritize domestic supplies.

  In March, several countries announced bans on food exports.

Russia announced a temporary ban on the export of wheat, rye, barley, corn and other grains to the Eurasian Economic Union countries (except Belarus).

Ukraine also announced a suspension of exports of rye, oats, buckwheat, salt, sugar, wheat and livestock.

Hungary announced a ban on all grain exports.

Argentina, whose main export product is soybeans, has suspended the export registration of soybean oil and soybean meal.

Turkey has halted exports of grains, oilseeds, cooking oil and other agricultural products held in warehouses at its seaports, and the country's agriculture and forestry ministry has also halted exports of cooking oil, olive oil, margarine, red lentils and dried beans.

Even Moldova, which exports very little, has announced an emergency halt to exports of wheat, corn and sugar.

  In fact, there is no shortage of food in the world.

In the aforementioned forecast of global grain trade and consumption, the United Nations Food and Agriculture Organization expects wheat production to increase by 1.1% year-on-year in 2022, reaching 784 million tons.

Some analysts say that the global food crisis caused by the Russian-Ukrainian military conflict is very similar to the last food crisis in 2007-2008. There is no shortage of food in the world, but panic has caused countries to erect high walls of food protectionism and pay for it. It is economically backward countries that cannot afford high food prices.

  Totova called on countries to keep trade open to protect the most vulnerable.

Rob Voss, Director of Markets, Trade and Institutions of the International Food Policy Research Institute, told China News Weekly that during the global food crisis from 2007 to 2008, many countries cut import tariffs or adopted export restrictions in order to solve the problem in a short time. own food security issues, which increases the global demand for food and causes food prices to rise further.

And countries may adopt food protectionism accordingly, forming a vicious circle.

"The last food crisis taught us a lesson, and we cannot do it again this time."

  Countries are also actively responding to the food crisis.

The EU is working on a 1.5 billion euro agricultural crisis disposal fund, and plans to free up nearly 4 million hectares of fallow land to grow crops to stimulate production.

German Chancellor Scholz has pledged that Germany will invest 430 million euros to help maintain global food supplies and avoid famine.

  The current global food crisis is caused by the conflict between Russia and Ukraine, and the bell has to be solved. The direction of the conflict also affects the global food supply and supply chain.

Totova analyzed that if the conflict is prolonged and Ukraine's infrastructure has not been restored, the replacement of the country's food export supply chain may be a bigger problem than food production.

And if the situation in Russia and Ukraine is tense for a long time, Russia, Ukraine, especially Ukraine, may be kicked out of the global food supply chain, and new players will join, thereby reshaping the global food supply chain.

  "China News Weekly" 2022 Issue 15

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