Factors like sanctions against Russia, the Ukraine-Russia war, and expensive fuel can be the primary reasons to push inflations to the global food system and can prove to be a great problem for the population of the entire world.
The food system across the world may face the most difficult time in the current year. According to several global organizations, disruption of supplies due to the Russia-Ukraine conflict, heightening fuel prices, and sanctions against the Kremlin are the reasons behind this constraint. It is predicted that the situation is going to be more than something similar to 2008. According to the experts, Ukraine’s invasion by Russia triggered the rise in costs of items like barley, cooking oils, corn, and wheat. Russia is a chief supplier of fertilizers, and this supply has been affected as well because of currency exchange and shipping issues.
The current state of global food security
The pandemic has already taken a toll on global food systems. Ending world hunger is literally the second goal set for the UN’s 17 Sustainable Development Goals 2030. But achieving this goal has become more challenging. About 720 million to 811 million people had faced hunger in 2020. Africa has been highly affected, and the same happened with the Caribbean and Latin America. Malnutrition is affecting children highly, especially in Southern and Central Asia and sub-Saharan Africa. Climate variability and extremes, conflict, and the economic slowdowns and downturns that are exacerbated by the global pandemic are threatening the global food security as well.
Energy and food prices
The surging rise in fuel prices have led to retail inflation rising to a 17-month high in March in India. In the UK, it has hit a 30-month high at 7% in March, and in the USA, it has risen to 8.5%, a 40-year high. EFG International, a banking group, said that the rise in fuel prices, food, and shelter contributed the most in March to inflation. 11% increment has taken place in energy prices month-on-month, and a 1% increment has taken place month-on-month in the United States. As per the World Bank, the rising food and energy prices that are triggered by the Russia-Ukraine conflict may exacerbate the present concerns related to food security in Africa and West Asia.
Hit in developing economies
The International Food Policy Research Institute said that a food crisis had been brewing before the Russia-Ukraine conflict. This all started before the world could recover from the COVID-19 impact. As per its report, Africa is a highly vulnerable region. The FAO (Food and Agriculture Organization) said that the index of food price had averaged a record of 12% from February, the cereal index rose by 17.1% in March, and its vegetable oil index increased by 23.2%. The FAO has downgraded its estimates for maize and wheat production because of the conflict.
Asli Demirguc-Kunt, the Chief Economist of the World Bank for Central Asia and Europe, said that the war is hitting the developing and emerging economies of Central Asia and Europe. The regions were already encountering an economic slowdown from the pandemic’s impact. The Economic Research Service of the US Department of Agriculture has said that every food price is estimated to rise between 4.5% and 5.5% in 2022. The food-away-from-home prices are estimated to rise between 5.5% and 6.5%, and the food-at-home prices are estimated to rise between 3.0% and 4.0%.
The hit on inflation is going to be felt much more in the developing markets because Kyiv and Kremlin together account for 1/3 of global barley and wheat shipments. Also, they contribute about 68% to the sunflower oil trade across the trade. Port infrastructure destruction and the Black Sea’s mining have highly reduced grain exports. According to Fitch Solutions, Wheat prices are going to rise at an average of $338 per ton in 2022. Earlier it has predicted the grain prices to be about $249 per ton.
According to the World Bank, the economies that are still trying to recover from the impact of the pandemic, the inflationary pressures because of the war will make situations worse. The government took multiple fiscal measures to tackle the pandemic, and their finances have depleted. More people are going to be poverty vulnerable as they start to spend 2/3 of their income on food. However, the World Bank said that impacts like this could be mitigated through social protection policies.